Urban Residential Development: A Conversation with StreetLights Residential’s Doug Chesnut

Doug Chesnut-cropped

 

DFW Reimagined and CNU North Texas hosted their Fall Breakfast Seminar Wednesday, with an interview of Doug Chestnut, CEO and Founder of StreetLights Residential.

With their eight recent and current projects in Dallas, and many more nationwide, StreetLights Residential is on a roll. In Dallas, you’re probably familiar with their work. Recent and current projects include:

The Jordan on McKinney Ave at Pearl St, The McKenzie just off Knox St, The Case Building in Deep Ellum, The Taylor on Carlisle St in Uptown, Trinity Green on Singleton in West Dallas, The Union at Field and Cedar Springs, Residences next to Deep Ellum’s Knights of Pythias building, and another yet-unannounced residential project in Deep Ellum featuring artist living and artisan shops.

The Jordan

The Jordan

Doug confirmed that this demand wave they’re riding, for more urban residences, is a demographic trend that will not be changing anytime soon. Many Baby Boomers who lost a lot of equity in the financial downturn of 2008 decided to liquefy their home equity and change their living situation. That, plus the 2 million Millennials turning 22 years old every year for the next eight years, is a lot of demand. Many of these young professionals don’t have the income to buy a home, nor desire a lifestyle that requires driving. In essence, they’re looking for quality of life through an urban lifestyle with amenities close at hand.

StreetLights Residential has built its business on this principle — that a building and the neighborhood’s design creates lasting value and quality of life. Said Chestnut: “Endearing neighborhoods have activated streets, parks, and entertainment nearby. You go to bed exhausted and can’t wait to get up early and do it all over again. Entertainment doesn’t have to be Six Flags or million-dollar museums, it can be as simple as having a glass of wine on a patio.” Great cities flow.

Each building contributes to the public realm, creating a humanizing experience. It starts with the street, where people see each other coming out onto the street and interacting along the street. The street isn’t just for cars. People on the sidewalk need buffers (cars, trees, bike lanes.)  We feel good when there’s a dimension outdoors that we feel comfortable in, like outdoor rooms.

The Case Building

The Case Building

Walkable neighborhoods are another principle StreetLights promotes with their projects — traffic’s worse but you’re not stuck driving a car to go six blocks. And when the neighborhood’s denser, you can offer better mass transit, and the quality of life begins improving exponentially. In some of the great cities they’ve worked in, neighbors are more concerned about an ugly building being built across the street than a high rise. Figuring out the parking takes the most time and design attention though. “No one says, ‘I love that city, it has great parking.’ Mostly we’ll say we love it despite the parking problem,” Chestnut said.  In Austin and San Diego, a developer will pay a penalty if providing more than one car per unit. They require that you build out the full FAR because they need it, and they can’t afford for every person to own a car and drive everywhere.

“Do we want to be a well-planned urban city? Do we want to grow or not?” asked Chesnut, rhetorically. “Frisco will gladly if we don’t. It’s a matter of attracting talent and jobs to talent. This city needs to revamp what they’re allowing — not a single developer does good design.” As with the new Trulucks and the new Convention Center restaurants, in Dallas each building seems to be its own castle. It doesn’t flow. “It’s painful to see a building that’ll be poor to walk by for decades.”

Finally, the meat of the interview: Affordable Housing.

Although they recognize that socio-economically diverse neighborhoods are an important component that makes a city valuable, Doug made the case that it’s not always financially feasible to provide such low market rate homes in a building that’s providing $3,000 a month apartments.

DougChesnut

 

Keep in mind that the “affordable” we’re talking about here is for the middle class — people who make 80 percent of the median income ($48,000).  These are our teachers, firefighters, and secretaries making $35,000/year.

If a developer is building 300 market-rate apartments that will rent for $3,000/month, debt service per unit is at least $1,700/month. Which means losing money even with TIF incentives, when apartment rents are capped at $990/month for the affordable units.

I’m sure they wouldn’t finish-out the affordable units quite as nicely as the market-rate units, but it does seem a bit absurd to spend on the amenities and other luxuries that the market-rate tenants will expect, without the payback.

“If Dallas has an affordability problem, the developers need to figure out that problem — we need to be invited to the team, not just as a punitive measure,” Chestnut said. “Let’s make it attractive to build!”

Chesnut’s solution: require developers to contribute money into an affordability fund, which the city matches one for one. Then the developer building an affordable complex can buy land lower than $200 per foot and build a less expensive product. So we end up with mixed-income housing by neighborhoods. Not mixed throughout each building.

What do you think? How do we better create great, diverse neighborhoods?

6 Comment

  • Oh boy, more architectural marvels to come !
    It is just REIT development rentals to be flipped. Can you imagine what these will be like in 20 years? Probably time to scrape again.
    Unfortunately the city of Dallas does not make the developers of these projects install new concrete streets and new sewer mains and water lines in the street fronting the properties. Instead streets get torn up, utilities hooked up to old systems and then the street just settles and more pot holes and sunken patched up streets. Then the taxpayers have to pay for street repairs. Make the developers pay for new streets and utilities at the development time like many cities around the world do. Yes, real world class development !

    • mm

      Agree but then the developers would go elsewhere. Like Frisco. Or Plano. I think we need to, to put it coarsely, get as much out of them as we can without sending them packing. 20 years? It’s the cycle of Real estate.

      • Candy, I’ve heard this before, but I’m really skeptical about their willingness to go elsewhere. They could never get the price/sqft and return that they do in Uptown and nearby in places like Frisco where a 4,000 sq ft house costs ~$400k. Don’t you think they say things like that to scare the city council & planning/zoning into letting them build whatever they want despite the zoning in place on a given site?

  • The way to create financially diverse neighborhoods is to not rely on “answers” from those directly profiting from the developments but instead ask those who serve the residents you’re trying to attract.

  • 1) “I’m sure they wouldn’t finish-out the affordable units quite as nicely as the market-rate units”
    … That does not meet HUD regulations.
    2) $3,000/unit monthly rents… with $1,700/unit debt service coverage… That won’t be affordable when the market is over-supplied with ONLY “luxury” units when the market softens – just as projects break ground next year. These developers will be lucky to stabilize in absence of a turn in the market. Best of luck, guys!
    3) I’d enjoy more data centric and multi-family commentary. I’m certain there are many who’d like to be such a contributor.