Downtown Cleveland Alliance? Downtown Dleveland Housing Demand Analysis Downtown Cleveland Housing Demand Analysis E X E C U TIVE S U MMA RY INTRODUCTION In 2017, the number of people living in Downtown Cleveland reached the milestone of 15,000, a 77% increase from 2000 - 2015. This growth, as well as the number of housing development projects in the pipeline, prompted Downtown Cleveland Alliance (DCA) to take a deeper look at the factors driving the momentum in the Downtown Cleveland housing market, as well as consider strategies to enhance this momentum, with the goal of doubling the Downtown population by 2030. This study forecasts that the traditionally defined Downtown area (Flats West Bank to Tri-C Metro Campus) will exceed 20,000 residents in the next twenty-four months and 30,000 residents by the end of 2032. This executive summary provides an overview of the housing demand analysis for Cleveland’s Center City neighborhoods commissioned by DCA, in collaboration with Greater Cleveland Partnership, Cleveland Development Advisors, Cleveland Neighborhood Progress, Enterprise Community Partners, Historic Gateway Neighborhood Corporation, Historic Warehouse District Development Corporation, the City of Cleveland, and Cuyahoga County. GOAL The goal for this study is to provide an accurate overview of the current state of the housing market in Cleveland’s Center City neighborhoods. The information provided here can serve as a basis to formulate housing priorities and housing diversification strategies that create an environment conducive to continued growth in the residential population and the job market. STUDY AREA Cleveland’s Center City neighborhoods, defined as Downtown and portions of adjacent neighborhoods, were selected for the study due to the dynamic nature of the housing and employment markets, transportation corridors and shared community assets surrounding the central business district; and to align with census tracts The Center City study area is comprised of the following neighborhoods between W. 65th to E. 55th, from the lakefront to the Innerbelt: • Six neighborhoods within Downtown - Campus District; The Flats; Gateway District; Nine-Twelve District; Playhouse Square; Warehouse District • Portions of six neighborhoods near Downtown - Central; Detroit Shoreway; Midtown; Ohio City; St. Clair Superior; Tremont METHODOLOGY Urban Partners, a Philadelphia-based community and economic development consulting firm, analyzed data from the U.S. Census Bureau, Ohio Development Service Agency, Cleveland Property Database, rental market and property management websites, U.S. Department of Housing and Urban Development, Cleveland Metropolitan Housing Authority, PolicyMap, and Downtown Cleveland Alliance. KEY FINDINGS The future growth potential of Downtown Cleveland is analyzed based on the expectation that Downtown Cleveland as a residential community can grow within the profiles of the more mature downtowns analyzed in this study. (See below for comparison cities.) The forecast model details demand for an additional 6,800 units by 2030, of which approximately 3,000 are currently under construction or in various stages of planning and development. If these units are all completed, they will accommodate increased demand through 2023. After that point, other developments will be necessary to handle the additional 3,800 units required through 2030. While there are signs of a strengthening Downtown’s for-sale market, Downtown Cleveland’s homeownership rate of 5.1 percent is extremely low compared to the average rate of 22.7 percent noted the comparison downtowns. A key factor in this growth is the increasing capture of Downtown workers as residents—growing 2.05 percent of Downtown workers currently to 3.37 percent in 2030. This represents a 64 percent increase in capture over a 12 year period (2018-2030). While additional and higher quality housing product will facilitate much of this capture—including expanded homeownership product—an effective marketing campaign will also be essential. Measured against the average economic and residential patterns observed in the ten comparison downtowns, the assumptions used for the above forecast model are very modest. If Downtown Cleveland achieves merely the average marks for the ten comparison downtowns, the resulting growth will translate to over 50,000 residents and 30,000 housing units (Table 48). To increase and maintain housing diversity, each section of Center City will need to employ different strategies based on a set of policy goals agreed upon by public and private stakeholders. As new marketrate units are continually introduced in these neighborhoods, the relative percentage of income-restricted units could decline, while at the same time development pressures are placing formerly income-restricted units coming off initial compliance periods at risk of flipping to market-rate. PROJECTIONS To assess the long-term potential growth of the Downtown Cleveland market, it is important to place the Cleveland within the context of other downtowns with a larger or more established housing portfolio. Ten cities analyzed in this study include: - Boston - Denver - Indianapolis - Memphis - Milwaukee - Minneapolis - Orlando - Philadelphia - San Francisco - Seattle The study assumes that the level of economic and residential activity Downtown will shift toward the averages for the ten more mature downtowns noted above. It is assumed that by 2030: • • • • The percentage of regional jobs located in Downtown will grow to 8.7% The percentage of jobs held by Downtown residents will increase to 3.37% The average household size in Downtown will increase slightly from 1.63 to 1.66 Homeownership rates will increase from 5.4% to 9.3% In addition we looked at some of these same variables for Columbus, Pittsburgh and Cincinnati. Downtown Cleveland Housing Demand Analysis E X E C U TIVE SUM M ARY REPORT RECOMMENDATIONS • Continue market-rate rental momentum in Downtown by preserving and continuing to promote existing development tools and incentives and pursuing placemaking and community enhancement initiatives • Diversify the housing mix in Downtown toward homeownership through the creation of a homeownership program in partnership with the public and private sectors; and by working with developers, lenders and other real estate professionals to promote the development of for-sale properties in the Center City • Maintain and expand housing diversity Downtown and in adjacent neighborhoods by: - Preserving current income-restricted communities and identifying specific sites for new incomerestricted communities, while leveraging the 9% Low Income Housing Tax Credits and establishing a Housing Trust Fund; - Promoting the development of mixed-income communities with a variety of tools, potentially including tax exempt bonds, increased utilization of 4% tax credits, the Federal Home Loan Bank Affordable Housing Program, expedited permitting processes for mixed-income and affordable housing projects and considering inclusionary zoning policies for designated locations; and - Creating workforce and market-rate housing opportunities in Center City neighborhoods while preserving current income-restricted housing DCA’S RESPONSE This housing demand analysis confirms: • there is continued demand for market-rate rental properties in Downtown Cleveland and • there is demand for for-sale properties in Downtown Cleveland The results of this analysis demonstrate the success of Downtown and its surrounding neighborhoods are intimately connected. Enhancing housing options and encouraging the job market throughout Center City neighborhoods will benefit residents, employers, retail establishments and homeowners across the city. Moving forward, Downtown Cleveland Alliance will continue to discuss the results and recommendations of this study with its various partners in both the public and private sectors and focus on key opportunities for enhancing momentum in Center City neighborhoods’ rental and for-sale markets. The Center City neighborhood community development corporations will continue to collaborate on growing the diversity of housing options through advocacy and coordination on ideas around policy, connected mobility, and placemaking strategies. DCA is particularly interested to explore the following policy recommendations further: • Continuing to leverage current and existing tools like Historic Tax Credits, Conservation Easements and Tax Abatements to attract developers and residents • Initiating the dialogue necessary to launch a home rehabilitation subsidy program that supports smaller developers in the rehabilitation and sale of market-rate housing in adjacent neighborhoods, such as the Homeownership Rehabilitation Program in the City of Philadelphia in the 1990s to 2000s; and, • Creating a homeownership incentive program with public and private partners that will benefit residents, employees, and employers throughout the Center City housing market, potentially as mirroring the success of the University Circle Greater Circle Living Program Downtown Cleveland Housing Demand Analysis E X E C U TIV E SUM M ARY Downtown Cleveland Housing Demand Analysis Preliminary Data & Market Research Summary (Final) Prepared for: Prepared by: September 24, 2018 Table of Contents 1. Background .................................................................................................................... Page 2 2. Demographic Trends ...................................................................................................... Page 4 3. Employment Trends ....................................................................................................... Page 8 • Commuting Pattern ........................................................................................... Page 10 4. Population and Job Growth Projections ........................................................................ Page 15 5. Homeownership Market Snapshot ................................................................................ Page 16 • Market Observations for Owner Occupied Housing Market ....................... Page 18 6. Rental Market Snapshot ................................................................................................ Page 20 • Market Observations for Renter Occupied Housing Market ....................... Page 24 7. Housing Affordability ..................................................................................................... Page 26 • Income Diversity for Owner-Occupied Households .......................................... Page 26 • Income Diversity for Renter-Occupied Households .......................................... Page 28 • Housing Cost Burden for Center City Households ............................................. Page 29 • Income Restricted Communities on Center City ............................................... Page 30 8. Comparison Analysis of Downtowns ............................................................................. Page 33 • Mid-Term Growth Potential for Downtown Cleveland (2021-2030) ................ Page 37 9. Preliminary Conclusions on Mid-Term Housing Demand .............................................. Page 40 10. Long-Term Growth Forecast for Downtown Cleveland (2031-2040) ............................ Page 41 Appendix 1 ........................................................................................................................... Page 43 Appendix 2 ........................................................................................................................... Page 44 Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 1 1. Background The Downtown Cleveland Alliance (DCA), in collaboration with Cleveland Development Advisors, Cleveland Neighborhood Progress, the City of Cleveland, and Cuyahoga County, commissioned this Housing Demand Analysis for Downtown Cleveland and the surrounding neighborhoods. The study area is comprised of six neighborhoods within Downtown (Campus District, the Flats, Gateway District, NineTwelve District, Playhouse Square, and Warehouse District) and portions of six neighborhoods near Downtown (Central, Detroit Shoreway, Midtown, Ohio City, St. Clair Superior, and Tremont). Together, these twelve neighborhoods are collectively referred to as Center City in this report. The stated goal for this study is to provide DCA and its partners a meaningful sense of the housing market to formulate housing priorities and housing diversification strategies. To assist in the research and preparation of this study, DCA has retained Urban Partners as a consultant. This report is a summary of Phase One finding (i.e., preliminary data research and market analysis) for the Center City housing market. In Section 8, Downtown’s potential growth projections are introduced based on the analysis of trends in downtown areas across ten cities. For the purpose of studying a consistent set of demographic and employment data, the Center City neighborhoods are subdivided into three sections that are coterminous with census tract boundaries. Figure 1 illustrates the three sections, Downtown, Eastside, and Westside, as well as the corresponding census tracts. Figure 1: Center City Study Area Downtown Tracts: 1033 1071.01 1077.01 1078.02 Eastside Tracts 1082.01 1083.01 1084 1087.01 1093.01 1097.01 1098.01 9801 Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) Westside Tracts 1012 1018 1019.01 1031 1034 1035 1036.02 1039 1041 1042 1043 2 It should be noted that the traditional eastern boundary for Downtown Cleveland is E. 30th Street, while this analysis uses the Innerbelt Highway to coincide with census tract boundaries. The estimated population for the geographic portion between the Innerbelt and E. 30th Street is approximately 3,500 residents (see Figure 2). Figure 2: Comparison of Study Area and Traditional Boundaries for Downtown Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 3 2. Demographic Trends According to the 2016 American Community Survey 5-Year Estimates (ACS), the total population of Downtown Cleveland is 13,851, which is 55.7% larger than what was reported in 2010. The population growth of Downtown is an outlier within the City of Cleveland and Cuyahoga County, which lost 4.9% and 2.7% of their respective populations. The Eastside neighborhoods lost 113 residents from 2010 to 2016 (or 0.8% loss), while the Westside neighborhoods lost 654 residents (or 2.9% loss). The 7-County Region1 lost 24,884 residents, which is equivalent to a decrease of 0.9% from 2010 to 2016 (Table 1). Table 1: Population Trends, 2010-2016 Downtown Eastside Westside 8,894 13,851 4,957 55.7% 14,196 14,083 -113 -0.8% 22,509 21,855 -654 -2.9% 2010 Population 2016 Population Total Change (2010-16) % Change (2010-16) Cleveland City 409,221 389,165 -20,056 -4.9% Cuyahoga County 1,293,825 1,258,710 -35,115 -2.7% 7-County Region 2,789,682 2,764,798 -24,884 -0.9% Source: U.S. Census Bureau, Urban Partners Downtown saw an increase in the total number of households between 2000 and 2016, but at a slower pace than the rate of population gain. The number of households in Downtown grew by 35.5% during this period, compared to 2.0% reduction for the City of Cleveland. Both Eastside and Westside neighborhoods added new households in this time period, reporting increases of 2.0% and 2.2%, respectively (Table2). Table 2: Household Trends, 2010-2016 Downtown Eastside Westside 4,805 6,513 1,708 35.5% 5,625 5,737 112 2.0% 10,069 10,295 226 2.2% 2010 Households 2016 Households Total Change (2010-16) % Change (2010-16) Cleveland City 170,464 167,067 -3,397 -2.0% Cuyahoga County 538,944 534,559 -4,385 -0.8% 7-County Region 1,131,062 1,132,244 1,182 0.1% Source: U.S. Census Bureau, Urban Partners Downtown experienced a 58.9% increase in population in households from 2010 to 2016, while the Eastside and Westside neighborhoods remained stable with minor changes. The City of Cleveland, Cuyahoga County, and the 7-County Region all experienced drops in population in households. The group quarters population—which includes individuals in correctional facilities, nursing homes, college dormitories, homeless shelters, etc.