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

 

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.

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.

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.

 

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?