1380 Monroe St NW
PMB 405
Washington DC 20010
202-232-1616
Testimony of Greg LeRoy, Executive Director, Good Jobs First, to the DC Council Committee on Business and Economic Development on the Housing in Downtown Abatement Amendment Act of 2023, April 10, 2023
Chairperson McDuffie and members of the Committee, thank you for the opportunity to testify regarding the proposed amendment to the Housing in Downtown (HID) abatement. My name is Greg LeRoy; I am the executive director of Good Jobs First, a non-profit, non-partisan research organization. Founded and based in the District since 1998, we are the nation’s leading watchdog group on economic development incentives.
My main message is that HID, as proposed, is costly, risky and indifferent to market dynamics. Creating a 20-year property tax entitlement assumes the District knows what its housing and office markets will look like in the year 2043. I don’t think that is a rational or reasonable assumption; it’s asking for unintended consequences.
Losing a total of $909.1 million in revenue by FY43 — at the rate of more than $40 million per year by FY 28 — would mean the District is committing itself to a very large new spending line item. And since this spending would be structured as an “as of right” abatement or entitlement, it would not be subject to the normal safeguards of annual appropriations reviews.
This model — of the District foregoing all of its property tax revenue on converted properties for such a long period of time — places, in our opinion, an unreasonable share of the transition risk on other District taxpayers.
While I understand the District seeks to strengthen all of its downtown areas, I could easily foresee an abatement like this playing out more like a windfall in areas that already have considerable housing (or offices that were previously housing) and walkable amenities. The forms of office space within DC’s downtown area range from federally occupied compounds to offices in areas such as Dupont Circle and the West End that were first built as residences. This law would treat them equally, yet the previous residences will obviously be the cheapest to convert.
Such an abatement could cause, because downtown’s borders bisect areas with existing mixed use, situations where two properties within a stone’s throw of each other could have wildly disparate property tax bills — and therefore market/profit dis/advantages. That is a recipe for taxpayer resentment among existing residential property owners; it could even prompt some of those with non-abated taxes to appeal their assessments to seek a more level playing field.
One size cannot fit all. And markets will not treat all of downtown the same way.
Therefore, we recommend:
Shorter, Descending Abatements: HID abatements should be limited to no more than three to five years in duration, and preferably in a phase-down so that year 1 is 100%, Year 2 is 80% and so on.
Market Flexibility: It is absolutely necessary to structure the program to reduce the District’s risk and allow for market-based corrections. By market-based, I mean changes in demand for housing and office space throughout the defined downtown area — and geographic variations among different parts of DC’s downtown.
Put another way, any program with this intent needs to enable the District to “take its foot off the gas pedal” when any combination of incentive effects and market changes makes any abatement unnecessary or less necessary. Nothing about HID should be rigid or fixed; it should all be dynamic and tied to specific, public metrics.
Sophisticated Monitoring and Enforcement: There are tools available from pro-revitalization consultants that enable analysis of the economic trajectory of very small geographic units of cities — right down to the parcel or any set group of parcels. For better oversight and enforcement of awards, there is also software available to enable the District to ensure compliance on a payroll or rent-frequency basis. (When I made long-ago queries with the District regarding TIF district outcomes, it was evident that the District was not performing close monitoring.)
Compost This Challenge for Creativity: The District should treat this situation as a “hackathon” moment for creativity and seek the ideas of architects, planners, consultants, and housing advocates, especially those who specialize in racially just and affordable housing innovations. In the same way a cottage industry evolved to repurpose dead shopping malls, the District should foster the birth of a post-pandemic cottage industry for mixed-use office buildings. Local universities’ planning and business schools should be recruited to make this a graduate project.
Thank you and I welcome your questions.