—saw decreases across all geographies examined (see Table 3). Table 3: Population in Households Trends, 2010-2016 Downtown Eastside Westside Cleveland City Cuyahoga County 7-County Region 2010 Population in Households 2016 Population in Households 6,603 10,494 13,165 13,051 21,853 20,963 397,047 376,239 1,265,067 1,229,934 2,729,612 2,704,982 2010 Group Quarters Population 2016 Group Quarters Population 4,126 3,357 1,055 1,032 1,055 892 13,742 12,926 29,251 28,776 61,312 59,816 Source: U.S. Census Bureau, Urban Partners 1 The 7-County Region includes Cuyahoga County and the following six counties immediately adjacent: Geauga County, Lake County, Lorain County, Medina County, Portage County, and Summit County. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 4 The average household size for Downtown Cleveland increased, from 1.37 in 2010 to 1.61 in 2016. All other geographic locations analyzed below experienced decreases in average household sizes (Table 4). Table 4: Average Household Size, 2010-2016 AVG Household Size - 2010 AVG Household Size - 2016 Downtown Eastside Westside 1.37 1.61 2.34 2.27 2.17 2.04 Cleveland City 2.33 2.25 Cuyahoga County 2.35 2.30 7-County Region 2.41 2.39 Source: U.S. Census Bureau, Urban Partners Compared to Cuyahoga County and the 7-County Region that reported homeownership rates of 65.4% and 58.9% in 2016, respectively, Center City neighborhoods have very low rates of homeownership. In 2016, 5.1% of all Downtown households were owner-occupants, which is a slight increase from 4.9% in 2010. The Eastside neighborhoods reported a 13.9% homeownership rate, while the Westside reported 29.8% in 2016 (Table 5). Table 5: Homeownership Rate Trends, 2010-2016 2010 Homeownership % 2016 Homeownership % Downtown Eastside Westside 4.9% 5.1% 12.1% 13.9% 33.8% 29.8% Cleveland City 47.1% 41.9% Cuyahoga County 62.4% 58.9% 7-County Region 68.4% 65.4% Source: U.S. Census Bureau, Urban Partners Figure 3 below illustrates the changes in the age distribution for Downtown. From 2010 to 2016, the two largest age groups remained 25-to-34 year olds (32.3%), followed by 18-to-24 year olds (24.8%), though they are proportionally smaller than what was reported in 2010. Three growing age groups are 45-to-54 year olds (11.7%), 55-to-64 year olds (8.3%), and under 18 years-of-age(7.9%). Figure 3: Age Distribution Trends, Downtown, 2010-2016 40% 35% 32.3% 30% 24.8% 25% 20% 15% 10% 11.7% 11.6% 8.3% 7.9% 5% 2.9% 0.4% 0.2% 0% Under 18 18 to 24 25 to 34 35 to 44 45 to 54 2010 55 to 64 65 to 74 75 to 84 85 & over 2016 Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 5 Figure 4 below compares the age distribution patterns in Center City neighborhoods to the Region. First, Downtown has very few children under 18 years-of-age, while the Eastside reports a high percentage of residents in this age bracket. Second, compared to the Region, Downtown has a disproportionately high percentage of 18-to-24 year olds and 25-to-34 year olds. Figure 4: Age Distribution, 2016 40% 35% 30% 25% 20% 15% 10% 5% 0% Under 18 18 to 24 25 to 34 35 to 44 Downtown 45 to 54 Eastside 55 to 64 Westside 65 to 74 75 to 84 85 & over Region Source: U.S. Census Bureau, Urban Partners According to the Census Bureau, 43.9% of Downtown households earn less than $25,000 a year, including 27.8% that make less than $10,0002. For the Eastside, 73.0% of the households earn less than $25,000 a year and 43.0% make less than $10,000—while 43.7% of the Westside households earn less than $25,000 and 15.7% make less than $10,000. The percentage of high-income households earning over $100,000 in the Region is 21.2%—compared to 18.6% for Downtown, 4.1% for the Eastside, and 10.1% for the Westside (Table 6). Table 6: Household Income, 2016 Less than $10,000 $10,000 to $14,999 $15,000 to $24,999 $25,000 to $34,999 $35,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $149,999 $150,000 to $199,999 $200,000 or more Downtown Eastside Westside 27.8% 7.0% 9.1% 7.4% 5.8% 15.6% 8.6% 8.3% 3.4% 6.9% 43.0% 13.3% 16.7% 7.4% 6.3% 5.7% 3.4% 1.7% 0.9% 1.5% 15.7% 10.7% 17.3% 10.6% 17.3% 12.7% 5.6% 5.4% 2.9% 1.8% Cleveland City 20.7% 10.3% 16.6% 12.4% 13.4% 13.2% 6.2% 4.6% 1.2% 1.2% Cuyahoga County 10.8% 6.4% 12.1% 11.0% 13.4% 16.7% 10.7% 10.8% 3.8% 4.3% 7-County Region 8.4% 5.5% 10.9% 10.3% 13.6% 17.8% 12.1% 12.6% 4.4% 4.2% Source: U.S. Census Bureau, Urban Partners 2 This figure for Downtown may be influenced by the relatively large numbers of undergraduate or graduate school students. According to the Census Bureau, there were 1,458 undergraduate college students and another 1,002 graduate/professional school students living in Downtown. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 6 According to the 2016 ACS, 45.8% of Downtown residents are Non-Hispanic Whites, while 38.6% are NonHispanic Blacks, and 7.4% are Non-Hispanic Asians. In 2010, the percentages were 43.7%, 43.7%, and 7.6%, respectively. Two significant trends are the drop in the Hispanic population in the Eastside (from 6.9% to 3.9%) and the increase of the Non-Hispanic White population in the Westside (from 49.0% to 54.2%)(See Table 7). Table 7: Ethnic/Racial Composition, 2010-2016 Downtown Non-Hispanic White Alone Black Alone Asian Alone All Others3 Hispanic (All Races) Eastside Westside Cleveland City 2010 2016 2010 2016 2010 2016 2010 2016 96.8% 43.7% 43.7% 7.6% 1.9% 3.2% 95.6% 45.8% 38.6% 7.4% 3.9% 4.4% 93.1% 13.4% 70.9% 8.0% 0.8% 6.9% 96.1% 14.7% 70.6% 8.1% 2.7% 3.9% 76.8% 49.0% 24.3% 0.8% 2.7% 23.2% 79.1% 54.2% 21.0% 0.8% 3.2% 20.9% 90.8% 34.9% 52.5% 1.6% 1.8% 9.2% 89.2% 34.3% 50.1% 2.0% 2.8% 10.8% Source: U.S. Census Bureau, Urban Partners 3 Includes individuals of mixed race. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 7 3. Employment Trends According to the Census Bureau’s OnTheMap application, which uses employer payroll tax information to geo-locate jobs within a defined area, Downtown Cleveland experienced significant job loss from 2002 to 2011, falling from 113,248 jobs to 91,695. From 2011 to 2015, there’s been a steady but modest amount of job growth annually (approximately 1,000 jobs being added per year, see Figure 4).4 The Eastside and Westside neighborhoods also experienced job loss from 2002 to 2011, but unlike Downtown they have yet to show signs of a bounce back. The Eastside reported 21,534 jobs in 2015, compared to 27,913 jobs in 2002. The Westside neighborhoods totaled 11,015 jobs in 2015, compared to 12,433 jobs in 2000 (see Figure 5). Figure 5: Jobs Located in Center City (2002, 2011, 2015) 120,000 113,248 96,943 100,000 91,695 80,000 60,000 40,000 27,913 23,322 21,534 20,000 12,433 11,534 11,015 0 2002 2011 Downtown Eastside 2015 Westside Source: U.S. Census Bureau 4 Again, the Study Area for Downtown is slightly smaller than the traditionally defined area that uses E. 30 th Street as the eastern boundary. According to OntheMap, the number of jobs located in the geographic portion between the Innerbelt and E. 30th Street in 2015 is, 4,244 jobs. In this analysis, these 4,244 jobs are included in the 21,534 jobs reported for the Eastside neighborhoods. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 8 There are nine (9) sectors that added a total of 11,021 new jobs in Downtown from 2002 to 2015. The biggest net job gains in this period were in Management of Companies & Enterprises (3,270 net new jobs) and Accommodation & Food Services (2,429 net new jobs, see Table 8). Table 8: Employment in Rising Industrial Sectors, 2002-2015 Mining, Quarrying, and Oil and Gas Extraction Real Estate and Rental and Leasing Professional, Scientific, and Technical Services Management of Companies and Enterprises Administration & Support, Waste Management & Remediation Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation Accommodation and Food Services Jobs in 2002 16 1,227 17,687 3,779 7,783 8,529 3,174 4,402 4,867 Jobs in 2015 238 1,483 18,002 7,049 8,285 9,683 4,187 6,262 7,296 Change 2002-2015 222 256 315 3,270 502 1,154 1,013 1,860 2,429 Source: U.S. Census Bureau On the other hand, there are nine (9) other sectors that experienced sustained job loss from 2002 through 2015. The most significant employment losses were in the Finance & Insurance sector, which lost a total of 11,536 jobs during this period (see Table 9 on the following page). Table 9: Employment in Declining Industrial Sectors, 2002-2015 Agriculture, Forestry, Fishing and Hunting Utilities Construction Manufacturing Retail Trade Information Finance and Insurance Other Services (excluding Public Administration) Public Administration Jobs in 2002 3 1,841 1,905 4,001 2,146 6,180 19,312 3,311 14,545 Jobs in 2015 0 1,414 1,290 847 740 3,345 7,776 2,271 11,910 Change 2002-2015 -3 -427 -615 -3,154 -1,406 -2,835 -11,536 -1,040 -2,635 Source: U.S. Census Bureau Location quotient is an analytic tool to measure how concentrated a particular industry, cluster, occupation, or demographic group is in a region as compared to the nation or state. It can reveal important growth engines of the local economy since the dollars earned from selling products or services out of the local area may be used for investment and future development. In order to calculate the location quotients (LQ), the local percentage of employment in a sector/industry is divided by the national or state percentage for that sector/industry. A ratio exceeding 1.0 indicates that a region is more specialized in a particular industry than the nation or state. In Figure 6, Downtown Cleveland employment sectors with LQs above 1.0 (compared to the State average) are illustrated. The sectors with the highest LQ’s in Downtown Cleveland are Arts, Entertainment, & Recreation (4.31), Public Administration (3.72), Professional, Scientific, and Technical Services (3.71), and Management of Companies and Enterprises (2.51). Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 9 Figure 6: Sectors with Highest LQ, Downtown Cleveland (2015) 5.00 4.50 4.31 4.00 3.72 3.71 3.50 3.00 2.51 2.50 2.43 2.16 2.00 1.96 1.38 1.50 1.27 1.16 1.00 0.50 0.00 Arts, Public Entertainment& Administration Recreation Professional, Management of Scientific& Companies and Technical Enterprises Services Utilities Information Finance and Insurance Administration Real Estate and & Support, Rental and Waste Leasing Management & Remediation Educational Services Source: U.S. Census Bureau COMMUTING PATTERN Figure 7 illustrates the In-Area Employment Efficiency, or the percentage of jobs in Downtown filled by Downtown residents. Though the percentage of Downtown workers who also live in Downtown has been steadily increasing (from 0.8% in 2002 to 1.8% in 205), the overwhelming majority of the Downtown workforce is comprised of in-commuters. Figure 7: In-Area Employment Efficiency, 2002, 2008, 2015 2002 2008 2015 In-Commuters In-Commuters In-Commuters Employed and Living in Downtown Employed and Living in Downtown Employed and Living in Downtown 0.8% 1.1% 1.8% 99.2 % 98.9 % 98.2 % Source: U.S. Census Bureau Figure 8 shows the commuting pattern of employed Downtown residents. According to the Census Bureau, a total of 5,566 Downtown residents were employed in 2015. Thirty-two percent (32%) of these residents (or 1,778) also work in Downtown, which means 3,788 “reverse commute” from Downtown. Of the total employed residents, 24.8% (or 1,379) commute to other locations within the City of Cleveland and another 1,521 workers (or 27.3%) work in other locations within Cuyahoga County (Figure 7). Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 10 Figure 8: Commuting Pattern for Employed Downtown Residents, 2015 150 174 3% 3% 564 10% Employed in Downtown 1,778 32% Employed Elsewhere in Cleveland Employed Elsewhere in Cuyahoga County Summit County 1,521 27% Lake County 1,379 25% All Other Locations Source: U.S. Census Bureau The pattern of commuting from the Eastside and Westside neighborhoods to Downtown is illustrated in Figure 9. In 2015, there were a total of 2,133 workers commuting to Downtown from these neighborhoods—578 from Eastside neighborhoods and 1,555 from Westside neighborhoods. As an aggregate, there were more Eastside-Westside residents employed in Downtown in 2015 than from Downtown itself (2,133 to 1,778). Figure 9: Commuting to Downtown from Eastside and Westside Neighborhoods, 2015 Source: U.S. Census Bureau Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 11 Figure 9 shows the commuting pattern of employed Eastside residents. According to the Census Bureau, a total of 4,179 Eastside residents were employed in 2015. A total of 578 residents (13.8%) work in Downtown, while 398 (9.5%) live and work in the Eastside. Additionally, 992 residents (23.7%) work in other locations within Cleveland, and another 1,373 residents (32.9%) commute to other locations within Cuyahoga County (Figure 10). Figure 10: Commuting Pattern for Employed Eastside Residents, 2015 146 3% 541 13% 151 4% 578 14% Employed in Downtown Employed in Eastside Neighborhoods 398 9% Employed Elsewhere in Cleveland Employed Elsewhere in Cuyahoga County Summit County 992 24% 1,373 33% Lake County All Other Locations Source: U.S. Census Bureau The commuting pattern of employed Westside residents is shown in Figure 10. According to the Census Bureau, a total of 9,027 Westside residents were employed in 2015. A total of 1,555 residents (17.2%) work in Downtown, while 695 (7.7%) live and work in the Westside. Additionally, 2,205 residents (24.4%) work in other locations within Cleveland, and another 2,766 residents (30.6%) commute to other locations within Cuyahoga County (Figure 11). Figure 11: Commuting Pattern for Employed Westside Residents, 2015 280 3% 1,173 13% 353 4% Employed in Downtown 1,555 17% Employed in Westside Neighborhoods 695 8% Employed Elsewhere in Cleveland Employed Elsewhere in Cuyahoga County Summit County 2,766 31% 2,205 24% Lake County All Other Locations Source: U.S. Census Bureau Table 10 shows the residential location of all Downtown workers. Approximately two-thirds of Downtown workers (or 63,954) are Cuyahoga County residents, including 1,778 Downtown residents and 19,745 nonDowntown Cleveland residents. Other locations within Cuyahoga County where larger numbers of Downtown workers reside are Lakewood, Parma, Euclid, and Cleveland Heights. Table 10 also shows that Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 12 other six counties that make up the 7-County Region along with Cuyahoga send a total of 21,660 workers to Downtown Cleveland. Table 10: Commuting Pattern for Downtown Workers, 2015 Locations Cuyahoga County Total Residents of Downtown Other Cleveland Residents Residents of Lakewood Residents of Parma Residents of Euclid Residents of Cleveland Heights Residents of Other locations Cuyahoga County 63,954 1,778 19,745 4,112 3,476 2,294 2,280 30,269 Other Counties in Region Residents of Lorain County Residents of Summit County, OH Residents of Lake County, OH Residents of Medina County, OH Residents of Geauga County, OH Residents of Portage County, OH Residents of All Other Locations Total Workers 21,660 5,740 5,346 4,798 3,003 1,688 1,085 11,329 Source: U.S. Census Bureau The University Circle section of Cleveland, located three miles to the east of Downtown, is home to 46,940 jobs in the Healthcare & Social Assistance sector and 58,638 jobs in total. The three Circle Institutions— Cleveland Clinic, University Hospitals, and Case Western Reserve University—have been the dominant "Eds and Meds" economic engines not only for the area but for the entire city (Figure 12). Figure 12: Large Employers located in University Circle Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 13 Table 11 shows the number of Center City