Post #236: The tear-down boom actually has zero impact, or, by-right jumps the shark

Posted on April 12, 2019

After sitting through Wednesday’s Planning Commission (PC) meeting I had a revelation.  I’ve been looking at the tear-down boom (Post #217) all wrong. Now that I have revised my thinking, and modeled it after the logic used by some members of the planning commission, I now realize that the tear-down boom has absolutely no impact on anything in the Town of Vienna.

Here’s the key:  Every owner of a small home in Vienna has the right to tear down their home and build a vastly larger home on the lot.  And so, because they have the right to do that, the only logical way to assess actual tear-downs is against this by-right baseline. This was the key bit of logic that had escaped me before.

And so, the following are inescapable conclusions of that logic:

  1. These new, much larger homes have zero impact on the schools.
  2. There is no impact on the Town of Vienna tax base.
  3. The tear-down boom leaves the look of our residential streets unchanged.
  4. Conversion of the entire housing stock to very large homes has no impact on the perception of Vienna as “small town”.

If you think this looks a bit off, I’ll just remind you of the logic used to get there.  The right way to assess a change that actually will occur (an actual tear-down), is against a baseline of what could possibly have been done, by right.  No matter how improbable.  And so, logically, because all homeowners have the right to tear down and rebuild, the actual tear-down boom has zero impact.

This is exactly the logic used by some, at Wednesday’s PC meeting, to justify, in part, the size of 380 Maple West.  This is the logic of the by-right analysis as it is currently being done.

The builder showed a diagram of the largest building that could have physically have fit on that lot, under existing zoning.  This included two floors of underground parking, and 10′ parapets on top of the building.  And, I guess we were supposed to go “ooh, ahh, look at that”.   And nobody bothered to ask two simple questions.  Two questions that get at my prior critique of the “by right boogie man”.

  1.  Are there any buildings like that in Vienna now?  (No.)
  2. Why not?  (Because you’d lose money if you built that.)

How do I know 2) above?  First, I “ran the numbers” as best I could.  The killer under by-right zoning is that you can’t make this a housing project with a little bit of retail, the way you can under MAC.  Under by-right, half the building has to be commercial space, which in today’s depressed office market means retail space.  A third of the retail space would be undesirable second-floor or third-floor retail.  Every bit of that retail has a parking burden of about one space for ever 200 square feet or so. And current “cap rates” are such that retail space, at typical rents, sells for less than housing space.

In short, it’s not just the height restriction that burdens this building.  Its the fact that half the building has to be less-profitable retail, instead of more-profitable housing.

Compare that 50% retail restriction under current zoning to what is being built under MAC. For 380 Maple West, a rough calculation shows the retail is about  7% of the rentable space of the building.  If I do my (admittedly crude) financial calculation, the retail space at 380 Maple West accounts for perhaps 5% of the sales price of the building (at $40/sq ft/year rental that I used to think was typical of Maple) to possibly as much as 8% of the sales price of the building (at the $60/sq ft/year that is currently being asked for 444 Maple West and for Danor Plaza restaurant space).

But you don’t have to trust my guesses as to the profitability of the building.  Item 1) is what economists call a market test.  If somebody could have made a decent profit building that building … then chances are, they would have done that by now.

And so, as with my analysis of the tear-down boom above, what you are looking at in the by-right scenario is a fiction.  You’re using a fictional unprofitable building, that would never be built, to justify the building of the highly-profitable one that is only feasible under MAC zoning.

I can’t quite figure out what drives this appeal to a fictitious by-right scenario.  It would be perfectly reasonable to consider realistic by-right scenarios for a piece of property, starting with “nothing would change”. It is perfectly reasonable to ask, in a realistic way, what would happen absent rezoning.  There is nothing at all wrong with, and there is much to recommend, a by-right scenario analysis as long as it is properly limited to looking only at profitable redevelopment. 

Because … it it ain’t profitable, it ain’t going to get built.  Doesn’t go an inch deeper than that.

But Wednesday’s by-right scenario was beyond the pale.  It wasn’t even a good fiction.  It was so obviously unlike anything seen anywhere in Vienna, plausibly unlike anything in the DC Metro area — that nobody (with any sense) actually thought they were looking at a realistic option for redeveloping that lot.

Let me be clear about the lack of logic in the “by right boogieman”.  On the one hand, the people pushing MAC strenuously argued that MAC was necessary in order to provide the economic incentives for redevelopment.  Without MAC, they claimed, nothing would get redeveloped under our existing zoning.  And now, those same people turn around and say, oh, be very, very scared about what could be developed under existing commercial zoning.

So, at some level, if they have done any introspection at all, they know this is nonsense.  So why is it there?  Why was this a part of the discussion of 380 Maple West?  And in particular, why was this over-the-top by right alternative presented?

At this point, all I can do is speculate.

Option 1, they really are that dumb.  Possibly, they really, truly don’t understand that economics severely constrains what can be built.  This, despite the fact that they surely seemed to understand that when arguing for MAC in the first place.

I judge that to be “not plausible”.  These people have, by and large, spent their careers in the building trade.  Every one of them brings something valuable to the table.  Surely they understand that economics is the prime driver.

Option 2, they think we really are that dumb. Not a bad guess, I’d say.  The Town has a habit of saying whatever will justify big MAC buildings.  (E.g., a building the size of a football field preserves “small town” Vienna.)  So, even though the audience has no effect on the outcome of the process, maybe they were aiming this at the crowd?

I judge that to be “not plausible” as well.  The crowed was solidly against the construction of 380 Maple West.  So, whomever the “by right” analysis was aimed it, it wasn’t us.

Option 3, this is an exercise in self-justification.  I would guess it’s fairly psychologically wearing, knowing that 1000 people in Vienna signed a petition against 444 Maple West, and you did that anyway.  Knowing that the first building you approved is already a common object of scorn.  For some, at least.  I believe it was Councilman Springsteen who called MAC the most divisive issue to hit Vienna in decades.  And so by concocting a building that was almost as big as 380 Maple West (10′ parapets!), maybe the point was purely to justify this to themselves.  I.e., “See, MAC only added a little to the size, and look at how much nicer the MAC building is compared to that ugly old thing under by-right.”

That would go hand-in-hand with a mantra of “the objectors are just the disgruntled neighbors”. Which is, as I understand it, largely how the Town has dismissed the opposition to these big MAC buildings.  That’s another way to marginalize the effect that this is having on Vienna.  But at least for that line of thinking, there is some hope that might be disproven on May 7th.  But that’s probably just wishful thinking on my part.

Of the three, I’m going to judge that … the least implausible. They certainly aren’t doing this on the basis of logic.  Surely everyone voting was smart enough to understand that economics is the driver of what is built.  They aren’t doing this to sway the crowd.  The crowd was solidly against 380 Maple West.  So at some level, I have to ask whether, at root, this is there really just to allow them to marginalize, to themselves,  the size of the changes they are bringing about in Vienna.

Let me be clear, those last three points are pure speculation.  I’m just trying to make some logical sense of what I saw.

All I know for sure is that Wednesday’s “by right” scenario jumped the shark.  The by-right scenario that Town staff concocted for 444 Maple West was done sloppily, and was not economically viable, but at least looked like it might fit into the Town.  But the one presented on Wednesday?  That took “by right” from “misleading-but-plausible-looking” to “off the charts”.   And I’m still trying to figure out why some PC members made sure that was publicly presented..