Bauhaus solutions: Preservation isn't free

People are legitimately concerned when a developer changes a key part of their neighborhood's commercial district. But the Green Bay Packers model might help communities control their own destiny while respecting ownership rights.
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People are legitimately concerned when a developer changes a key part of their neighborhood's commercial district. But the Green Bay Packers model might help communities control their own destiny while respecting ownership rights.

The possible redevelopment of the Bauhaus block on Capitol Hill has generated some fruitful discussion about land use, preservation, and the basis of our economic system, capitalism. Many people have asked: Is that all there is, price tags and profits? Don’t culturally important buildings have an intrinsic and financial value?

The answer is that historic buildings often do have special values, and we can preserve and profit at the same time if we focus on solutions, and avoiding the blame game.

People can get understandably upset when an owner decides to change how a property is going to be used, even though ownership is a basic principle we all understand. When we buy something we’re taking what we’ve worked for and acquiring something of value and making it ours. Sharing is also a basic principle, and we expect commercial space to have some public component.

But any homeowner would agree that there is something sacred about the process of finally moving into a new house, making repairs, and transforming the house into a home. It’s hard sometimes to see commercial real estate in the same way. It’s easier to see someone who transforms commercial space as being greedy because they do it for money.

There is, however, nothing wrong with buying property at one price in order to increase its value. Indeed, how is that any different than making home improvements to a house to increase the resale value? Is it greed to increase the value of a single-family home by putting on a new roof, adding a deck, and a new coat of paint?

Many will reject the analogy, but it would be helpful to the dialogue to put oneself in the shoes of the new owner of the building. How would you feel if you invested in a property only to be called greedy? Rather than criticize owners, maybe Seattle neighborhoods could become owners themselves.

There are two market-based ideas that could be implemented in Seattle to preserve blocks like the Bauhaus block on Capitol Hill. The first is a Real Estate Investment Trust (REIT) and the second is Transfer of Development Rights (TDR).

A REIT is really a communal form of ownership of property. Lots of people buy shares in the trust; the trust buys, develops, and operates real property; and if the value goes up and there are funds after paying operation costs, the shareholders get increases in the value of their shares and dividends from profits. If the property increases in value and is managed well, the shareholders share in the increases.

Why not pool neighborhood resources to acquire real estate? People in Green Bay managed to put together an ownership structure for the Packers like this.  Fans in Green Bay were determined to own the team, rather than have it moved away for more profits. In the same way, local neighborhood activists could acquire key blocks of property, managing those blocks in the interests of something broader than just the highest financial return.

If this idea were combined with the concept of Transfer of Development Rights (TDR) we also wouldn’t lose the housing that new development creates. If the city worked with neighborhoods as they purchased key blocks, other blocks in the neighborhood could get increases in height, bulk, and scale in exchange for the construction opportunity lost where the building was preserved.

If the City of Seattle bought that capacity from the neighborhood, the shareholders would have even more resources to manage their iconic block. If the City, in turn, sold this capacity to another developer somewhere else, what would also be preserved is the ability to move more people into the neighborhood to benefit from the character that the neighborhood had invested to save.

Government can channel the natural human tendency to seek increases in the value of their assets, predictably, over time in the interests of the broader community. In a sense, this is a primary purpose of government, to make individual tendencies toward self-preservation and profit generate enough value to support the community interest (e.g. taxation).

If we can get beyond our own prejudice against developers and become developers ourselves, maybe Seattle’s neighborhoods could spark a renaissance of preservation and profit, culture and growth, consistency and change that would be a model for the region and the country.


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