residents that commute to University Circle. In 2015, 678 Downtown residents commuted to University Circle, while the number of commuters from the Eastside and Westside neighborhoods totaled 288 and 599, respectively. Table 11: Commuting to University Circle, 2002-2016 Downtown Eastside Westside All Center City Residents 2002 68 92 183 343 2005 177 165 263 605 2008 151 138 208 497 2011 443 278 400 1,121 2015 678 288 599 1,565 Source: U.S. Census Bureau, Urban Partners Figure 13 shows the percentage of employed Center City residents commuting to University Circle, Downtown, and other locations. For Downtown, 12.2% of all employed residents commute to University Circle and 31.9% stay in Downtown for work. Nearly identical percentages of employed residents of the Eastside neighborhoods commute to University Circle and to Downtown (14.3% and 13.8%, respectively) while a bigger percentage of Westside employed residents commute to Downtown (17.2%) than to University Circle (6.6%). Figure 13: Commuting Patterns for Employed Center City Residents, 2015 Downtown Eastside 578, 14% 1778, 32% 3110, 56% 678, 12% Work in Downtown Work in University Circle Work Elsewhere Westside 1555, 17% 599, 14% 3002, 72% 6873, 76% Work in Downtown Work in University Circle Work Elsewhere Work in Downtown Work in University Circle Work Elsewhere 599, 7% Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 14 4. Population and Job Growth Projections According to population projections published by the Ohio Development Service Agency (ODSA), Cuyahoga County is projected to lose 8.3% of its population from 2016 to 2040. Within the 7-County Region, three counties (Geauga, Lorain, and Medina) are projected to add population, while the Region as a whole is forecasted to lose 3.1% of its population from 2016 to 2040 according to ODSA (Table 12). Table 12: Population Projection, 2010-2040 Cuyahoga County Geauga County Lake County Lorain County Medina County Portage County Summit County Total 2010 Census 1,280,122 93,389 230,041 301,356 172,332 161,419 541,781 2,780,440 2016 ACS 1,258,710 94,020 229,266 304,091 175,543 161,796 541,372 2,764,798 2020 Projection 1,209,550 93,510 228,600 310,230 184,670 161,410 534,150 2,722,120 2030 Projection 1,179,030 94,270 228,320 315,760 190,430 160,780 532,080 2,700,670 2040 Projection 1,154,210 94,930 228,380 320,430 194,510 158,930 528,990 2,680,380 % Change 2016-2040 -8.3% 1.0% -0.4% 5.4% 10.8% -1.8% -2.3% -3.1% Source: Ohio Development Service Agency In terms of job growth projections for the county, the Cuyahoga County Office of Economic Development estimates that in 2017 there were 759,580 jobs located within the county. Based on a data service utilized by the County5, Cuyahoga County is forecasted to add 37,692 jobs from 2017 to 2027. It should be noted that one of the industries expected to grow is Arts, Entertainment, and Recreation, a sector for which Downtown Cleveland has a dominant position with an LQ of 4.31 (Table 13). Table 13: Job Growth Projection, Cuyahoga County, 2017-2027 Agriculture, Forestry, Fishing and Hunting Mining, Quarrying, and Oil and Gas Extraction Utilities Construction Manufacturing Wholesale Trade Retail Trade Transportation and Warehousing Information Finance and Insurance Real Estate and Rental and Leasing Professional, Scientific, and Technical Services Management of Companies and Enterprises Administrative, Support, Waste Management, Remediation Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation Accommodation and Food Services Other Services Public Administration Unclassified Total 2017 Employment 279 453 3,004 26,759 67,869 34,353 64,165 27,303 14,337 40,695 15,219 50,337 23,969 51,098 54,222 146,792 17,739 60,303 30,770 29,813 102 759,580 2027 Employment 283 392 2,463 27,204 55,097 33,319 77,477 27,514 12,533 35,864 15,483 45,277 20,647 59,920 50,703 153,590 24,770 95,867 33,863 24,893 113 797,272 Change 2017-27 4 -61 -541 445 -12,772 -1,034 13,312 211 -1,804 -4,831 264 -5,060 -3,322 8,822 -3,519 6,798 7,031 35,564 3,093 -4,920 11 37,692 % Change 2017-27 1.6% -13.4% -18.0% 1.7% -18.8% -3.0% 20.7% 0.8% -12.6% -11.9% 1.7% -10.1% -13.9% 17.3% -6.5% 4.6% 39.6% 59.0% 10.1% -16.5% 11.0% 5.0% Source: Ohio Development Service Agency 5 Estimates provided by Chmura Economics & Analytics. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 15 5. Homeownership Market Snapshot Estimates of current homeownership in the Center City neighborhoods have been derived from two sources: (1) the 2016 ACS; and (2) the analysis of Cleveland’s current property database6. Both sources have limitations. ACS is both two years old and based on relatively small sampling. 7 Similarly, estimating homeownership from the property database requires assessment of individual parcel data in terms of mailing address, name of owner, etc. We also note that as of this writing, data on Census Tract 1018 properties has not been available for inclusion in this portion of the analysis. With these limitations, ACS data identifies nearly 4,200 homeowners in the Center City neighborhoods in 2016, while the property database analysis finds 3,600 in 2018. One-third of this difference involves the lack of property information on Census Tract 1018. The remaining discrepancies may flow from minor sampling and analytic errors. As shown on Table 14, 10.9% of these homeowners are located Downtown, while 71.6% are in the Westside neighborhoods and 17.5% in the Eastside. Of homeowners that purchased since 2014, 71% continue to be in the strong homeownership Westside, while 21% are Downtown and only 8% are on the Eastside. Table 14: Homeowners Households in Center City Homeowners (2016 ACS) Homeowners (Cleveland Property Database - 2018) % of Center City Homeowners (2018) Downtown Eastside Westside 329 393 10.9% 798 629 17.5% 3,070** 2,579 71.6% Center City Total 4,197 3,601 - Source: U.S. Census Bureau, Cleveland Property Database, Urban Partners ** Includes Tract 1018 Comparison of ACS data from 2010 to 2016 shows 40.0% growth in homeownership in Downtown and 17.4% growth in the Eastside neighborhoods (Table 15). However, the Westside, which contains the majority of owner-occupied units in Center City, lost 9.7% of its homeowners during these six years. More detailed analysis suggests much of that homeownership loss is in the far western portions of this Westside subarea. Table 15: Change in Homeownership, 2010-2016 Homeowners (2010 ACS) Homeowners (2016 ACS) % Change Downtown Eastside Westside 235 329 40.0% 680 798 17.4% 3,399 2,579 -9.7% Center City Total 4,314 3,601 -2.7% Source: U.S. Census Bureau, Urban Partners Analysis of 2018 Cleveland Property Database information (Table 16) suggests that about one-sixth of homeowners reside in condominiums—mostly in Downtown, but also importantly in the Westside neighborhoods. Overall, about 59% of homeowners live in single-family homes—not surprisingly—with 6 The database was obtained with the cooperation of Cleveland Neighborhood Progress. 7 The sampling error for homeownership for the City of Cleveland is estimated by the Census Bureau at 1.6%; for smaller census tracts these error margins range from 15% to 20%. At the scale of the Center City neighborhoods in the aggregate, this error range is likely 7% to 10%. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 16 very little of this housing type in Downtown; but in the Westside and Eastside, we find about two-thirds of the homeowners in this housing type. Interestingly, another one-quarter of homeowners appear to occupy properties classified as two-family homes. We do not know the extent to which those homeowners rent one unit in these structures to tenants versus simply occupying both units themselves. Table 16: Housing Type of Homeowners, 2018 Residential Condominium Single-Family Home Two-Family Dwelling Total Downtown Eastside Westside 368 23 2 393 7 393 229 629 223 1,707 649 2,579 Center City Total 598 2,123 880 3,601 Source: Cleveland Property Database, Urban Partners Long-term homeownership varies between neighborhoods. On the Eastside, more than 60.6% of homeowners purchased their homes before 2008. In Downtown, only 15.8% have lived in their homes for more than 10 years; while on the Westside, 40.6% of homeowners purchased before 2008 (Table 17). On the other hand, 56.4% of Downtown homeowners have purchased since the beginning of 2014, including 22.1% in 2017 and first half of 2018 alone. Coupled with the growth in homeownership Downtown reported on Table 17, this suggests increasing demand for owner-occupied Downtown condominiums, reducing the previous excess supply of condominiums in Downtown. Transfer data indicates that about 25% to 30% of condominium sales in Downtown since 2014 have been purchases from developers of previous inventory (some from the 2005 to 2007 period). Recent buyers (since 2014) are also a strong factor away from Downtown; they represent three of eight homeowners in the Westside and 18.9% of homeowners in the Eastside. Table 17: Terms of Homeowners, 2018 Bought Before 2008 Bought 2008 to 2010 Bought 2011 to 2013 Bought 2014 to 2016 Bought 2017 + First Half 2018 Downtown Eastside Westside 15.8% 10.4% 17.3% 34.3% 22.1% 60.6% 10.9% 9.6% 11.9% 7.0% 40.6% 8.0% 14.7% 21.2% 15.4% Center City Total 40.4% 8.8% 14.3% 21.6% 15.0% Source: Cleveland Property Database, Urban Partners On Table 18, we examine trends in sales prices. On a price per square foot basis, Downtown condominiums are the most expensive—averaging $215 per SF recently (2017/2018). This represents a modest up-tick from the prices paid by longer-term condo owners. By 2016, this pricing appeared to recover from the 2011 to 2013 dip, but still was at earlier pricing near $200 per SF. The other growing condo market—Westside—remains price competitive at about 77% of Downtown prices, but this represents a significant growth in price and volume over previous circumstances. More than 55% of Westside condos have been purchased since 2014. Nearly 500 current homeowners purchased a single-family home in the Center City area since 2014; 89% of them are in the Westside. Pricing for this home type in Westside has grown dramatically, averaging Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 17 $141 per SF in the past 18 months. Eastside resales of single-family homes for homeownership remain highly affordable with prices in the range of $45 per SF in the past 18 months. The two-dwelling property class remains an importance component of homeownership with 35% of Eastside homeowners and 25% of Westside residing in that building type. Purchase of this home type by homeowners remains an important market in the post-2014 period, with 18% of Westside post-2014 owners purchasing this type and 30% of Eastside buyers. Pricing of this property type has grown in Westside to about $72 per SF, but this represents a 50% discount from the pricing for single-family homes. On the Eastside, two-family homes owned by homeowners have been generally under $20 per SF. Table 18: Home Pricing by Type & Year, Owner-Occupied Units (per SF) Downtown Condominium Single-Family Two-Family Eastside Condominium Single-Family Two-Family Westside Condominium Single-Family Two-Family Bought 2008 to 2010 Bought 2011 to 2013 Bought 2014 to 2016 Bought 2017 + 1st Half 2018 $ 204.29 $ 138.13 $ 3.66 $ 175.41 $ 130.23 - $ 202.63 $ 145.10 - $ 215.09 $ 156.01 - $ 71.95 $ 58.40 $ 20.36 $ 36.93 $ 17.02 $ 102.59 $ 42.57 $ 17.99 $ 124.53 $ 45.53 $ 11.92 $ 114.23 $ 76.89 $ 42.73 $ 131.97 $ 83.57 $ 43.42 $ 149.45 $ 108.11 $ 65.10 $ 166.56 $ 141.83 $ 72.21 Source: Cleveland Property Database, Urban Partners MARKET OBSERVATIONS FOR OWNER OCCUPIED HOUSING MARKET Thirty-seven percent (37%) of current homeowners in the Center City neighborhoods purchased their homes since the beginning of 2014. Nine out of ten (91%) of those homebuyers focused on four specific products: • • • • 47% bought single family homes in the Westside neighborhoods. This demand has sharply increased sales prices to $142 per SF; 20% purchased condominiums in Downtown, creating enough demand that pricing finally began to uptick after many stagnant years; 13% bought two-family dwellings in Westside neighborhoods causing some escalation in pricing; and 11% purchased condominiums in Westside neighborhoods generally at prices 75% to 80% of Downtown pricing per SF. These components of demand suggest that Ohio City, Tremont, and portions of Detroit Shoreway are being reinforced as the near-Downtown homeownership locations of choice. Escalation of pricing in these communities are strengthening property values and growing population, but also beginning to press affordability for certain housing segments (for more discussion, see Section 7, Housing Affordability). There are also some signs of a strengthening Downtown for-sale condominium market. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 18 The Eastside neighborhoods, on the other hand, have faced generally stagnant market conditions— population and occupied housing units have remained stable, but these neighborhoods have seen the most limited homebuyer demand and pricing has stayed well below conditions in Downtown and the Westside. With growing price pressures in the Westside, these neighborhoods can offer the best opportunities for affordable and workforce homeownership within the Center City neighborhoods. There are no indications that the growth of the Downtown housing market has drained demand from the adjacent Westside and Eastside. Rather, spillover demand from Downtown appears to be strengthening housing market conditions on the Westside, while conditions on the Eastside remain stable—being neither negatively impacted by Downtown nor, as yet, receiving any direct market benefit. There are, however, no assurances that continued growth of Downtown will not put affordability pressures on the Eastside. Active planning needs to be undertaken to maintain the affordability of Eastside, to capture the potential for workforce housing there, and to benefit from further strengthening of the Downtown housing market. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 19 6. Rental Market Snapshot According to the 2016 ACS, there were a total of 18,348 renter-occupied homes in Center City, which represents a 13.4% increase from 2010. Downtown added 1,614 renter-occupied homes during this period, while the Westside neighborhoods added 555 units. Meanwhile, the Eastside neighborhoods remained stable, losing six (6) renter occupied units (Table 19). Table 19: Total Number of Renter Occupied Homes Units, 2010-2016 Total Renter-Occupied Units, 2010 Total Renter-Occupied Units, 2016 Total Change, 2010-2016 % Change, 2010-2016 Downtown Eastside Westside 4,570 6,184 1,614 35.3% 4,945 4,939 -6 -0.1% 6,670 7,225 555 8.3% Center City Total 16,185 18,348 2,163 13.4% Source: U.S. Census Bureau, Urban Partners Approximately half of the Center City renter households live in structures with less than ten units. The smaller size rental structures are most prevalent in the Westside neighborhoods where two-thirds of all renter households live in structures with four-or-less units. Most of the Downtown’s renter households (69.0%) live in large structures with 50-or-more units (Table 20). Table 20: Units in Structure, Rental Homes All Rental Units 1, detached 1, attached 2 3 or 4 5 to 9 10 to 19 20 to 49 50 or more Mobile home Boat, RV, van, etc. Downtown % Eastside % Westside % 6,184 121 181 165 100 245 153 912 4,270 0 37 2.0% 2.9% 2.7% 1.6% 4.0% 2.5% 14.7% 69.0% 0.0% 0.6% 4,939 464 880 347 257 1,157 395 385 1,054 0 0 9.4% 17.8% 7.0% 5.2% 23.4% 8.0% 7.8% 21.3% 0.0% 0.0% 7,225 1,221 638 1,752 1,201 426 330 387 1,259 11 0 16.9% 8.8% 24.2% 16.6% 5.9% 4.6% 5.4% 17.4% 0.2% 0.0% Center City Total 18,348 1,806 1,699 2,264 1,558 1,828 878 1,684 6,583 11 37 % 9.8% 9.3% 12.3% 8.5% 10.0% 4.8% 9.2% 35.9% 0.1% 0.2% Source: U.S. Census Bureau Table 21 shows the rental vacancies in Center City neighborhoods from 2010 to 2016. Center City neighborhoods reported a total of 1,500 vacant for-rent units in 2016, a decrease of 15.3% from 2010. Table 21: Vacant, For Rent Units, 2010-2016 Total Vacant Rental Units, 2010 Total Vacant Rental Units, 2016 Downtown Eastside Westside 651 462 553 533 568 505 Center City Total 1,772 1,500 Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 20 Approximately three out of four renter households (74.2%) in Center City pay less than $1,000 per month in rent. A total of 2,922 renter households pay between $1,000 to $1,499 per month in rent, while 1,204 households pay more than $1,500 per month. A total of 610 renter households don’t pay any cash rent, which is equivalent to 3.3% of all renter households. Downtown reports the highest percentage of renter household paying higher rents, with 12.1% (or 748 households) paying more than $1,500 in monthly rent. As for renter households paying more than $3,000 per month, Downtown reported a total of 36 households (Table 22). Table 22: Gross Monthly Rent, 2016 Less than $100 $100 to $299 $300 to $499 $500 to $999 $1000 to $1,499 $1,500 to $1,999 $2,000 to $2,499 $2,500 to $2,999 $3,000 to $3,499 $3,500 or more No cash rent Downtown % Eastside % Westside % 486 862 302 1,939 1,736 584 97 31 26 10 111 7.9% 13.9% 4.9% 31.4% 28.1% 9.4% 1.6% 0.5% 0.4% 0.2% 1.8% 749 1,316 911 1,268 161 141 61 10 0 0 322 15.2% 26.6% 18.4% 25.7% 3.3% 2.9% 1.2% 0.2% 0.0% 0.0% 6.5% 211 833 899 3,836 1,025 196 28 20 0 0 177 2.9% 11.5% 12.4% 53.1% 14.2% 2.7% 0.4% 0.3% 0.0% 0.0% 2.4% Center City Total 1,446 3,011 2,112 7,043 2,922 921 186 61 26 10 610 % 7.9% 16.4% 11.5% 38.4% 15.9% 5.0% 1.0% 0.3% 0.1% 0.1% 3.3% Source: U.S. Census Bureau Working from DCA’s inventory of Downtown rental communities, the performance of Downtown’s rental market was analyzed. From 2010 to 2015, a total of 1,755 rental homes were added in Downtown with the opening of these 14 communities: • • • • • • • • • • • • • • 2010 - University Studios (148 units of student apartments) 2013 - Langston (318 units of student apartments) 2013 - Lofts at Rosetta (97 units) 2013 - Residences at Hanna (102 Units) 2013 - Seasons at Perk Plaza (33 units) 2013 - Reserve Square, Embassy Suite Conversion (232 units) 2014 - Residences at 1717 (223 units) 2014 - The Nine Luxury Suites (104 units) 2014 - The Nine Boutique Suits (90 units) 2014 - 2320 Lofts (39 units of student apartments) 2015 - Ivory on Euclid (29 units) 2015 - The Creswell (80 units) 2015 - Flats East Bank (241 units) 2015 - Lofts at Southworth (18 units) From 2016 to 2017, a total of 1,043 rental homes were added in Downtown with these eight (8) communities: • 2016 - Schofield Residences (55 units) Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 21 • • • • • • • 2017 - 1224 Huron (9 units) 2017 - Residences at Leader (224 units) 2017 - Milton Townhome Apartments (16 units) 2017 - The Edge (237 units of student apartments) 2017 - The Garfield (123 units) 2017 - Worthington Yards (98 units) 2017 - Standard Building (281 units) Downtown’s rental housing market benefits from the presence of a growing off-campus population at Cleveland State University and, to a lesser degree, students attending Cuyahoga Community College (TriC). Responding to this demand, four rental communities have been introduced in Downtown that primarily target students renters: University Studios, Langston, 2320 Lofts, and The Edge. These complexes offer all-utilities-included rent, fitness centers, and on-site parking. Langston offers additional luxury amenities such as swimming pool, door attendant, and deck/patio space. Asking rents per bedroom, per month in 2018 are: • Studio units: $492 to $1,385 • One-bedroom units: $550 to $1,390 • Two-bedroom units: $675 to $897 • Three-bedroom units: $775 to $975 • Four-bedroom units: $675 to $1,150 (Table 23) Table 23: Summary of Rental Rates for Newly Opened Student-Oriented Complexes in Downtown Name Built Total Units Type Price Per Bedroom Availability University Studios Langston 2010 318 150 2013 39 2014 The Edge 240 2017 $645-$1,385 $974 $1,269-$1,272 $749-$897 $775-$814 $550-$600 $675-$850 $900-$975 $1,000-$1,150 $492 None None 2320 Lofts Studio Studio 1 Bedroom 2 Bedroom 3 Bedroom 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom Studio 1 Bedroom 2 Bedroom 4 Bedroom $1390 $849 $675 None Some Two-bed and Four-bed available Source: Company Websites, Apartments.com, Urban Partners Table 24 shows 18 non-student rental communities introduced in Downtown from 2010 to 2017. Most of these complexes offer luxury amenities such as swimming pools, fitness centers, washer/dryer in the unit, dedicated parking spaces (for additional fee), and community rooms. Additionally, many of these complexes offer 24-hour security and maintenance services. Asking rents for studio units range from $765 to $1,145/month (or $1.41 to $2.10 per SF); one-bedroom units range from $893 to $2,395/month (or $1.38 to $2.80 per SF); two-bedroom units from $1,324 to $5,900/month (or $1.11 to $2.16 per SF); and three-bedroom units range from $1,756 to $3,686/month (or $1.09 to $2.13 per SF). Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 22 Table 24: Summary of Rental Rates for Downtown Complexes Opened from 2010 to 2017 Name Total Units 97 Built Type 2013 Residences at Hanna Seasons at Perk Plaza The Nine - Luxury Suites Residences at 1717 Reserve Square 102 2013 33 2013 104 2014 223 2014 971 2013 (last update) The Nine Boutique Suites Ivory on Euclid The Creswell 90 2014 29 80 2015 2015 Flats East Bank 241 2015 Schofield Residences Lofts at Southworth 1224 Huron 52 2016 18 2015 9 2015 Residences at Leader 224 2017 Milton Townhomes The Garfield 16 2017 Studio 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom Studio 1 Bedroom 2 Bedroom 3 Bedroom 1 Bedroom 2 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom 3 Bedroom 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom Studio 1 Bedroom 2 Bedroom 2 Bedroom 123 2017 Worthington Yards 98 2017 The Standard 292 2017 1 Bedroom 2 Bedroom 3 Bedroom 1 Bedroom 2 Bedroom 3 Bedroom 1 Bedroom 2 Bedroom Lofts at Rosetta Center Price Size (SF) $/SF Availability $1,145-$1,145 $1,050-$1,260 $1,450 $902-$1,409 $1,324-$1,932 $1,100-$1,400 $1,575-$1,900 $2,175 $,3875-$5,900 $1,018-$1,489 $1,903-$2,938 $792-$922 $925-$1,099 $1,202-$1,948 $1,756-$2,003 $1,125-$1,325 $1,795 $2,025 $1,200-$1,500 $1,450-$1,900 $1,906-$2,026 $2546-$3,676 $3,686 $1,650-$1,925 $2,850-$3,995 $1,050 $1,490-$1,550 $1,450 $1,650-$2,100 $765-$801 $893-$1,479 $1,591-$3,045 $2,400 544-608 SF 737-889 SF 1,115 SF 525-925 SF 950-1,400 SF 630-905 SF 1,180-1,240 SF 1,010 SF 1,817-2,775 SF 740-945 SF 1,445-1,910 SF 561-561 SF 665-714 SF 1,080-1,440 SF 1,615-1,700 SF 566-667 SF 929 SF 1,185 SF 769-888 SF 1,101-1,164 SF 876-910 SF 1,331-1,700 SF 1,602 SF 745-870 SF 1,490-1,960 SF 700 SF 1,200-1,200 SF 912 SF 1,102-1,078 SF 450-500 SF 515-940 SF 1,005-1,925 SF 1,200 SF $1.88 to $2.10 $1.42 $1.30 $1.52 to $1.72 $1.38 to $1.39 $1.55 to $1.75 $1.33 to $1.53 $2.15 $2.13 $1.38 to $1.58 $1.32 to $1.54 $1.41 to $1.64 $1.39 to $1.54 $1.11 to $1.35 $1.09 to $1.18 $1.99 $1.93 $1.71 $1.56 to $1.69 $1.32 to $1.63 $2.18 to $2.23 $1.91 to $2.16 $2.30 $2.21 $1.91 to $2.04 $1.50 $1.24 to $1.29 $1.59 $1.50 to $1.95 $1.60 to $1.70 $1.57 to $1.73 $1.58 $2.00 None $1,275-$2,395 $2,250-$3,095 $3,595 $1,255-$2,200 $1,895-$2,200 $2,850-$2,925 $1,400-$2,300 $2,000-$3,150 551-889 SF 1,044-1,530 SF 1,688 SF 711-1,080 SF 1,139-1,515 SF 1,855-2,003 SF 808-821 SF 1,172-1,261 SF $2.31 to $2.69 $2.02 to $2.16 $2.13 $1.77 to $2.04 $1.45 to $1.66 $1.46 to $1.54 $1.73 to $2.80 $1.71 to $2.50 3 One-bed Available None Two-bed Available 1 Two-bed Available 3 Studios 21 One-bed 13 Two-bed Two-bed Available None 2 Two-bed available None None None None 1 Two-Bed Available None 50% leased, Nov-17 to May-18 None 50% leased, Jan-18 to May-18 Source: Company Websites, Apartments.com, Urban Partners Table 25 shows ten notable rental communities in Downtown built prior to 2010. Amenities offered in these communities are comparable to the ones at the newest communities–such as fitness centers, washer/dryer in the unit, on-site parking (for additional fee), and community rooms. Asking rents for studio units range from $555 to $1,035/month (or $1.26 to $1.89 per SF); one-bedroom units range from $630 to $2,200/month (or $0.65 to $2.56 per SF); two-bedroom units from $1,010 to $3,373/month (or Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 23 $1.06 to $2.24 per SF); and three-bedroom units range from $1,700 to $4,634/month (or $1.26 to $2.67 per SF). Table 25: Summary of Rental Rates for Other Notable Complexes in Downtown Name Total Units 407 Built Type 1968 Crittenden Court 208 1996 The Archer 250 2016 Water Street Apartments Bridgeview Apartments 100 1997 250 2000 The Statler 295 2002 Stonebridge Apartments The Shoreline (Quay 55) 159 2002 139 2003 The Bingham 342 2004 668 Euclid 236 2007 Studio 1 Bedroom 2 Bedroom Studio 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom 3 Bedroom Studio 1 Bedroom 2 Bedroom 3 Bedroom 1 Bedroom 2 Bedroom 1 Bedroom 2 Bedroom 3 Bedroom 1 Bedroom 2 Bedroom 3 Bedroom Studio 1 Bedroom 2 Bedroom Sphere (Chesterfield) Price $710-$900 $835-$1,320 $1,335-$1,360 $555-$640 $870-$870 $1,010-$1,245 $1,498-$1,598 $1,685-$1,850 $995-$1,180 $1,450 $1,099-$1,275 $1,525-$1,850 $1,795-$2,500 $865-$1,035 $840-$1,825 $1,100-$1,900 $1,700-$2,850 $1,026-$1,277 $1,084-$2,269 $1,225-$1,399 $1,730-$2,350 $2,740 $1,568-$2,200 $1,655-$3373 $3008-$4634 $889 $630-$1,582 $1,405-$1,933 Size (SF) $/SF Availability 450-600 SF 745-950 SF 1092-1,255 SF 440-615 SF 700-740 SF 950-970 SF 754-942 SF 977-1,163 SF 534-679 SF 1,330 SF 716-877 SF 1,086-1287 SF 1,375-1611 SF 522-547 SF 684-1,632 SF 1,100-1,632 SF 1,351-1,900 SF 1,000-1,000 SF 925-2,000 SF 623-745 SF 1,000-1,435 SF 1,800 SF 613-915 SF 1,081-1,509 SF 1,737-1,735 SF 655 SF 976-1,495 SF 1,045-1,565 SF $1.50 to $1.58 $1.12 to $1.39 $1.08 to $1.22 $1.04 to $1.26 $1.18 to $1.24 $1.06 to $1.28 $1.70to $1.99 $1.59to $1.77 $1.74 to $1.86 $1.09 $1.45 to $1.53 $1.40 to $1.44 $1.31 to $1.55 $1.66 to $1.89 $1.12 to $1.23 $1.00 to $1.16 $1.26 to $1.50 $1.03 to $1.28 $1.13 to $1.17 $1.88 to $1.97 $1.64 to $1.73 $1.52 $2.40 to $2.56 $1.53 to $2.24 $1.73 to $2.67 $1.36 $0.65 to $1.06 $1.24 to $1.34 1 available None 13 one-bed, 13 two-beds 1 one-bed 2 one-bed, 7 two-bed available 1 studio, 12 one-bed, 6 two-bed, 6 three-bed 5 two-beds 2 one-bed, 6 two-bed, 1 three-bed 2 one-bed, 14 two-bed, 1 three-bed None Source: Company Websites, Apartments.com, Urban Partners MARKET OBSERVATIONS FOR RENTER OCCUPIED HOUSING MARKET From 2010 to 2015, Downtown has added a total of 1,755 rental homes, or 351 units per year. In the ensuing two years, a total of 1,043 rental homes in were introduced. All but two communities—the Garfield, and the Standard—have been fully absorbed. Not including the 208 units yet to be absorbed at the Garfield and the Standard, Downtown rental communities that opened from 2010 to 2017 have reached stabilization at an aggregate absorption rate of approximately 35 units per month. Developers and property managers interviewed for this study indicated that the demand for new apartment units remain strong, though there are some early signs of a slowing trend. Unlike previous years when most of the renters signing the lease were brand new Downtown residents, a fair amount of hopping from one Downtown apartment to another can now be observed. Some have indicated that rent concessions could be a customary practice among Downtown rental communities in the future, but comparing the current rent rates and vacancy status of the older communities (Table 25) to the newer communities (Table 24), the older rental units are still performing well. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 24 The major segment of the rental market in Downtown is driven by Millennials (those born between 1982 and 2000), but several developers remarked that a growing percentage of their tenants are older households—couples with small kids, retirees, and empty nester. For example, anecdotal evidence points to approximately one-third of the renters in the Flats at East Bank property being retirees or empty nesters who’ve recently downsized from their larger suburban homes and moved into Downtown. As detailed in Section 3, a growing number of Downtown residents work in University Circle. In 2015, Downtown residents commuting to University Circle totaled 678, which represents 12.2% of all employed residents in Downtown. According to one property manager, demonstrating the large influence of the Cleveland Clinic and University Hospitals in University Circle, Match Day for the National Resident Matching Program is one of the busiest days for apartment managers operating in Downtown. As of this report, the following seven rental communities are at some stage of construction. At the current pace of absorption, these 850 units will be fully leased up in a span of 24 to 28 months. • • • • • • • The Shoreline (Quay 55) – 29 units Bloch Building – 12 units Residences at Halle - 122 units Harbor Verandas – 16 units The Beacon – 187 units Cleveland Athletic Club Building – 166 units The Lumen – 318 units At the current absorption rate of 35 units per month, Downtown Cleveland can absorb up to 3,800 rental homes from 2018 to 2026. The total number of renter-occupied housing in Downtown in that scenario will be approximately 10,800 units (6,184 units reported in the 2016 ACS + 835 units absorbed in 20162017 + 3,800 units to be absorbed from 2018-2016). The growth of Downtown’s rental market has occurred without negatively impacting the rental markets in the Eastside and Westside neighborhoods. From 2010 to 2016, the Eastside neighborhoods have remained stables in the total number of rental homes, while the Westside neighborhoods added 555 new units. Notable rental communities in the Eastside include Sankofa Village with asking rents ranging from $675 to $1,075 per month ($1,000 for 2-bedroom units), Innerbelt Lofts with asking rents ranging from $968 to $1,611 per month, Body Block Arcade Apartments with asking rents ranging from $650 to $897 per month, and 1900 Euclid Lofts asking rents ranging from $900 to $1,595 per month. The Eastside neighborhoods— located between Downtown and University Circle—are in great position to absorb the rental housing demand originating from both sides. Commuters using the Healthline bus on Euclid Avenue can travel from E. 30th Street to Cleveland Clinic in just 14 minutes. The rental housing market in the Westside also benefit from their proximity to Downtown, but it has the added advantage of the RTA Redline and the trail/recreation amenities along the lake at Edgewater Park. Asking rents at these communities are near Downtown prices, including: Battery Park Loft Apartments from $2,014 to $2,439 per month; the Edison at Gordon Square from $1,354 to $2,938 per month; Edge 32 Apartments from $1,994 to $2,414 per month; Mariner’s Watch Apartments from $1,558 to $3,718 per month; and Clinton West Luxury Apartments from $1,525 to $3,450 per month. