Wednesday, June 21, 2006
Pittsburgh: “Little Big Apple”?
For all the talk about the free market working in the redevelopment of Downtown, there are state and local dollars aplenty finding there way in through the cracks to the developers. That’s no real surprise. In some cases, like the PNC Tower, the project will get money from both sources. With the Millcraft development on Fifth and Forbes seeking only state dollars, the Mayor and County Executive are being called upon to lobby the state for the help.
Why does Millcraft need the help? One of their officials noted that “it costs as much to build in Pittsburgh as it does, potentially, in New York City, if you take out the land value”. Really? It costs as much to build a structure here as it does in one of the most expensive places on earth? What could explain such a claim if accurate? Could it be the favorable labor policies that ensure contractors are paid prevailing wages on a project if it gets public subsidy?
While it might be as expensive to build as in New York, Millcraft is convinced that people won’t pay New York prices for housing in Downtown. That’s where the subsidies come in according to Millcraft. The taxpayers’ generosity—to the tune of $18 million—will help keep Downtown housing affordable, say $150,000 to $200,000. That’s well above the median housing price in many communities and would be considered a luxury for a lot of folks. It is no better than using tax dollars to construct a building that will house condos and a boutique hotel, as will be the case with PNC Tower.
To be sure, there are plenty of people who pay $200,000 an up for housing, and some of them do it in Downtown and other city-based condominiums. Millcraft is working in a situation where there is not an influx of new residents, the City is losing population (over 4,000 between July of 2004 and July of 2005), and a lot of their prospective tenants are likely going to relocate from other locations in the City or region. Demand is not high. So it is no surprise the developers are grabbing the money when they can.
Why does Millcraft need the help? One of their officials noted that “it costs as much to build in Pittsburgh as it does, potentially, in New York City, if you take out the land value”. Really? It costs as much to build a structure here as it does in one of the most expensive places on earth? What could explain such a claim if accurate? Could it be the favorable labor policies that ensure contractors are paid prevailing wages on a project if it gets public subsidy?
While it might be as expensive to build as in New York, Millcraft is convinced that people won’t pay New York prices for housing in Downtown. That’s where the subsidies come in according to Millcraft. The taxpayers’ generosity—to the tune of $18 million—will help keep Downtown housing affordable, say $150,000 to $200,000. That’s well above the median housing price in many communities and would be considered a luxury for a lot of folks. It is no better than using tax dollars to construct a building that will house condos and a boutique hotel, as will be the case with PNC Tower.
To be sure, there are plenty of people who pay $200,000 an up for housing, and some of them do it in Downtown and other city-based condominiums. Millcraft is working in a situation where there is not an influx of new residents, the City is losing population (over 4,000 between July of 2004 and July of 2005), and a lot of their prospective tenants are likely going to relocate from other locations in the City or region. Demand is not high. So it is no surprise the developers are grabbing the money when they can.
