Post #412: The 10,000 foot overview of changing Vienna’s commercial zoning.

The Vienna Town Council is going to take up discussion of the zoning rules again, starting tonight (10/9/2019) at 7:30 in Town Hall.  This will include both MAC zoning and the pre-existing standard commercial zoning.


Background

My observation is that MAC discussions in the past year tended to get mired in the details almost immediately.  The result is that all the time gets devoted to the existing text of the law, and to little tweaks of the law, with scant time spent examining the bigger issues.

And, from what I have seen, this is encouraged by Town staff.   Meanwhile, town staff have repeatedly tried to get the Town Council to adhere to an extremely (and unnecessarily) rapid schedule.  The most recent go-round with that is described in Post #378.  The previous abrupt about-face on the schedule is summarized in Post #203.  As I recall, it was Councilmembers Majdi, Noble and Springsteen who had to say, wait, why are we doing this, this schedule is unrealistic, and so on.

If you believe that MAC zoning is fine as-is, that’s a good strategy.  That combination (focus on the details, and hurry up about it) systematically limits full (re)consideration of the larger issues.  In effect, it keeps Town Council from meddling with your work.  But if you think the basic structure of MAC needs work, then that’s not an efficient way to proceed.  You need to discuss and settle the larger issues first.

But at the last Town Council work session (9/9/2019, reviewed in Post #378) there was some broad discussion of fundamental changes to the law.  Before this, by my recollection, the primary person concretely questioning the basic structure of MAC was Councilman Majdi, who at various times suggested (e.g.) that allowing four stories by-right under MAC was a poor bargaining strategy, and that (e.g.) adjacent neighborhoods should be buffered from the large MAC buildings by some form of transition housing (e.g., modified zoning rules for town houses).

Here’s my summary paragraph from Post #378, to remind people of some of the changes that were discussed.

But by far, the biggest news here is that the Town is (finally) considering making major changes to MAC zoning.  Many things that were considered bedrock assumptions of the existing MAC were … at least up for discussion now.  Among those were items such as a) not applying MAC to all of Maple (see Post #302 for a comparison of the MAC zone to other shopping districts),  b) producing some viable three-floor building options, c) vastly reducing the parking “incentives” that were previously though absolutely necessary, d) introducing transitional housing zones between the redeveloped commercial lots and adjacent neighborhoods, e) or just plain restricting the large MAC structures to lots not adjacent to neighborhoods.  And so on.  Lot of things now appear to be on the table.

That said, when I looked at where the draft (redline or red line) of the law stood recently, not much had changed.  That’s summarized in Post #402.  In a nutshell, as I read it, you have all the worst features of MAC locked into place, and then some, on the majority of Maple.  And for a couple of blocks, at either end of the zone, you replace it with three-story MAC-like buildings that can be built entirely by-right, without public review.

So far, that redrafting of the law has been driven almost entirely by staff and a selected subset of Town Council and others (the “Ad Hoc Committee”), not our elected officials generally, in Town Council session.  I don’t think that doubling down on “MAC-plus” on the majority of Maple is what the last election was about.

Finally, I’ve already written the obituary for all the questions I’d have liked to have seen answered before proceeding (Post #382). Let me just take a second to highlight two of them.

Market for retail space on Maple.  The Town is engineering a makeover of a retail district, introducing cross-subsidy between housing and retail (you must build the iffy retail space, in order to build the profitable housing).  It’s a strategy that has worked out well in some areas, but hasn’t worked out well in others.  I.e., it’s a gamble, not a sure thing.  As far as I can tell, the entire extent of analysis of this issue seems to boil down to “we think there are a lot of empty storefronts on Maple, so let’s build more.”  As an economist, that seems questionable, at best.  And so, we’re taking that gamble without doing any estimate of the odds — any estimate of how much more retail space Maple can plausibly absorb.  Shoot, wouldn’t you at least want to know the actual current vacancy rates for retail and office space along Maple, and how that compares to vacancy rates in the rest of NoVA (Post #390)?