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 25 7. Housing Affordability The U.S. Department of Housing and Urban Development (HUD) publishes the Comprehensive Housing Affordability Strategy (CHAS) data that combine the U.S. Census Bureau’s ACS with HUD adjusted median family incomes (or more commonly referred to as Area Median Income or AMI) to create estimates of the number of households that would qualify for HUD assistance. The CHAS data also incorporate household characteristics and housing unit characteristics (such as number of bedrooms and rent/owner costs). These characteristics are combined into a series of cross-tabulations, each of which has a particular focus. To study the discernable patterns of housing affordability in Downtown and the other Center City neighborhoods, CHAS data from 2009 and 2014 were analyzed 8. First, Cleveland-Elyria-Mentor MSA’s HUD income limits and income categories for 2009 and 2014 are shown in Table 26 and Table 27 below. Table 26: 2009 HUD Income Limits by Income Category Household Size Income Category Median Income (100%) Low-Income (80%) Very Low-Income (50%) Extremely Low Income (30%) Source: HUD 1 $45,400 $36,320 $22,700 $13,620 2 $51,800 $41,440 $25,900 $15,540 3 $58,300 $46,640 $29,150 $17,490 4 $64,800 $51,840 $32,400 $19,440 5 $70,000 $56,000 $35,000 $21,000 6 $75,200 $60,160 $37,600 $22,560 7 $80,400 $64,320 $40,200 $24,120 8 $85,500 $68,400 $42,750 $25,650 6 $72,700 $58,150 $36,350 $21,850 7 $77,700 $62,150 $38,850 $23,350 8 $82,700 $66,150 $41,350 $24,850 Table 27: 2014 HUD Income Limits by Income Category Household Size Income Category Median Income (100%) Low-Income (80%) Very Low-Income (50%) Extremely Low Income (30%) Source: HUD 1 $43,900 $35,100 $21,950 $13,200 2 $50,100 $40,100 $25,050 $15,050 3 $56,400 $45,100 $28,200 $16,950 4 $62,600 $50,100 $31,300 $18,800 5 $67,700 $54,150 $33,850 $20,350 INCOME DIVERSITY FOR OWNER-OCCUPANT HOUSEHOLDS According to the CHAS data, higher percentage of Downtown owner-occupants are at or above 100% of the AMI in 2014 than in 2009. A vast majority of Downtown owner-occupants (92.5%) fall into that income category, compared to 66.7% in 2009 (Table 28).9 Table 28: Household income for Downtown Owner Occupants as a percentage of AMI, 2009-2014 All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median Downtown Owner Occupants - 2009 255 170 50 0 10 25 % 66.7% 19.6% 0.0% 3.9% 9.8% Downtown Owner Occupants - 2014 265 245 10 10 0 0 % 92.5% 3.8% 3.8% 0.0% 0.0% Source: HUD, Urban Partners 8 As of this report, the most recent version published by HUD are the 2014 CHAS. 9 We must note that, for areas with small numbers of households such as Downtown, the sampling for ACS (8% of households over a five-year period) can result is significant sampling error. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 26 Detailed in Table 29, the biggest change in the income diversity of the Eastside neighborhoods from 2009 to 2014 was the increase of owner-occupants in the 80% to 100% of the Area Median Income range. A total of 154 households in that income category were reported in 2014, comprising 17.1% of all owneroccupant households in the Eastside neighborhoods. Table 29: Household income for Eastside Owner Occupants as a percentage of AMI, 2009-2014 All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median Eastside Owner Occupants - 2009 801 280 14 255 124 128 % 35.0% 1.7% 31.8% 15.5% 16.0% Eastside Owner Occupants - 2014 903 275 154 135 158 181 % 30.5% 17.1% 15.0% 17.5% 20.0% Source: HUD, Urban Partners The income diversity for owner-occupant households in the Westside neighborhoods is shown in Table 30. Like Downtown, the Westside neighborhoods reported higher percentage of wealthier households in 2014, as indicated by the percentage of owner-occupant households at or above 100% of AMI (41.5% in 2009 to 50.0% in 2014). The most significant shifts during this period for the Westside neighborhoods are the reduction of the overall number of owner-occupant units (842 units) and the decrease of owneroccupant households earning between 30% and 80% of the Area Median Income (-627 households). Table 30: Household income for Westside Owner Occupants as a percentage of AMI, 2009-2014 All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median Westside Owner Occupants - 2009 3,892 1,615 345 809 610 513 % 41.5% 8.9% 20.8% 15.7% 13.2% Westside Owner Occupants - 2014 3,050 1,525 296 429 363 437 % 50.0% 9.7% 14.1% 11.9% 14.3% Source: HUD, Urban Partners Taken as a whole, fewer owner-occupied households residing in the Center City neighborhoods are below 80% of the Area Median Income—reporting 40.7% of all owner-occupant households in 2014, compared to 50.0% in 2009. Additionally, nearly half of the owner-occupied households are at or above 100% of the AMI in 2014, compared to 41.7% in 2009 (Table 31). Table 31: Household income for Center City Owner Occupants as a percentage of AMI, 2009-2014 All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median Center City Owner Occupants - 2009 4,948 2,065 409 1,064 744 666 % 41.7% 8.3% 21.5% 15.0% 13.5% Center City Owner Occupants - 2014 4,218 2,045 460 574 521 618 % 48.5% 10.9% 13.6% 12.4% 14.7% Source: HUD, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 27 INCOME DIVERSITY FOR RENTER-OCCUPANT HOUSEHOLDS According to the CHAS Data, higher percentage of Downtown renter-occupants are at or above 100% of the AMI than in 2009. A total of 2,425 renter households in Downtown (representing 40.9% of all renters) fall into that income category, compared to 32.8% in 2009 (Table 32). Table 32: Household income for Downtown Renter Occupants as a percentage of AMI, 2009-2014 All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median Downtown Renter Occupants - 2009 5,619 1,845 305 660 555 2254 % 32.8% 5.4% 11.7% 9.9% 40.1% Downtown Renter Occupants - 2014 5,925 2,425 185 540 565 2,210 % 40.9% 3.1% 9.1% 9.5% 37.3% Source: HUD, Urban Partners In the Eastside neighborhoods, both ends of the income range saw increases from 2009 to 2014. Renter households earning at or above 100% of AMI increased from 4.8% in 2009 to 12.3% in 2014. At the same time, renter households earning less than 30% of the AMI also increased from 60.1% in 2009 to 63.9% in 2014 (Table 33). Table 33: Household income for Eastside Renter Occupants as a percentage of AMI, 2009-2014 All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median Eastside Renter Occupants - 2009 4,083 194 205 515 714 2,455 % 4.8% 5.0% 12.6% 17.5% 60.1% Eastside Renter Occupants - 2014 4,673 574 114 388 613 2,984 % 12.3% 2.4% 8.3% 13.1% 63.9% Source: HUD, Urban Partners From 2009 to 2014, Westside renter households earning at or above 100% of AMI increased from 10.9% to 19.3%; while renter households earning less than 30% of AMI decreased from 50.4% to 38.7% during this period. On the other hand, a total of 421 renter households earning between 30% and 50% of AMI were added to the Westside, increasing their percentage share from 14.1% in 2009 to 20.8% in 2014 (Table 34). Table 34: Household income for Westside Renter Occupants as a percentage of AMI, 2009-2014 All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median Westside Renter Occupants - 2009 6,996 763 475 1,250 984 3,524 % 10.9% 6.8% 17.9% 14.1% 50.4% Westside Renter Occupants - 2014 6,762 1,305 420 1,015 1,405 2,617 % 19.3% 6.2% 15.0% 20.8% 38.7% Source: HUD, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 28 Significant numbers of high priced rental apartments have been introduced in the Center City neighborhoods from 2009 and 2014, and the CHAS data reflect this development pattern. During this time, a total of 1,502 renter households at or above 100% of AMI were added to the Center City neighborhoods, increasing their share from 16.8% of all renter households in 2009 to 24.8% in 2014. As for renter households earning less than 50% of AMI, Center City neighborhoods have held steady (from 10,486 units in 2009 to 10,394 units in 2014, see Table 35). Table 35: Household income for Center City Renter Occupants as a percentage of AMI, 2009-2014 Center City Renter Occupants - 2009 16,698 2,802 985 2,425 2,253 8,233 All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median % 16.8% 5.9% 14.5% 13.5% 49.3% Center City Renter Occupants - 2014 17,360 4,304 719 1,943 2,583 7,811 % 24.8% 4.1% 11.2% 14.9% 45.0% Source: HUD, Urban Partners HOUSING COST BURDEN FOR CENTER CITY HOUSEHOLDS The U.S. Census Bureau’s definition of “cost-burdened” households are those who pay more than 30% of their income on housing costs. Using the CHAS data, the following cost burden analysis was performed for the Center City neighborhoods. Table 36 shows the percentage of owner-occupant households who are cost burdened in Downtown, Westside, and Eastside neighborhoods by income categories. In 2014, Downtown reported a total of 60 cost burdened owner-occupant households, while Eastside and Westside neighborhoods report 311 and 661, respectively. Table 36: Cost Burdened Owner Occupant Households by Neighborhood, 2014 Downtown Cost Burdened Owners All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median Source: HUD, Urban Partners 60 40 10 10 0 0 Downtown Cost Burdened Owners (%) 15.7% 100.0% 100.0% - Eastside Cost Burdened Owners 311 25 70 60 32 124 Eastside Cost Burdened Owners (%) 9.2% 44.6% 44.1% 21.6% 66.7% Westside Cost Burdened Owners 661 69 62 15 216 299 Westside Cost Burdened Owners (%) 4.5% 21.2% 43.8% 64.1% 73.1% Table 37 shows the percentage of renter-occupant households who are cost burdened in the Center City neighborhoods by income categories. In 2014, Downtown reported a total of 2,029 cost burdened renteroccupant households, while Eastside and Westside neighborhoods report 1,613 and 2,995, respectively. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 29 Table 37: Cost Burdened Renter Occupant Households by Neighborhood, 2014 Downtown Cost Burdened Owners All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median Source: HUD, Urban Partners 2,029 95 30 420 444 1,040 Downtown Cost Burdened Owners (%) 3.9% 16.8% 76.4% 78.0% 46.8% Eastside Cost Burdened Owners Eastside Cost Burdened Owners (%) 6.2% 0.0% 19.3% 46.2% 41.5% 1,613 34 73 277 1,229 Westside Cost Burdened Owners 2,995 35 200 1,034 1,726 Westside Cost Burdened Owners (%) 0.0% 8.5% 20.3% 72.4% 65.9% Examined together, a total of 7,839 cost burdened households reside in the Center City neighborhoods in 2014, equivalent to 36.3% of all households. Of these cost burdened households, 3,915 are categorized as “severely cost burdened” or pay more than 50% of their income for housing costs (Table 38). Table 38: Cost Burdened Households in Center City, 2014 All Incomes At or above 100% of Median Between 80% of 100% of Median Between 50% of 80% of Median Between 30% of 50% of Median Below 30% of Median Severely Cost Burdened 3,915 28 24 130 769 2,964 Cost Burdened 3,924 235 183 818 1,234 1,454 Not Burdened/ Not Calculated 13,631 6,072 961 1,535 1,079 3,984 Grand Total 21,470 6,335 1,168 2,483 3,082 8,402 Source: HUD, Urban Partners INCOME RESTRICTED COMMUNITIES IN CENTER CITY Table 39 lists the income-restricted rental communities located in Center City. As of this report, there are a total of 5,908 income-restricted rental homes in 40 communities in various parts of Center City, representing 32.2% of the total rental market. In Downtown, there are a total of 1,430 income-restricted units—for which roughly half are located at the Lakeview community operated by Cuyahoga Metropolitan Housing Authority (CMHA)—representing 23.1% of all rental units. There are 3,534 income-restricted units in the Eastside neighborhoods, representing 71.6% of all rental homes. On the Westside, 1,662 units are income-restricted, representing 23.0% of all rental housing units. Table 39: Summary of Income-Restricted Communities in Center City Income Restricted Units – Total Public Housing (CMHA) HUD Disabled HUD Multi-Family HUD Senior Low Income Housing Tax Credit Low Income Housing Tax Credit – Senior Income Restricted Units – % of Total Rental Market Downtown Eastside Westside 1,430 718 199 243 270 23.1% 3,534 2,158 893 422 61 71.6% 1,662 593 10 126 262 631 40 23.0% Center City Total 6,626 3,469 10 1,218 684 935 310 36.1% Source: HUD, CMHA, PolicyMap, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 30 Table 40 is a detailed list of all income-restricted communities located in Center City. Also see Figure 14 on the following page for a map of all 40 communities within Center City. Table 40: Detailed List of Income-Restricted Communities in Center City Ref # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Name Address St. Clair Place 1850 Superior Allerton Apt Winton Manor Lakeview Langston Commons Arbor Park St. Andrews Tower Asia Evergreen Skyline Tower Help Six Chimneys Emeritus House Independence Pl Nouvelle Espoire Arcade Olde Cedar Cedar Ext High Rise Outhwaite Homes Carver Park Franklin House Lake Avenue Commons Ville Mercedes Colman Court Magnolia on Detroit Bishop Homes Cleveland Multifamily Courtland Building Harp Apartments Kennedy Building Nelson W. 47th Skibo Homes Emerald Commons Gordon Sq Homes Magnolia on Detroit Templin-Bradley Co. Lofts Valleyview Phase I Valleyview Phase Ii Cogswell Hall Ohio City Elderly Riverview Tower Tremont Pointe 1380 E. 13th St 1850 Superior Ave 1802 E. 13th St 1012 E. Prospect Ave 2700 Washington Ave 3043 Project Ave 3750 Fleming Ave 5225 Superior Ave 3843 Payne Ave 2250 Community College Ave 3907 Prospect Ave 4450 Cedar Ave 4019 Prospect Ave 4925 Payne Ave 2202 E. 30th St 2202 E. 30th St 2452 E. 46th St 2366 E. 55th St 8300 Franklin Ave 8321 Lake Ave 1331 W 70th St 2025 W 65th St 1375 W 83rd St 1809 Fulton Rd 1788 W. 45th St 5403 Detroit Ave 1389 W. 64th St 1403 W. 65th St 1818 W. 47th St 6901 Detroit Ave 1976 W. 79th St 7001 Detroit Ave 8016 Detroit Ave 5700 Detroit Ave 2556 W. 6th St 2556 W. 6th St 7200 Franklin Blvd 3207 Franklin Blvd 1795 W 25th St 2560 W 6th St Neighborhood Downtown Downtown Downtown Downtown Downtown Eastside Eastside Eastside Eastside Eastside Eastside Eastside Eastside Eastside Eastside Eastside Eastside Eastside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Westside Total Units 199 44 199 270 718 88 629 176 42 278 46 56 22 39 550 155 712 741 10 79 150 33 126 6 31 16 13 8 1 49 52 85 126 15 102 87 40 40 498 95 Type HUD Multifam LIHTC LIHTC LIHTC Senior Public Housing HUD Multifam HUD Multifam HUD Multifam HUD Senior HUD Senior HUD Senior HUD Senior LIHTC LIHTC Public Housing Public Housing Public Housing Public Housing HUD Disabled HUD Senior HUD Senior HUD Senior HUF Multifam LIHTC LIHTC LIHTC LIHTC LIHTC LIHTC LIHTC LIHTC LIHTC LIHTC LIHTC LIHTC LIHTC LIHTC-Special Needs LIHTC Senior Public Housing Public Housing Expiration Date 2017 2020 2023 2021 N/A 2031 2024 2023 2017 2033 2024 2023 2026 2025 N/A N/A N/A N/A 2018 2023 2034 2017 2026 2019 2019 2032 2030 2024 2018 2024 2021 2021 Not avail 2030 2022 2024 2024 2018 N/A N/A Source: HUD, CMHA, PolicyMap, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 31 Figure 14: Map of Income-Restricted Communities in Center City Source: HUD, CMHA, PolicyMap, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 32 8. Comparison Analysis of Downtowns The resurgence of the housing markets in downtowns of larger metropolitan areas has been occurring at varying paces over the past five decades. To assess the long-term potential growth of the Downtown Cleveland market, it is important to place Cleveland within the context of a larger pool of downtowns, including many that have more mature housing markets. Within that context and in order to identify future growth potential for Downtown Cleveland, population and employment characteristics in the downtown areas for the following ten cities were analyzed10: • • • • • • • • • • Boston, MA Denver, CO Indianapolis, IN Memphis, TN Milwaukee, WI Minneapolis, MN Orlando, FL Philadelphia, PA San Francisco, CA Seattle, WA Additionally, Downtown Cleveland is compared to two peer downtowns in Cincinnati, OH and Pittsburgh, PA in Appendix 1. In Table 41, the total population in households, physical size, and population density of Downtown Cleveland is compared to the ten comparison downtowns. Though the physical size of Downtown Cleveland (4.553 Sq. Mi.) is slightly bigger than the average of the ten downtowns (4.409 Sq. Mi.), the total population (in households and college dormitories) is less than a quarter of the average population for the compared downtowns (12,025 to 58,103). Table 41: Comparison of Physical Size, Population, and Population Density - 2015 Downtown Cleveland Average for 10 Cities Downtown San Francisco Downtown Boston Downtown Seattle Downtown Philadelphia Downtown Denver Downtown Milwaukee Downtown Minneapolis Downtown Orlando Downtown Indianapolis Downtown Memphis Physical Size (Sq. Mi.) 4.553 4.409 Total Population 12,025 58,103 Population Density (persons/Sq. Mi.) 2,641 12,740 6.568 2.497 3.142 6.649 5.942 2.713 3.785 4.966 4.420 3.411 188,960 63,790 60,813 106,392 58,988 34,415 22,531 19,130 16,001 10,007 28,770 25,547 19,355 16,001 9,927 9,093 8,305 3,852 3,620 2,934 Source: U.S. Census Bureau, Urban Partners 10 Data source for this comparison analysis are the OnTheMap application for employment statistics and the American Community Survey for demographic numbers. The study areas for each of the ten downtowns are the census tracts that encompass the central business districts with the highest employment concentrations within their respective cities. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 33 In Table 42, Downtown Cleveland’s total number of jobs, as well as its share of the employment situated in the city and the metropolitan area, are compared to the ten comparison downtowns. As detailed previously, Downtown Cleveland is home to a total of 97,353 jobs, which accounts for 34.6% of Cleveland’s jobs and 7.3% of the 7-County Region’s jobs. The average shares of the city and regional jobs are 38.5% and 12.0%, respectively. Table 42: Comparison of Jobs and Shares of City/Regional Employment - 2015 Downtown Cleveland Average for 10 Cities Downtown San Francisco Downtown Boston Downtown Seattle Downtown Philadelphia Downtown Denver Downtown Milwaukee Downtown Minneapolis Downtown Orlando Downtown Indianapolis Downtown Memphis Total Downtown Jobs 97,353 - Share of Jobs in the City 34.6% - Share of Jobs in the Metro Area 7.3% 12.0% 491,608 293,528 235,071 280,597 185,226 103,608 151,120 103,734 152,667 39,561 70.2% 47.2% 41.4% 43.2% 37.5% 25.8% 44.9% 30.8% 34.4% 9.6% 21.3% 11.3% 10.1% 12.9% 13.2% 15.0% 8.1% 9.0% 12.3% 6.6% Source: U.S. Census Bureau, Urban Partners Next, the Downtown Cleveland’s In-Area Employment Efficiency, or the percentage of jobs in Downtown filled by Downtown residents, is compared to those of the ten downtowns. Of the 97,353 jobs in Downtown Cleveland, only 1,782 (or 1.8%) are held by Downtown residents. The average percentage of downtown jobs held by residents in the ten comparison downtowns is 5.1% (Table 43). Table 43: Comparison of In-Area Employment Efficiency - 2015 Downtown Cleveland Average for 10 Cities Downtown San Francisco Downtown Philadelphia Downtown Denver Downtown Seattle Downtown Boston Downtown Milwaukee Downtown Minneapolis Downtown Indianapolis Downtown Orlando Downtown Memphis Total Downtown Jobs 97,353 - Downtown Jobs Held by Residents 1,782 - In-Area Employment Efficiency 1.8% 5.1% 491,608 280,597 185,226 235,071 293,528 103,608 151,120 152,667 103,734 39,561 54,631 20,903 13,429 12,861 14,514 3,964 5,031 3,923 2,475 856 11.1% 7.4% 7.3% 5.5% 4.9% 3.8% 3.3% 2.6% 2.4% 2.2% Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 34 In Table 44, Downtown Cleveland’s ratio of total employed Downtown residents to Downtown jobs filled by residents is compared to those of the ten downtowns. The OnTheMap application reports a total of 5,580 employed residents, 1,782 of whom work in Downtown for a ratio of 3.13 total employed Downtown residents to those working and living in Downtown. The average ratio for the ten comparison downtowns is 3.17. Table 44: Ratio of Employed Downtown Residents to Downtown Jobs Filled by Residents - 2015 Downtown Cleveland Average for 10 Cities Downtown San Francisco Downtown Philadelphia Downtown Denver Downtown Seattle Downtown Boston Downtown Milwaukee Downtown Minneapolis Downtown Orlando Downtown Indianapolis Downtown Memphis Employed Downtown Residents 5,580 - Residents Who Work in Downtown 1,782 - Ratio 110,709 53,463 39,265 37,702 35,314 15,027 13,945 11,756 9,319 4,396 54,631 20,903 13,429 12,861 14,514 3,964 5,031 2,475 3,923 856 2.03 2.56 2.92 2.93 2.43 3.79 2.77 4.75 2.38 5.14 3.13 3.17 Source: U.S. Census Bureau, Urban Partners In Table 45, Downtown Cleveland’s ratio of total population to the number of employed residents is compared to those of the ten downtowns. The ratio of Downtown Cleveland’s total population in households and college dormitories (12,025 residents) to the number of employed residents (5,580) is 2.16, compared to the average ratio of 1.81 for the ten comparison downtowns. Table 45: Ratio of Population to Employed Residents Downtown Cleveland Average for 10 Cities Downtown Denver Downtown Seattle Downtown Minneapolis Downtown Orlando Downtown San Francisco Downtown Indianapolis Downtown Boston Downtown Philadelphia Downtown Memphis Downtown Milwaukee Total Population 12,025 - Total Employed Residents 5,580 - Ratio 58,988 60,813 22,531 19,130 188,960 16,001 63,790 106,392 10,007 34,415 39,265 37,702 13,945 11,756 110,709 9,319 35,314 53,463 4,396 15,027 1.50 1.61 1.62 1.63 1.71 1.72 1.81 1.99 2.28 2.29 2.16 1.81 Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 35 Finally, Downtown Cleveland’s homeownership rate of 5.1% is extremely low compared to the average rate of 22.7% for the ten downtowns. With a homeownership rate of 12.9% Memphis is the lowest among the ten comparison downtowns, but still more than twice that of Downtown Cleveland (Figure 15). Figure 15: Homeownership Rates Cleveland 5.1% 10 City AVG 22.7% Philadelphia 36.9% Boston 31.7% Minneapolis 28.0% Denver 26.3% Indianapolis 20.3% Orlando 19.0% Milwaukee 17.8% San Francisco 17.3% Seattle 16.7% Memphis 12.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 36 MID-TERM GROWTH POTENTIAL FOR DOWNTOWN CLEVELAND (2021-2030) In this section, the estimated future growth potential for Downtown Cleveland is analyzed based on the expectation that Downtown Cleveland as a residential community can grow within the profiles of the more mature circumstances of the ten comparison downtowns analyzed above. The baseline assumption for this projection is that employment levels in the 7-County Region will see modest growth for the foreseeable future (at approximately 0.3% per year, ending up with 1.39 million jobs in 2030). However, in assessing the growth of Downtown housing, we will assume that the level of economic and residential activity Downtown will shift toward the averages for the ten more mature downtowns noted above. The following is a set of assumptions for the 2018 to 2021 period: • • • • • • The percentage of Regional jobs located in Downtown will grow The percentage of Downtown jobs held by Downtown residents will increase The ratio of employed Downtown residents to employed residents who work in Downtown will increase slightly The ratio of total Downtown population to employed residents will decline The average household size in Downtown will increase The tenure of Downtown households will shift toward ownership 2018 2021 AVG 10-Downtowns 7.6% 7.8% 12.0% 2.05% 2.38% 5.1% 3.15 3.16 3.17 2.12 2.06 1.81 1.61 1.63 1.68 5.4% 6.2% 22.7% Table 46 shown on the next page is a forecast model of Downtown’s growth from 2021 to 2030 assuming the continuous incremental shifts in economic and resident behavior. The following are the assumptions: • • • The percentage of the Region’s jobs located in Downtown grows from 7.8% to 8.7%. The percentage of Downtown jobs held by Downtown residents grows from 2.38% to 3.37%. The ratio of employed Downtown residents to workers living & working Downtown increases from 3.16 to 3.17. The ratio of Downtown population to employed Downtown residents drops from 2.06 to 1.92. The average household size increases from 1.63 to 1.66. Homeownership rate increases from 6.2% to 9.3%. • • • Based on the above assumptions, Downtown Cleveland will achieve these numbers by 2030 (Table 46): • • • • • • • 11 Downtown Employment: Downtown Residents Working in Downtown: Total Employment Downtown Residents: Total Downtown Population11: Total Occupied Housing Units: Total Occupied Owner-Occupied Homes: Total Occupied Rental Units: 120,982 4,077 12,912 24,766 14,901 1,386 13,515 As noted in the Introduction, the area defined as Downtown in this study does not include portions east of the Innerbelt to E. 30th Street. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 37 Table 46: Forecast Model for Downtown Cleveland Growth, 2021-203012 Regional Employment (in millions) % of Region jobs located Downtown 2021 1.356 2022 1.359 2023 1.363 2024 1.367 2025 1.371 2026 1.375 2027 1.379 2028 1.383 2029 1.387 2030 1.391 7.8% 7.9% 8.0% 8.1% 8.2% 8.3% 8.4% 8.5% 8.6% 8.7% 105,729 107,393 109,064 110,743 112,430 114,125 115,828 117,538 119,256 120,982 2.38% 2.49% 2.60% 2.71% 2.82% 2.93% 3.04% 3.15% 3.26% 3.37% 2,516 2,674 2,836 3,001 3,171 3,344 3,521 3,702 3,888 4,077 3.16 3.16 3.17 3.17 3.17 3.17 3.17 3.17 3.17 3.17 7,954 8,461 8,981 9,505 10,041 10,590 11,152 11,726 12,313 12,912 Ratio of Downtown population to employed residents 2.06 2.04 2.02 2.01 1.99 1.98 1.96 1.95 1.93 1.92 Total Downtown Population in Households + Dorms 16,409 17,285 18,168 19,085 20,012 20,947 21,890 22,842 23,800 24,766 Downtown Employment % of Downtown jobs held by Downtown residents Downtown Residents Working Downtown Ratio of employed Downtown residents to workers living & working Downtown Total Employed Downtown Residents 1.63 1.63 1.63 1.64 1.64 1.65 1.65 1.65 1.66 1.66 Total Occupied Downtown Units Average household size 10,092 10,605 11,119 11,652 12,187 12,726 13,267 13,810 14,355 14,901 % owner-occupied units Renter-occupied units (demand) Owner-occupied units (demand) 6.2% 9,466 626 6.5% 9,915 689 6.8% 10,362 756 7.1% 10,824 827 7.4% 11,286 902 7.7% 11,746 980 8.1% 12,192 1,075 8.5% 12,636 1,174 8.9% 13,077 1,278 9.3% 13,515 1,386 Incremental Supply Required Total 531 533 534 554 557 559 562 563 565 567 469 62 468 65 466 68 481 73 481 76 480 80 465 462 459 456 97 101 106 110 Rental @ 96% Occupancy Ownership @ 98% Occupancy Source: U.S. Census Bureau, Downtown Cleveland Alliance, Urban Partners In general, this forecast for the 2021 to 2030 period shows demand sufficient to support an average of 500 to 550 new housing units being added to the supply annually. This assumes a stable 96% occupancy for rental units and 98% occupancy for owner-occupied units. This forecast also shows a modest shift toward homeownership units as housing conditions in the Downtown mature. The following shows the population growth forecast for the Downtown Study Area and the portion between the Innerbelt Highway and E. 30th Street. Based on this calculation, the traditionally defined Downtown area will exceed 20,000 residents in 2021 (Table 47). Table 47: Forecast Model for Traditionally Defined Downtown, 2021-2030 12 See Appendix 2 for growth pattern observed for the 2014-2017 and anticipated for 2018-2020. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 38 Total “Core” Downtown Population in Households + Dorms Inner Belt-3oth Street Residents Total Downtown Population in Households + Dorms 2021 16,409 2022 17,285 2023 18,168 2024 19,085 2025 20,012 2026 20,947 2027 21,890 2028 22,842 2029 23,800 2030 24,766 3,604 3,604 3,604 3,604 3,914 3,914 3,914 3,914 3,914 3,914 20,013 20,889 21,772 22,689 23,926 24,861 25,804 26,756 27,714 28,680 Source: U.S. Census Bureau, Downtown Cleveland Alliance, Urban Partners Measured against the average economic and residential patterns observed in the ten comparison downtowns, the assumptions used for the above forecast model are very modest. If Downtown Cleveland achieves merely the average marks for the ten comparison downtowns, the resulting growth will translate to over 50,000 residents and 30,000 housing units (Table 48). Table 48: Additional Growth Capacity Growth Based on Comparison Downtowns % of Region jobs located Downtown % of Downtown jobs held by Downtown residents Ratio of employed Downtown residents to workers living & working Downtown Ratio of Downtown population to employed Downtown residents Average household size % owner-occupied units AVG Rate/Ratio Comparison Downtowns Result Based on Comparison Downtown AVG 12.0% 172,800 Jobs 5.1% 8,813 Residents Working in Downtown 3.17 27,937 Employed Downtown Residents 1.81 1.68 22.7% 50,564 Total Downtown Residents 30,098 Total Housing Units 6,832 Owner Units, 23,266 Rental Units Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 39 9. Preliminary Conclusions on Mid-Term Housing Demand The forecast model summarized on Table 46 details demand for 14,900 housing units in Downtown Cleveland by 2030—an increase of 6,600 over the approximately 8,300 occupied as of this report. Assuming stable occupancy at 96% for rentals and 98% for homeownership, this demand will support a housing supply of approximately 15,500 units, including 1,400 for sale and 14,100 rentals. As of the writing of this report, housing supply stood at approximately 8,700 units, requiring an additional 6,800 units to be added by 2030. Twenty (20) specific development projects with approximately 3,000 units are currently under construction or in various stages of planning and predevelopment. Under the growth scenario outlined in the previous section, these 20 projects—if they are all completed—will accommodate this increase in demand through 2023. After that point, other developments will be necessary to handle the additional 3,800 units required through 2030. It should be noted that the forecast model is based on a straight-line analysis and does not factor in real estate fluctuations that may be triggered by national trends such as interest rate hikes. We also note the demand for increasing numbers of homeownership units, which may require earlier (before 2023) introduction of different kinds of developments beyond the current 20 in construction and planning. Finally, a key factor underlying this forecasted growth is the increasing capture of Downtown workers as Downtown residents—growing from 2.05% of Downtown workers currently to 3.37% in 2030. This represents a 64% increase in capture over a 12-year period (2018 to 2030). While additional and higher quality housing product will facilitate much of this capture—including expanded homeownership product—an effective marketing campaign will also be essential. As for the need for maintaining income diversity, each section of Center City will need to employ different strategies based on a set of policy goals agreed upon by public and private stakeholders. Currently, Downtown and Westside neighborhoods benefit from 3,100 income restricted units which represent 23% of the entire rental housing stock for both Downtown and Westside. As new market-rate units are continually introduced in these neighborhoods, the relatively percentage of income-restricted units will decline, while at the same time development pressures are placing formerly income-restricted units coming off initial compliance periods at risk of flipping to market-rate. In the Eastside neighborhood, where a very high percentage (71.6%) of rental housing is income-restricted, striking a balance between attracting market-rate investment in formerly underutilized parcels while continuing to preserve the current affordable stock appears to be a prudent approach in the next five to ten years. (Note that for this topic, the income-restricted properties in the Inner Belt to 30th Street area are allocated to Eastside.) Phase Two of this study will involve the investigation of specific toolkits to preserve affordability and to protect low-income residents from getting displaced in value-increasing sections of Center City. Relevant housing policy goals to be discussed in the next phase will include: ideal ratio of income-restricted homes to market-rate homes; anti-displacement programs; target market segments (such as age and tenure); affordable housing funding mechanisms; and other important considerations. Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 40 10. Long-Term Growth Forecast for Downtown Cleveland (2031-2040) Table 49 is a forecast model that extends the growth assumptions detailed on page 37 to 2040. Under those scenarios, Downtown Cleveland will have 139,835 jobs, 35,830 residents, and 21,328 housing units by 2040. Table 49: Long-Term Forecast Model for Downtown Cleveland Growth, 2031-2040 Regional Employment (in millions) % of Region jobs located Downtown 2031 1.396 2032 1.401 2033 1.406 2034 1.411 2035 1.416 2036 1.421 2037 1.426 2038 1.431 2039 1.437 2040 1.442 8.8% 8.9% 9.0% 9.1% 9.2% 9.3% 9.4% 9.5% 9.6% 9.7% 122,822 124,671 126,531 128,401 130,281 132,172 134,072 135,983 137,904 139,835 3.48% 3.59% 3.70% 3.81% 3.92% 4.03% 4.14% 4.25% 4.36% 4.47% 4,274 4,476 4,682 4,892 5,107 5,327 5,551 5,779 6,013 6,251 3.17 3.17 3.17 3.17 3.17 3.17 3.17 3.17 3.17 3.17 13,536 14,175 14,827 15,493 16,174 16,869 17,579 18,303 19,042 19,796 Ratio of Downtown population to employed residents 1.90 1.89 1.87 1.86 1.84 1.83 1.81 1.81 1.81 1.81 Total Downtown Population in Households + Dorms 25,760 26,762 27,771 28,786 29,809 30,837 31,870 33,128 34,466 35,830 1.67 1.67 1.67 1.68 1.68 1.68 1.68 1.68 1.68 1.68 Total Occupied Downtown Units 15,462 16,025 16,589 17,155 17,722 18,355 18,970 19,719 20,515 21,328 % owner-occupied units Renter-occupied units (demand) Owner-occupied units (demand) 9.7% 13,962 1,500 10.1% 14,406 1,619 10.5% 14,847 1,742 10.9% 15,285 1,870 11.3% 15,720 2,003 11.7% 16,208 2,148 12.1% 16,675 2,295 12.5% 17,254 2,465 12.9% 17,869 2,646 13.3% 18,491 2,837 582 584 585 587 588 656 638 777 825 842 466 463 459 126 456 131 452 135 508 148 487 151 604 173 640 185 648 194 Downtown Employment % of Downtown jobs held by Downtown residents Downtown Residents Working Downtown Ratio of employed Downtown residents to workers living & working Downtown Total Employed Downtown Residents Average household size Incremental Supply Required Total Rental @ 96% Occupancy 116 121 Ownership @ 98% Occupancy Source: U.S. Census Bureau, Downtown Cleveland Alliance, Urban Partners Again, long-term growth forecast shown on Table 49 is for the Study Area portion of the Downtown. The following shows the population growth forecast for the Downtown Study Area and the portion between the Innerbelt Highway and E. 30th Street. Based on this calculation, the traditionally defined Downtown area will exceed 30,000 residents in 2032 (Table 50). Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 41 Table 50: Forecast Model for Traditionally Defined Downtown, 2031-2040 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Total “Core” Downtown Population in Households + Dorms Inner Belt-3oth Street Residents 25,760 26,762 27,771 28,786 29,809 30,837 31,870 33,128 34,466 35,830 3,914 3,914 3,914 3,914 3,914 3,914 3,914 3,914 3,914 3,914 Total Downtown Population in Households + Dorms 29,674 30,676 31,685 32,700 33,723 34,751 35,784 37,042 38,380 39,744 Source: U.S. Census Bureau, Downtown Cleveland Alliance, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 42 Appendix 1 In Table A1 below, Downtown Cleveland is compared to two peer downtowns in Cincinnati, OH and Pittsburgh, PA. Table A1-1: Comparison to Downtown Cincinnati and Downtown Pittsburgh, 2015 Total Downtown Population in Households + Dorms Average household size Downtown Cleveland 12,025 Downtown Cincinnati 11,844 Downtown Pittsburgh 15,325 1.61 1.66 1.60 6,513 7,150 6,942 5.1% 20.0% 22.6% 4.553 1.917 2.687 Density (per Sq. Mi) 2,641 6,178 5,703 Downtown Employment 97,353 69,744 109,022 Downtown jobs held by Downtown residents 1,782 1,789 2,055 % of Downtown jobs held by Downtown residents 1.83% 2.57% 1.88% 1.335 1.016 1.123 7.3% 6.9% 9.7% 1,782 3.13 1,789 3.71 2,055 3.18 5,580 6,634 6,535 2.16 1.79 2.35 Total Housing Units Homeownership Rate Downtown Size (in Sq. Mi.) Regional Employment (in millions) % of Region jobs located Downtown Downtown Residents Working Downtown Ratio of employed Downtown residents to workers living & working Downtown Total Employed Downtown Residents Ratio of Downtown population to employed Downtown residents Source: U.S. Census Bureau, Downtown Cleveland Alliance, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 43 Appendix 2 The following tables show the recent and near future growth patterns for Downtown Cleveland from 2014 to 2017. It should be noted that starting in 2017, the demand for owner-occupied homes exceeded the supply in Downtown, and, presumably, the demand was being absorbed elsewhere (e.g., the Westside neighborhoods where condominium units were being introduced to the market). Table A2-1: Growth Pattern for Downtown Cleveland, 2014-2020 Regional Employment (in millions) % of Region jobs located Downtown Downtown Employment % of Downtown jobs held by Downtown residents Downtown Residents Working Downtown Ratio of employed Downtown residents to workers living & working Downtown Total Employed Downtown Residents Ratio of Downtown population to employed Downtown residents Total Downtown Population in Households + Dorms Average household size Total Occupied Downtown Units Percentage owner-occupied units Occupied rental units – demand Owner-occupied units – demand Rental Supply Ownership Supply Occupancy Rate - Rental Occupancy Rate - Ownership 2014 2015 2016 2017 1.330 7.1% 1.334 7.3% 1.337 7.4% 1.341 7.5% 2018 1.344 7.6% 2019 1.348 7.6% 2020 1.352 7.7% 94,430 1.32% 97,353 1.83% 98,953 1.83% 100,560 1.94% 101,502 2.05% 102,448 2.16% 104,073 2.27% 1,246 1,782 1,811 1,951 2,081 2,213 2,362 3.78 3.13 3.13 3.15 3.15 3.16 3.16 4,712 2.35 5,580 2.16 5,672 2.14 6,149 2.14 6,559 2.12 6,982 2.10 7,461 2.08 11,049 12,025 12,154 13,178 13,924 14,682 15,541 1.61 6,513 1.61 7,123 1.61 7,203 1.61 7,839 1.61 8,627 1.62 9,074 1.62 9,581 5.1% 5.1% 5.2% 5.3% 5.4% 5.6% 5.9% 6,181 6,759 6,829 7,423 8,161 8,566 9,016 332 363 375 415 466 508 565 6,643 388 93.0% 85.6% 7,239 388 93.4% 93.6% 7,284 398 93.7% 94.1% 8,272 398 89.7% 104.4% 8,451 398 96.6% 117.1% 9,104 430 94.1% 118.2% - Source: U.S. Census Bureau, Downtown Cleveland Alliance, Urban Partners Table A2-2: Growth Pattern for “Expanded” Downtown Cleveland, 2014-2020 Total “Core” Downtown Population in Households + Dorms Inner Belt-3oth Street Residents Total Downtown Population in Households + Dorms 2014 11,049 2015 12,025 2016 12,154 2017 13,178 2018 13,924 2019 14,682 2020 15,541 3,200 3,200 3,200 3,514 3,604 3,604 3,604 14,249 15,225 15,354 16,692 17,528 18,286 19,145 Source: U.S. Census Bureau, Downtown Cleveland Alliance, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 44 Appendix 3 Based on feedback from DCA, the following three downtowns (Denver, Milwaukee, and Minneapolis) were selected for a targeted comparison analysis shown in this section. Table A3-1: Downtown Population, 2010-2016 70,000 60,000 Population 50,000 40,000 30,000 20,000 10,000 - 2010 2011 2012 2013 2014 2015 2016 Cleveland 8,894 9,850 10,586 11,771 12,643 13,782 13,851 Denver 47,366 50,304 52,960 54,809 57,391 59,568 61,522 Milwaukee 33,951 34,393 34,529 34,868 35,972 36,742 37,297 Minneapolis 21,631 22,502 23,089 24,079 24,758 25,712 26,445 Source: U.S. Census Bureau, Urban Partners Table A3-2: Downtown Population as Percentage of Total City Population, 2010-2016 10.0% 9.0% 8.0% Percentage 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2010 2011 2012 2013 2014 2015 2016 Cleveland 2.2% 2.4% 2.7% 3.0% 3.2% 3.5% 3.6% Denver 8.2% 8.5% 8.8% 8.9% 9.1% 9.2% 9.3% Milwaukee 5.8% 5.8% 5.8% 5.8% 6.0% 6.1% 6.2% Minneapolis 5.6% 5.9% 6.0% 6.2% 6.3% 6.4% 6.5% Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 45 Table A3-3: Downtown Population as Percentage of Total Region Population, 2010-2016 3.0% Percentage 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2010 2011 2012 2013 2014 2015 2016 Cleveland 0.3% 0.4% 0.4% 0.4% 0.5% 0.5% 0.5% Denver 1.9% 2.0% 2.1% 2.1% 2.2% 2.2% 2.2% Milwaukee 2.2% 2.2% 2.2% 2.2% 2.3% 2.3% 2.4% Minneapolis 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.8% Source: U.S. Census Bureau, Urban Partners Table A3-4: Downtown Employment, 2010-2015 200,000 180,000 Employment 160,000 140,000 120,000 100,000 80,000 60,000 2010 2011 2012 2013 2014 2015 Cleveland 92,197 91,695 92,979 93,956 94,503 96,943 Denver 164,995 162,710 170,622 170,095 175,952 185,226 Milwaukee 100,463 112,498 98,412 89,500 100,563 103,608 Minneapolis 140,453 143,565 158,526 158,087 156,130 151,120 Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 46 Table A3-5: Downtown Employment as Percentage of Total Regional Employment, 2010-2015 16.0% 14.0% Percentage 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2010 2011 2012 2013 2014 2015 Cleveland 6.9% 6.9% 7.0% 7.0% 7.1% 7.3% Denver 13.6% 13.2% 13.5% 13.1% 13.1% 13.2% Milwaukee 12.6% 13.7% 12.1% 11.0% 12.0% 12.3% Minneapolis 8.3% 8.3% 9.0% 8.9% 8.6% 8.1% Source: U.S. Census Bureau, Urban Partners Table A3-6: Employed Downtown Residents Working in Downtown as a Percentage of All Downtown Jobs, 2010-2015 8.0% 7.0% Percentage 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2010 2011 2012 2013 2014 2015 Cleveland 1.1% 1.2% 1.2% 1.3% 1.3% 1.8% Denver 5.9% 6.0% 6.3% 6.2% 6.5% 7.3% Milwaukee 3.3% 3.2% 3.5% 3.6% 3.4% 3.8% Minneapolis 2.8% 2.4% 2.8% 2.8% 2.9% 3.3% Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 47 Table A3-7: Downtown Housing Units, 2010-2016 40,000 35,000 Total Units 30,000 25,000 20,000 15,000 10,000 5,000 - 2010 2011 2012 2013 2014 2015 2016 Cleveland 4,805 5,302 5,539 5,786 6,186 6,429 6,513 Denver 31,089 32,295 33,500 33,840 34,736 35,890 36,694 Milwaukee 14,990 15,170 15,395 15,562 15,777 15,823 16,213 Minneapolis 13,077 13,487 13,339 13,592 13,848 14,175 14,516 2015 2016 Source: U.S. Census Bureau, Urban Partners Table A3-8: Percentage of Homes Occupied by Owner Households, 2010-2016 35.0% 30.0% Axis Title 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 2010 2011 2012 2013 2014 Cleveland 5.1% 4.7% 4.3% 4.3% 4.0% 4.6% 4.9% Denver 26.3% 27.7% 26.8% 26.9% 27.4% 28.2% 28.6% Milwaukee 17.8% 16.8% 17.1% 16.9% 15.7% 15.9% 16.0% Minneapolis 28.0% 27.8% 28.5% 28.7% 28.3% 27.3% 28.0% Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 48 Table A3-9: Number of Home Sales by Type, 2017-2018 3,000 2,500 Axis Title 2,000 1,500 1,000 500 Cleveland Denver Condos Townhomes Single Family 147 3 3 2,639 314 416 Milwaukee 535 - 88 Minneapolis 1,626 13 115 Source: Realquest, Urban Partners Table A3-10: Condo/Townhome Sales as Percentage of All Home Sales, 2017-2018 100.0% Cleveland 98.0% 98.0% 96.0% Minneapolis 93.4% 94.0% Axis Title 92.0% 90.0% 88.0% Denver 87.7% Milwaukee 85.9% 86.0% 84.0% 82.0% 80.0% 78.0% 2010 Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 49 Figure A3-11: Age Distribution Comparison, 2016 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Under 18 18 to 24 25 to 34 Downtown 35 to 44 Denver 45 to 54 55 to 64 Milwaukee 65 to 74 75 to 84 85 & over Minneapolis Source: U.S. Census Bureau, Urban Partners Figure A3‐12: Generational Distribution in Downtowns by City, 2016 Cleveland 1% Gen Z 8% 11% Denver 2% Gen Z 7% 16% 23% Millennials Millennials Gen X Gen X Boomers 24% 51% Boomers 57% Silent Gen Silent Gen Milwaukee Gen Z 3% 12% Minneapolis 4% 18% Millennials Gen Z 10% 18% Millennials Gen X 17% Gen X Boomers 24% 50% Silent Gen 44% Boomers Silent Gen Source: U.S. Census Bureau, Urban Partners Downtown Cleveland Housing Demand Analysis – Preliminary Data and Market Research Summary (Final) 50 PROPOSED HOUSING GOALS FOR CLEVELAND’S CENTER CITY NEIGHBORHOODS Last updated: September 21, 2018 The Downtown Cleveland Alliance (DCA)—in collaboration with Cleveland Development Advisors, Cleveland Neighborhood Progress, Enterprise Community Partners, Greater Cleveland Partnership, Historic Gateway Neighborhood Corporation, Historic Warehouse District Development Corporation, the City of Cleveland, and Cuyahoga County—commissioned a Housing Demand Analysis for Downtown Cleveland and the surrounding neighborhoods. The study area is comprised of six neighborhoods within Downtown (Campus District, the Flats, Gateway District, Nine-Twelve District, Playhouse Square, and Warehouse District) and portions of six neighborhoods near Downtown (Central, Detroit Shoreway, Midtown, Ohio City, St. Clair Superior, and Tremont). Together, these twelve neighborhoods are collectively referred to as Center City in this report. GOAL 1: CONTINUE MARKET-RATE RENTAL MOMENTUM IN CENTER CITY The Data Research and Market Analysis Report projected a strong demand for market-rate rental homes for the foreseeable future in Downtown. Yet, compared to the ten mature downtowns profiled in the report, Downtown Cleveland may be just scratching the surface of potential growth as a residential community. In 2015, Downtown Cleveland was home to 97,353 jobs but only 1,782 (1.8%) of those positions were held by residents of Downtown. The average percentage of downtown jobs held by residents (i.e., the In-Area Efficiency rate) in the nine comparison downtowns is 4.4% (see below). Capturing a growing share of these workers to live in Downtown represents a low hanging fruit in the overall Downtown residential strategy. The stated goal for this study is to provide DCA and its partners a meaningful sense of the housing market to formulate housing priorities and housing diversification strategies. To assist in the research and preparation of this study, DCA has retained Urban Partners as a consultant. In-Area Employment Efficiency for Downtowns - 2015 Cleveland 1.8% 9 City AVG 4.4% Philadelphia The Data Research and Market Analysis Report prepared as “Phase 1” of this study detailed the state of the housing market for Center City and a mid-term housing demand for Downtown Cleveland. By 2030, an additional 6,800 units will be required in Downtown and thousands more in the Westside neighborhoods (portions of Ohio City, Tremont, and Detroit-Shoreway) and Eastside neighborhoods (portions of St. Clair-Superior/AsiaTown, Central, and MidTown) to meet the anticipated demand. 7.4% Denver 7.3% Seattle 5.5% Boston 4.9% Milwaukee 3.8% Minneapolis 3.3% Indianapolis 2.6% Orlando In this second phase of the study, we now turn to a discussion on housing policy and potential toolkits to promote a healthy and balanced housing market that expands and preserves housing opportunities for all residents of Center City. 2.4% Memphis 2.2% 0.0% 1.0% 2.0% 3.0% Source: U.S. Census Bureau, Urban Partners 1 4.0% 5.0% 6.0% 7.0% 8.0% Proposed Strategy to Consider #1: Preserve and continue to promote existing development tools and incentives to home builders and developers. ▪ These existing development tools and incentives include state and federal Historic Preservation Tax Credits, New Markets Tax Credits, Conservation Easements, 15-Year Real Estate Tax Abatement, etc. ▪ Identify new public and private strategies to support ground-up construction, such as non-conventional lending products and the proposed transformational mixed-use development tax credit (Ohio House Bill 469). ▪ Bring in additional capital resources, such as investment funds of building trade groups, EB-5 financing, etc. ▪ Continue to monitor the newly established Opportunity Zones program and evaluate applicability for multi-family projects. provide. Downtown Cleveland also benefits from strong arts and entertainment scene anchored by Playhouse Square, the largest performing arts district outside of New York City. Proposed Strategy to Consider #2: Pursue placemaking and community enhancement initiatives to continue attracting a diverse set of Center City residents. There has been extensive documentation of the evolution in lifestyle choices for Millennials, which is generally characterized by: - Smaller households; - A higher desire for rental housing rather than ownership; - Flexibility in employment arrangements including freelance The Lumen, pictured above, is a 319-unit, $135 million residential high-rise tower that Playhouse Square and its development manager, Hines, started building in 2018. employment and participation in co-working spaces; - Retail, recreation, and community facility environments that provide easy access to social networks; and - Lifestyle support through a variety of service-oriented businesses (spas; animal services; etc.). To continue attracting Millennials and Baby Boomers in Center City, the growing supply of amenity-rich, low-maintenance housing is crucial. Just as important, however, are placemaking and community enhancement initiatives that improve the quality of life for residents. Likewise, a growing percentage of Baby Boomers are selling their suburban homes for smaller homes in Downtowns across the country. Similar to Millennials, these retirees are attracted to shopping, dining, entertainment, and transit infrastructure that Downtown areas can ▪ 2 Support projects that improve pedestrian walkability/experience, convenient mobility options, and infrastructure, greenspace, and retail/service amenities in Center City. Examples of Owner-Occupied Townhomes in Downtown Areas GOAL 2: DIVERSIFY THE HOUSING MIX IN CENTER CITY TOWARD HOMEOWNERSHIP Downtown Cleveland’s homeownership rate of 5.1% is extremely low compared to the average rate of 22.7% for the ten downtowns. With a homeownership rate of 12.9%, Memphis is the lowest among the ten comparison downtowns, but still more than twice that of Downtown Cleveland (see below). Homeownership Rates for Downtown Areas Downtown Cleveland Westside Eastside 10 City AVG Philadelphia Boston Minneapolis Denver Indianapolis Orlando Milwaukee San Francisco Seattle Memphis 5.1% 29.8% 13.9% Renaissance on the River Townhomes Downtown Minneapolis Townhomes in Elliot Park Downtown Minneapolis Townhomes near Five Points Downtown Denver Townhome near City Park Downtown Denver Infill Townhome Center City Philadelphia Infill Townhome Center City Philadelphia 22.7% 36.9% 31.7% 28.0% 26.3% 20.3% 19.0% 17.8% 17.3% 16.7% 12.