For years beginning in the mid-2000s, a roughly four-block plot in downtown D.C. was a concrete wasteland. The site, the former location of the city’s convention center, was used as a parking lot, an intercity bus terminal, and, for less than a year, a tennis stadium. But mostly it felt like a black hole where street life, commerce, and most forms of human activity simply ended. Then-Mayor Anthony Williams badly wanted to develop the area into a cohesive, mixed-use community that included a public library and affordable housing, imagining a place as critical to the economic and social fabric of D.C. as the Inner Harbor is to Baltimore.
The resulting $950 million, 10-acre development is CityCenterDC, a shimmering maze of restaurants and stores that opened in 2013. Far from Williams’ inclusive pitch, however, it features luxury ground-floor retail (Gucci, Ferragamo, Hermès) that anchors similarly luxurious office, condominium, and apartment buildings. Some 500-square-foot studio apartments start renting at $1,900 per month; other units go for more than $14,000. White House aide Stephen Miller bought a CityCenterDC condo, as did former Missouri Sen. Claire McCaskill and former Attorney General Eric Holder.
At the end of 2020, though, the CityCenter area is only a little bit busier than it was in its parking lot days. Behind all the floor-to-ceiling glass, pert, well-pressed salespeople tinker with clothes in empty stores, with security guards poised blankly at the gilded doors. The development’s public plaza echoes with the sound of bubbling fountains, but in the absence of passersby the effect is just eerie. At all hours of day, venturing into CityCenter has the distinct feeling of walking through an immaculately maintained theme park after closing time.
Across the U.S., the coronavirus pandemic has sapped Americans’ appetite for fancy projects like this, in no small part because the cross-section of upwardly mobile people who can afford such apartments—like well-off students, high-earning young professionals, or people with second homes—have fled urban city centers or scaled back on spending.
“In Manhattan, there is blood on the streets,” one property management executive told BisNow in September about the borough’s luxury rental housing market. Rents there have plummeted 19 percent since this time last year, with the worst loss in demand occurring among luxury housing. One brokerage firm told BisNow that they saw between an 18 to 23 percent dip in rental prices since last year; in the Upper East Side, one of the city’s most notoriously expensive areas, there were 1,300 one-bedroom apartments on the market this fall, more than four times the number that were available this time last year. Joy Construction, a company that manages apartments in the glittering behemoth of Hudson Yards, dropped rental prices there by 15 percent. That still wasn’t enough to move interest, its executives said.
In Los Angeles, vacancies in luxury apartments are nearing 5 percent. L.A.’s downtown, which saw the largest number of newly built luxury units in the past decade, has been hit particularly hard, with rent prices dropping nearly 8 percent since January of this year, according to L.A. Magazine. Back in D.C., the vacancy rate for luxury housing topped 10 percent this summer. Now the average rent for a luxury apartment in D.C. is $2,387 per month, about $300 less than it was last year.
Some of the diminishing appeal of luxury apartments and condos is obvious. To the extent that developments like these achieve community, they do so primarily through the wink-and-nod of a shared class status, or through amenities like pools, saunas, and gyms, the last things that anyone fearful of catching a deadly respiratory disease wants to use. Several cities, too, are reimplementing restrictions on group activities in the face of a rising third wave of COVID cases.
The crisis in luxury housing is also an example of the pandemic accelerating a trend rather than creating one. Even before COVID-driven job losses forced people to downsize, developers chased luxury housing on a scale no market could match. In January, the Wall Street Journal reported that builders in the U.S. were on track to create more new units of housing in 2020 than in any year since the 1980s. The catch was the 80 percent of those expected 371,000 new rentals are Class A properties geared toward high earners. Given the high cost of land and labor, it’s simply easier to turn a profit building housing for the wealthy, developers said.
It’s exactly that kind of thinking that has driven urban development for the past two decades. Because what makes luxury apartments so undesirable now—central locations in cramped downtown corridors, with shared amenities that encourage social engagement—is exactly what has made city leaders bend over backward to accommodate that kind of development. Few ideas have been championed so greatly in this generation’s “return to urbanism” movement as walkability, both to work and to recreation, to bars and shops and restaurants and home again. In this world, ease of movement is analogous to community building.
Urban development on the scale of Hudson Yards, CityCenterDC, and Chicago’s revitalized Navy Pier became the shortcut to that ideal. (Being able to “live, work, and play” in one single place has become the mantra for this kind of development.) “I’ve heard the council members and people in our community talk about a legacy change, and I think that’s how I would characterize this,” one community development director in South Carolina said last year about a proposed $250 million mixed-use development. “It’s just a legacy for our community.”
But only delusions of grandeur—of slippery ideas like permanence and “placemaking,” which is developer lingo for this particular kind of urban revitalization—could encourage the idea that raising entire glossy neighborhoods from scratch would make cities more livable or civically minded. And as it turns out, the things cities chased for so long are part of the reason people are turning away from them.
Developers have long argued that they continue to bet on the top of the market because it’s less profitable to build and subsidize below-market-rate housing. But is it really? While luxury units are losing customers, vacancies are low in more affordably priced units as tenants flock to cheaper options. (In some cases, rents in lower-income neighborhoods have actually ticked up.) The markets that are now seeing minor rebounds in leasing this winter, like New York, are among those that saw the greatest rent decreases. And the kinds of businesses communities are rallying to support aren’t the Chanel in CityCenter—they’re the bodegas, bookstores, and niche mom and pop shops that have been decimated during COVID-related stay-at-home orders.
Those won’t bounce back immediately, and in some places, they might not reopen at all. But as cities look to a post-COVID future, it’s worth considering that this kind of development is easier to encourage, and arguably more gratifying for communities. For most jurisdictions, it’s cheaper to relax strict zoning codes that would prevent a coffee shop from opening on the ground floor of a residential street than it is to entice developers with a multimillion-dollar tax break.
It’s unlikely that lawmakers in D.C., New York City, Los Angeles, or Chicago will ever give up completely on designing playgrounds for the wealthy, in part because their property and sales tax dollars help generate local revenue. But the pandemic has helped clarify that for the average city dweller, when the going gets rough, people don’t turn to new communities for support—they go home. If it took a pandemic to help hollow out CityCenter, the soaring income inequality that’s likely soon to follow could finish the job.
Property management companies with a financial stake in luxury buildings have already hinted that they cannot sustain their COVID-level losses indefinitely. But cities have shown that they’re inclined to subsidize this kind of housing anyway, even if it doesn’t mirror community need. For now, it seems, that’s the primary form of community development that urbanites can expect.
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