Impact on traffic.  The eventual impact on traffic is another detail that would be well worth knowing and discussing.  The Town now has some estimates of that, thanks to Councilmember Noble.  Those estimates are imperfect and appear to have a downward bias (Post #364).  And, for the most part, there’s no way to check them after-the-fact to see how accurate they were.*  But they are a whole lot better than nothing.  And they address the major concern about development that Vienna residents expressed in comments on the Town’s visual preference survey.  To put it plainly, you can hardly claim to represent the people of Vienna while ignoring their #1 concern.  See table, top of this post.

* Total traffic on Maple will vary for any number of reasons.  In most cases, you can’t attribute the change to any one cause.  Similarly, you may project (guess) the impact of some change (e.g.,  more and better sidewalks), but can never literally count any resulting reduction in car trips.  Decisions in this area are based on a set of forward-looking projections whose accuracy we will never really be able to check.  Some people are perturbed by that, but that’s just the way the world works sometimes.  It’s still better to have some reasonable projections than to wing it based on no information at all.

 


Step 1:  Clear the decks

In this section, I was going to list out all the things I’ve heard about MAC that I think are just nonsense In effect, I was going to produce a laundry-list of things that the Town and others have said as a way to justify MAC zoning, or have listed as goals of MAC zoning, or similar, that just aren’t so.

The idea was just to get rid of the nonsense, so you could talk about the realities.

But at this point, I think it’s smarter to talk about what MAC is, than it is to take time to try to dispel myths about it.  So I’m just going to point you to analysis I have already done, for a few of these.  If you feel like reading it, great.  For my part, that’s due diligence done.

MAC is about preserving small-town Vienna.  No, just plain noNobody views these MAC buildings as small-town.

MAC will give us parks and plazas.  NoThe open space requirement under MAC is almost totally ineffective.  In no sense does it require or mandate parks and plazas.  Most of the “open space” is more-or-less what you see in front of the Chick-fil-a-car-wash.  It’s undesirable space directly adjacent to Maple.  The proposed changes would rename and redefine the open space requirement, but do not get rid of the basic problem that the law does not require open space to be “additional”.  It counts (e.g.) the mandatory sidewalks and such as open space.  You’re kidding yourself if you think the revised definition is going to result in mandated parks and plazas now.

MAC will yield affordable housing.  Nope, not as its currently structured.  And if you could restructure MAC, you would barely make a dent in the issue anyway, and for the foreseeable future, the only affordable housing in Town is the Wolf Trap Motel.

Vienna retail is in crisis, and we’ll become a ghost town without redevelopment.  No.  Not as far as one can tell from objective data — based on vacancy rate, or on property valuations, or on typical rents.

Ah, that’s enough.  Just try to clear out the mental cobwebs a bit, before trying to focus on the reality of the situation.


Part 2:  Follow the money.

Pop quiz:  Land on Maple Avenue is selling for about $6M/acre*.   On average, a parking place (and associated access road) takes up about 350 square feet.**  How much is the average parking place on Maple worth?  Answer:  ($6,000,000 x (350 sq ft/43560 sq ft per acre)) = $48,000.

* Here is the recent sale of 10 acres.  ** Baker and Funaro in Shopping Centers: Design and Operation state that 350 feet is the minimum that can be considered satisfactory.

In a nutshell:  In this section, I’m going to outline what I think is driving MAC zoning.  And so, what Town Council needs to pay attention to, in the overall design of MAC.

I’m an economist, so … surprise … I think it’s all about the money.  And Town Council’s fundamental questions have to be “what’s in it for us”, and “how do we get it”.

