Work continues Thursday, Jan. 24, 2019 on the Arts Residences at the Thompson building at 123 Lexington Ave. Development firm DC Partners is building the high-rise with help from a $10 million incentive package from the Center City Housing Incentive Policy, a program that gives developers property tax rebates and construction loans to build housing in downtown San Antonio. The policy was a key component of Julian Castro’s "Decade of Downtown."
San Antonio apartment construction slowed last year as rents rose but the expansion of UTSA’s downtown campus and growth in the city’s downtown workforce could spur more multifamily developments in the urban core.
Apartment completions fell below 6,000 units last year for the first time since 2014, according to a recent report from commercial real-estate firm Marcus & Millichap. And developers are filing fewer building permits for apartment complexes with more than five units a piece than in previous years, U.S. Census Bureau data shows.
Sluggish job growth in the San Antonio region last year has some analysts worried that multifamily apartment development could slow further. Local companies hired 11,000 workers last year, up 1 percent from the previous year — trailing job growth in Austin, Dallas and Houston.
“That’s what I’m most concerned with now,” said Bruce McClenny, president of Houston-based ApartmentData.com.
But demand for housing in and around downtown San Antonio remains strong. The city’s on track to meet its goal of adding 7,500 housing units to the downtown area by 2020. Downtown apartment complexes often reach 90 percent occupancy within a year of opening, Assistant City Manager Lori Houston said.
And demand for those apartments are expected to grow within the next decade. The University of Texas at San Antonio’s planned $90 million expansion of its downtown campus promises to bring 15,000 students to the urban core by 2030. San Antonio-based USAA plans to move 2,000 employees to its downtown offices. And financial-services firms Credit Human and Jefferson Bank are moving their headquarters to Broadway near the Pearl.
Nearly 3,000 housing units are currently under construction in and around downtown San Antonio, according to figures provided by the city. Another 1,600 are in the planning stage.
Will those be enough to absorb a surge of students, teachers and employees expected to flood downtown?
At the moment, it’s not clear. The city doesn’t yet have estimates about how many housing units will be necessary to satisfy new demand from those developments, Houston said. Not every student and downtown worker will want to live downtown. And students often double up or live at home.
City Council members restarted a program last year to subsidize downtown housing development partly in anticipation of corporate expansions and UTSA’s growth, Houston said. The Center City Housing Incentive Policy, known as CCHIP, gives property tax rebates and construction loans that are sometimes forgivable to build housing in the core.
The program, which began in 2012, gave nearly $102 million to developers to build market-rate housing before council members voted to pause the program in January 2018, driven by concerns the city was needlessly subsidizing pricey housing at the expense of its affordable housing needs.
City Council members approved a retooled version of the program in December that caps rents for properties that receive incentives and includes mechanisms intended to encourage more affordable development.
Among the first projects that could receive incentives under the revamped program: the Cattleman Square Lofts, a 160-unit development being developed by affordable-housing developer Alamo Community Group at 811 W. Houston, two blocks from UTSA’s downtown campus.
City officials intend to revisit the program every two years to gauge whether the city needs to beef up its incentives to stimulate more downtown housing, Houston said.
“We want to see if demand is still there,” Houston said. “Right now, there are indications that it is.”
But developers have questioned whether CCHIP is enough.
“It’s going to require significantly more than the CCHIP is offering today to achieve the number of units of housing that can potentially service not only the job growth for downtown but the university needs,” said David Adelman of Area Real Estate.
UTSA and city officials are making moves to boost residential development to accommodate students’ and faculty members’ housing needs in the downtown area.
The university plans to enter a public-private partnership to develop Cattleman’s Square Residential Tower, a mixed-use development with at least 10 stories of student housing, two ground floors of retail and classrooms on two acres UTSA owns. School officials are expected to pick a developer this spring.
City officials are expected to open the bidding process for a proposed housing development at the historic Continental Hotel property on 322 W. Commerce St., Houston said. It’s not yet clear how many residential units the development will have, but the development would have a certain number of units set aside for households making less than 80 percent of the area median income, Houston said.
Ultimately, builders and officials will have to find ways to increase residential density throughout the inside of Loop 410, not just in the downtown area, to handle downtown growth, Adelman said.
“I don’t think it’s unrealistic at all,” Adelman said. “I think it just takes a concerted effort from the public and private sector to make sure your urban core is thriving and attractive.”
Overall housing construction in the San Antonio-New Braunfels is flat year-over-year. Developers filed building permits for 9,802 housing units from January 2018 to November 2018, according to the latest available data from the U.S. Census Bureau — about as many as were filed during the same period the previous year and up more than 10 percent from about 8,800 in the same period in 2016.
But developers are building fewer apartment complexes. The share of permits for units in complexes with five or more units has fallen in recent years, census data shows. From January 2016 to November 2016, developers filed permits for more than 2,600 units in that category — accounting for 30 percent of all permits filed.
In the same period in 2018, that number stood at nearly 2,100, or 21 percent.
San Antonio apartment rents are still more affordable than its sister Texas cities. Rents grew by 3.8 percent last year and the average rental rate sits at $1.11 a square foot, figures provided by ApartmentData.com show. Rents in Houston, the Dallas-Fort Worth metroplex and Austin are $1.16 a square foot, $1.26 a square foot and $1.41 a square foot.
“When you look out across other places to live, it (San Antonio) fares incredibly well,” McClenny of ApartmentData.com said.
Joshua Fechter is a San Antonio-based staff writer covering retail and tourism. Read him on our free site, mySA.com, and on our subscriber site, ExpressNews.com. | firstname.lastname@example.org | Twitter: @JFreports