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Source: U.S. Census Bureau, Urban Partners Based on recent transaction activities of for-sale homes, and further corroborated by interviews with local realtors, there’s an unmet demand for homeownership opportunities in Center City and particularly in Downtown. The condominium segment currently represents a small fraction of the overall market, and townhomes— which are prevalent in other downtowns (see examples to the right)—are almost entirely missing in Downtown Cleveland. 3 Proposed Strategy to Consider #1: Initiate a homeownership incentive program in Center City. ▪ Work with the city and Center City employers to offer an incentive program for purchasing a home in Downtown and adjacent neighborhoods. The Greater University Circle Living program, which provides up to $30,000 in forgivable loans, serves a great local example of a residential incentive program. Proposed Strategy to Consider #2: Work with developers, lenders, and other real estate professional to promote townhome and condominium developments in Center City. ▪ Identify and expand development period resources for home builders. Implementation tools to consider: a) Provide a variety of credit enhancement and patient capital programs such as predevelopment loans, loan guarantees, bridge financing, etc. to stimulate owner-occupied housing production. Two other examples of homeownership incentive programs are the University of Pennsylvania Homeownership Services Program in Philadelphia, PA; and the Live Downtown program in Detroit, MI: Examples of homeownership incentive programs University of Pennsylvania Homeownership Services Program Live Downtown, Detroit From 2011 to 2016, this program offered cash incentives for Downtown residents. New homeowners received $20,000 forgivable loans; new renters a $2,500 rental allowance (and $1,000 for the second year). In addition, existing renters received $1,000 for renewing a lease, and existing homeowners received matching funds of up to $5,000 for exterior improvements on projects of $10,000 or more. Approximately $5 million in program funding came from five participating companies: Blue Cross Blue Shield of Michigan, Compuware Corp., DTE Energy, Quicken Loans Inc. and Strategic Staffing Solutions. Established in 1998, the Penn Homeownership Services Program helped 1,400 university employees buy or rehabilitate homes in the neighborhood near its W. Philadelphia campus. This program offers a $7,500 forgivable loan as an incentive for faculty and staff interested in living and/or currently residing in the West Philadelphia community. These loans can be used for closing costs, down payment, to buy down points, and/or for interior or exterior home improvements. In addition, the loan can be used to convert a property from a multifamily to a single-family residence. Existing home owners may apply for the $7,500 loan for improvements to houses that meet the program's criteria. In the early years of this program, the cash incentive was $15,000. Program funding came from the University as part of a nationally recognized n overall neighborhood strategy. In the five years, the program assisted more than 2,000 Downtown residents who work for the five companies. 4 As of 2018, we estimate that 20% of all rental housing units in Downtown and Westside are income restricted (17.5% for Downtown and 23.5% for Westside), while the Eastside’s ratio is 71.6%. See below for comparison to other downtowns and to the City of Cleveland as a whole). Proposed Strategy to Consider #1: Income restricted development ▪ Preserve current income restricted communities from flipping to market-rate. Establish a system of monitoring expiring tax credits and engaging current ownership structure in discussing ways to extent affordability. ▪ Identify specific sites, especially publicly owned parcels, to develop new mixed-income and income-restricted communities. ▪ Tax Credit communities near Year 15 of compliance periods GOAL 3: MAINTAIN AND EXPAND HOUSING DIVERSITY IN DOWNTOWN AND ADJACENT NEIGHBORHOODS Articulate a percentage objective for the ratio of incomerestricted homes to market-rate homes. Percentage of Affordable Rental Homes in Comparison Downtowns Downtown Cleveland 17.5% Westside Neighborhoods 23.5% Eastside Neighborhoods 71.6% City of Cleveland 27.7% 10 City Average 23.4% Downtown Memphis 43.1% Downtown Minneapolis 34.8% Downtown Seattle 32.3% Downtown Milwaukee 26.1% Downtown Denver Allerton Apartments 1802 E. 13th Street 199 Units LIHTC Year 15: 2023 21.3% Downtown Indianapolis 18.9% Downtown San Francisco 17.5% Downtown Boston 17.4% Downtown Philadelphia Implementation tools to consider: a) Capture a proportionate share of the 9% Low Income Housing Tax Credits for Downtown and Westside developments (a new OHFA program called the FHAct50 Building Opportunity Fund will allow Cincinnati, Cleveland 14.4% Downtown Orlando 7.8% 0.0% 20.0% 40.0% 60.0% Winton Manor 1012 E. Prospect Avenue 270 Units LIHTC Year 15: 2021 80.0% Source: HUD, PolicyMap, Urban Partners 5 ▪ Minneapolis and Columbus pick developers over a three-year period who receive extra credits above and beyond OHFA’s usual awards). b) identify and implement strategies to dedicate revenue to support the development of affordable housing: three potential ways to set up a funding mechanism: - An increase in the real estate transfer tax, such as 1% to 1.5% of sale price. - A real estate development impact fee, including commercial developments. - A “Rental Operations Fee” which is a modest fee that’s tied to gross rental receipts over designated rent levels. Index the amount of the fee to Consumer Price Index so that it’ll keep pace with inflation (see below for an example of a tiered fee structure). ▪ Philadelphia ▪ Pittsburgh ▪ San Francisco ▪ Seattle Housing revenue bond proceeds; miscellaneous funds Document recording fees (currently considering a 1% Construction Impact Tax that is estimated to generate $20 million for the Housing Trust Fund). Realty transfer tax Tax increment boomerang funds; business license fees; transient occupancy tax; bond proceeds Property tax levy; commercial linkage fee Proposed Strategy to Consider #2: Mixed-income development ▪ Promote the development of mixed-income communities. Implementation tools to consider: a) Tax exempt bonds: set aside requirements are 20% of total units for households earning less than 50% of the Area Median Income, or 40% of total units at 60% of AMI. b) Increase utilization of 4% tax credits: in Ohio, this tax credit is non-competitive as long as the development meets Internal Revenue Code (IRC) requirements. c) Federal Home Loan Bank Affordable Housing Program (AHP) grant: AHP is the largest private source of grant funds for affordable housing in the United States. Community-based housing development groups work through an FHLBank member financial institution to apply for the grant. d) Expedite permitting for mixed-income and affordable housing projects: consider establishing an electronic submission and review of building permit and zoning applications with real-time tracking of review status. New York City’s Building & Land Development Services recently set up the “eSubmit” system that eliminated all large print submissions of architectural drawings. Email alerts are sent to project stakeholders at each review milestone. Example of Tiered Rental Operations Fee for 2-Bedroom Units Rent Levels Fee % Fee $ ▪ Units below $1,500/month: 0.00% $0.00 ▪ Units between $1,501 to 0.50% $7.50 to $2,000/month: $10.00 ▪ Units above $2,000/month: 0.75% $15.00+ Total monthly fee for 50-unit complex $437.50 that rent for an average of $1,750/month per unit: Comparison Cities with Locally Funded Housing Trust Funds City Funding Mechanism ▪ Boston Developer impact fees ▪ Denver Development impact fees; property tax revenues ▪ Indianapolis Filing fees for property sales disclosure forms; document recording fees ▪ Milwaukee Bond revenues; property tax revenues 6 e) Inclusionary zoning policies are usually associated with cities and mature downtowns with very tight housing markets with high levels of price pressures. As the Center City housing market continues to strengthen, periodically evaluate the need and desire for inclusionary zoning policies in designated locations within the city. See examples below. Proposed Strategy to Consider #3: Create workforce and marketrate housing opportunities in the Eastside neighborhoods (St. Clair-Superior/AsiaTown, Central, and MidTown) ▪ Inclusionary Zoning Policies in Comparison Cities City Funding Mechanism ▪ Boston Developers of buildings with 10+ units seeking zoning relief or building on city owned land are required to set aside 13% of their units as affordable to moderate- to middle-income households. Units can be rental or homeownership. Developers also have to option of creating affordable units equal to 15% of the units in the sponsoring project or pay into the housing trust fund. ▪ Denver The Inclusionary Housing Ordinance requires 10% affordability in new, for-sale developments of 30 or more units. ▪ Seattle Mandatory Housing Affordability (MHA) requires 5% to 7% of the units in 7 neighborhoods, but currently proposing to expand citywide. In exchange for providing affordable units, higher building density is offered to developers. ▪ San Francisco Inclusionary Housing Program requires new residential projects of 10 or more units to pay an Affordable Housing Fee, or provide a percentage of the units as below market rate units at a price that is affordable to low or middle income households, either "on-site" within the project, or "off-site" at another location in the City. ▪ While preserving the current stock of income restricted housing in the Eastside neighborhoods, stimulate the development of workforce (80 to 120% of Area Median Income) and market-rate (above 120% of AMI) homes. Increase the rate of homeownership, which is currently 13.9% in the Eastside neighborhoods. Implementation tools to consider: a) Secure brownfield planning grants to study redevelopment feasibility on underutilized industrial land. The U.S. Department of Environmental Protection Agency awards local communities planning grants to stimulate the reuse of industrial parcels (see program writeup for the Area Wide Planning Grant program). Completing the planning effort qualifies the sponsoring project for clean up and other implementation funds from EPA. Pellet Terminal Site in Lorain, OH In 2017, the City of Lorain received a $200,000 planning grant from the EPA for the Pellet Terminal site (above) 7 - - Initiate a home rehabilitation subsidy program targeted for smaller developers engaged in substantial home renovation/resales. A successful program called Homeownership Rehabilitation Program (HRP) was utilized in the City of Philadelphia in the 1990s to 2000s to stabilize so-called Middle Neighborhoods and build momentum for market-rate development. Summary of Philadelphia’s HRP ▪ Provided financing for the acquisition and rehabilitation of vacant houses requiring moderate rehabilitation for sale to low- and moderate-income, first-time homebuyers. ▪ Funded through CDBG and Housing Trust Fund. ▪ Home buyers finance 100% of after-rehab value of home. Must receive pre-purchase counseling. ▪ Subsidy amounts are: $35,000 per unit, $10,000 additional for deconversion of two-unit home to oneunit, $15,000 developer fee, $1,000 for counseling fee. ▪ If private grants are leveraged, additional subsidy up to $15,000 is matched. ▪ Subsidized funds are recorded as 10-year soft-second (forgivable) mortgages. ▪ Example of HRP project pro-forma: Development Costs Sources of Funds Acquisition: Construction: Developer Fee: Counseling Fee: Other costs: - $40,000 $95,000 $15,000 $1,000 $10,000 $161,000 Perm Mortgage: HRP Subsidy: Developer Fee: Counseling Fee: Private Grant: HRP Grant Match: Work with developers to secure HUD 221(d)(4) loans for substantial renovation of mixed-income rental apartments. Local projects utilizing this resource include: Fenway Manor Renovations in University Circle and West 25th Street Lofts in Ohio City (see below). Fenway Manor $80,000 $35,000 $15,000 $1,000 $15,000 $15,000 $161,000 Total subsidy from City: $66,000 (recorded as 10-year soft second mortgage). Buyer’s monthly payment based on 30-year mortgage of $80,000. West 25th Street Lofts 8 - • • Increase the role of community development corporations in the acquisition and maintenance of potential properties. In East Liberty, a section of Pittsburgh that has made a remarkable transformation in the past 20 years, the local community development corporation, East Liberty Development Inc. (ELDI), was to implement a multi-phase, comprehensive approach to the development of for-sale homes to begin to replace some of the thousands of homes lost to decades of disinvestment. The underlying strategy was to build a private residential housing market, alleviate blight and vacancy, increase homeownership, and bring targeted area development activities to scale. - Consider a “residential incentive zone” that provide 10-year income tax credit (state and/or city) for moving inside the zone. Establish a household income cap (e.g., $70,000 a year) and a maximum loss cap of tax revenues associated with this incentive. See below for an example of a tax incentive zone in Pennsylvania. ▪ In Pennsylvania, the Commonwealth has designated Keystone Opportunity Zones (KOZs) scattered throughout the state in strategic locations to spur on investment in underserved areas. Businesses, property owners and residents that are located in a KOZ are eligible to receive significant state and local tax benefits (including sales tax, corporate net income tax, personal income tax ). Since the program began in 1999, KOZs have created and retained more than 43,000 jobs in their local communities. ▪ ▪ A key component of this strategy was ELDI leveraging public funds and charitable grants to acquire and package properties for redevelopment. In most cases, ELDI transferred the property to small-scale, local developers to rehabilitate and sell to homebuyers. 9