  1. Land along Maple is not being used in an economically efficient fashion.  See pop quiz above.  Would you pay $48,000 for a parking place?  If not, then it’s likely that the total market value of Maple Avenue property would increase if the land were used for something else.  (That’s what I mean by not economically efficient.)
  2. Given current market conditions, converting that land to housing would generate the most profit.
  3. Existing commercial zoning (C1x and C2) is a barrier to converting Maple to housing, because the majority of the building (C1x C2) must be for commercial use, not housing.
  4. Building codes changed around the year 2000, making it much cheaper to build low-rise apartment/condo/commercial buildings (a.k.a. “stumpies“).
  5. MAC gets around the limitations of the existing (C1x C2) commercial code by allowing more floors, and letting most of the building be housing.
  6. So now the combination of the change in building codes and the introduction of MAC zoning means there’s a lot of money to be made by converting the existing Maple (low-rise-with-surface-parking) to housing of various sorts.
  7. The Town’s job should be a) to minimize the negative impacts of that change, while b) extracting as much of the profit as possible for the benefit of the Town.
  8. Those two goals — minimize negative impact, maximize profit — run contrary to each other, and part of Town Council’s job is to balance those.
  9. In my opinion, MAC/C1x/C2 as currently written does not do a good job of either minimizing negative impact or maximizing benefits to the Town.

3: What are the major structural issues for revising the existing zoning?

My general take on this is that if the Town proceeds, it should seek to have the least possible negative effects from redevelopment.  That means that, if you are bound and determined to change the law to encourage redevelopment, aim for low and slow.  Aim for the lowest density, and the least financial incentives (which should lead to the slowest pace of redevelopment).

Does the Town of Vienna need to do this, period.  By this, I mean, MAC zoning, period, and now the revision of the rest of the commercial code. 

I would say no, but I doubt there is any going back on this.  The Town had several successive years of slow revenue growth following the 2008 banking crisis.  But of late, revenues have been rising about 5%/year, in line with increases in real estate assessments.  And, noted above, the idea of a failing retail sector on Maple appears to be bunk. unsupported by the facts. So, no, I don’t think anything forces the Town to make these changes.  The Town will not go bankrupt, and neither will Maple Avenue retail.  But the money to be made, in redeveloping Maple, is going to be a constant force pushing for redevelopment.   And, realistically, for the Town to do a U-turn now — ain’t gonna happen.  They got the ball rolling in 2014 when they passed MAC.  My guess is, we’re stuck with it.

Can three-story mixed-used buildings be built profitably on Maple?

Provisionally, it looks like the answer to that is yes.  That’s the precedent set by 901 Glyndon and the proposed 145 Church.  Those are (901) or would be (145) two floors of housing over some retail.  But note that both of these appear to have been built/proposed under zoning other than our standard C1, C1A, or C2 zoning.

The downside here is that the less profitable the building, the less the Town can extract from the builders.  And in particular, when you think about construction costs, the higher floors in the building generate most of the profit.  My guess is that three-floor buildings are not just less profitable, I bet they are a lot less profitable than the four (or is it five?) floor buildings that MAC would allow.

So the Town Council’s ability to extract benefits on behalf of the Town would be limited.  I more-or-less scoff at the benefits obtained so far, so I’m no sure how much I would miss them.  First, the Town is getting builders to bury the power lines piecemeal — but we have then quietly incurred a large financial liability for finishing the job (Post #210).  I guess your view of that depends on how much you object to power lines running along an urban arterial highway.  Second, the Town is getting some modest open spaces directly adjacent to Maple.  I don’t think those will end up being much of an amenity, due to the noise and pollution from Maple Avenue traffic.

Finally, because building values would be lower, the resulting property tax revenues would be lower.  So the Town would miss out on some portion of the potential future tax stream from these buildings.

Mixed use by right.  Should the Town amend the “primarily commercial” clause in the existing commercial zoning to allow by-right buildings that are two floors of housing over some retail space?

First, doing that destroys much of the Town’s bargaining position vis-a-vis developers.  Right now, as I understand it, developers won’t do housing-over-retail buildings under the existing zoning because the existing code requires too much retail space.  The majority of the space in the building has to be retail.  And so, if they want to build housing on Maple, practically speaking, they have to go through the MAC process.*

* As I read it, they actually could build straight-up apartment buildings if they wanted to, under the existing commercial code.  But those would have to obey the same height and setback requirements as houses do in Vienna — maximum height 35′, maximum lot coverage of 25%.  Plausibly that’s a less profitable use of the land then what Maple is used for now.   But it’s possible that I have simply misread that portion of the Town code.

If you changed the existing commercial code, then developers have the option of building three-story housing structures, with few restrictions, by right.  By right means there’s no public review, and no opportunity to extract concessions from the builders.  Under that scenario, there is less incremental profit to be made by opting for MAC.  And so there is less for the Town to bargain over, with the builders.  By making the default option (C1 C1A C2) more profitable, you’ve weakened the Town’s bargaining position for the MAC buildings.

One more caution:  As I read it, if you got rid of that clause, the only remaining restriction on buildings would be that housing cannot be on the first floor.  If you scrapped that clause, and did nothing else, I think that builders could do two floors of housing over a first-floor parking garage, period.  No retail.  No pretty storefronts.  I’d guess that the folks who think the existing downtown is ugly would not consider that a step up.

Second, that would solve a lot of problems for Town Council.  If done well, they could more-or-less wash their hands of this.  Assuming they avoided the worst issues (such as the caution above), and stepped up the existing C1 C1A C2 requirements (e.g., for landscaping and such, as Councilmember Majdi has already put into motion), then they would be out of the picture from that point forward.  From that point forward, they could say “blame the developers, we have no say in it”.

But in that case, the Town would get no amenities out of the redevelopment.  No burying of the power lines, no proffers for traffic control, and whatnot.  The only opportunity for extracting concessions would occur if the developer wanted a “conditional” use of the land, as with the rehabbing of the dead gas station at Maple and Park.

And because there would be no retail space requirements, and housing is the profitable commodity here, likely this would shrink the retail square footage on Maple.  Plausibly, given NoVA’s more-or-less infinite demand for housing, the long run result of this would be a Maple Avenue that supported only the most profitable retail, in whatever space had not been squeezed out by housing demand.

Finally, if they also kept MAC, then they might consider restricting MAC to some area where larger buildings would not be as controversial.  In the center of Vienna, on lots not adjacent to residential areas, say.

So, by-right primarily-housing redevelopment under existing C1 C1A C2 commercial zoning has a lot of ramifications.  You lose bargaining power for MAC redevelopment.  And without further restrictions, you risk allowing housing to squeeze most of the retail off of Maple Avenue.  But the Town Council would get to wash its hands of ongoing responsibility for redevelopment.

Bargaining in general.  Can the Town do any better than its current MAC default, which is that developers have the right to “fill the box” with the biggest possible building that will fit the height restriction and lot-line-setback restriction.

Currently, MAC zoning has a one-size-fits-all set of height and setback restrictions.  And — surprise — builders have reacted to that by more-or-less filling the legally available space with a building.  And then the Town has to claw back any reductions in building size, below that maximum.

Councilman Majdi fairly forcefully pointed out that this is not a smart bargaining position for the Town.  Surely you could set this up in a way that made the default building smaller (three floors, say), with a right to bargain with the Town over having a larger building.

The key thing about this is to expect absolutely zero help from Town staff on this.  The reason is that, as far as I can tell, they see their job as maximizing the amount of development in Vienna.  Shifting the bargaining in favor of the Town reduces developers’ profits.  Which reduces the incentives to redevelop.  And, ultimately, reduces the likelihood of redevelopment.  From the perspective of maximizing development, shifting the bargaining in favor of the Town is a bad thing.

I would say that Councilmember Majdi has a good point.  For example, to kill two birds with one stone, you could couple the 4th floor with a requirement for an expansive green buffer space between the building and any adjacent residential property.  As rough justice, if the building is going to be 60′ tall at the parapets, you’d have to create a 60′ green public park, not including Town right-of-way, at the back of your building.  At that point, it’s up to the builder — do you want a three-story building that covers the lot, or a four-story building built well away from the adjacent neighborhood, with public park facing the neighborhood?  This would be in the spirit of his suggestion to mandate transitional housing at the rear of the lot, to separate the MAC building from the adjacent neighborhood.

There are many other issues.  Do you want to allow five-story buildings, for one.  Does a 28′ setback provide an actual amenity to the Town.  And so on.  But my main point is that I hope that Town will focus first on the big picture.  And not get immediately down into the weeds of the specific language of the law.