Seeking to capitalize on renewed vigor and to satisfy a hunger for new housing, suburban builders, who a few years ago would never have considered building in Baltimore, are laying the groundwork to bring their products to urban areas.
Thursday, Mayor Martin O'Malley and city officials will join representatives from the Home Builders Association of Maryland and mortgage giants Freddie Mac and Fannie Mae in announcing the Baltimore Housing Renaissance Partnership, which will try to lure builders to construct market-rate, nonsubsidized housing in the city.
The announcement will come as part of a ground-breaking ceremony for Canton Gables, a new 27-unit garage townhouse Canton project being built by Ashley Custom Homes, a Pikesville builder primarily known for its suburban developments in Baltimore County.
"We strongly believe the effort to bring more moderate, middle-income homeowners and renters into the city is critical to its revitalization," said HBAM executive vice president John Kortecamp, who added that the program is an evolution of Vice President Al Gore's call to build 1 million new homes in central cities during the next 10 years.
Also, Freddie Mac, the federally chartered organization that purchases mortgages and repackages them to investors, officially is making Baltimore one of five pilot cities to participate in a $100 million program that is designed to stimulate new homebuilding in urban areas.
One area where Freddie Mac will help is by initiating a mortgage program that will permit builders to cover a borrower's down payment - up to 3 percent of the purchase price - to help make city housing more affordable.
"I can identify four or five suburban builders who have had conversations with me of late about entering the market, some of whom have taken options on pieces of property, some of whom want to know how to enter the city market, all of them serious," said Sandy Marenberg, who owns his own real estate development company and is president of the Baltimore chapter of HBAM.
"One of them is a national builder, who has not been in the city before. And two or three are purely, home grown suburban home builders who see the city as a reasonable alternative to where they are building now," added Marenberg, who has done development work for Struever Bros. Eccles & Rouse.
HBAM also will introduce new programs geared toward training minority, at-risk, city teenagers in the building trades and matching them with inner-city contractors. The organization is also committing to aiding those urban contractors who need help to become properly bonded and those who have had trouble obtaining working capital.
"What it does at its core is help stabilize those neighborhoods and helps increase the economic resources and jobs available in those targeted neighborhoods," Kortecamp said, adding that a by-product of helping city contractors is that they will get "exposure to the suburban market.
"There is a huge shortage of labor in the suburban market. This would be good for both them and for our builders to connect them to the job opportunities that exist outside the city of Baltimore."
With many suburban builders stung by Smart Growth policies as well as spiraling land acquisition costs in the surrounding counties, the development opportunities in the city, where infrastructure is present, may be too enticing to pass up.
'Significant progress' "We have a number of members who have been building out in the counties who are expressing interest in the city in part because the city is viewed as being on the path to significant progress," Kortecamp said. "The other part of it is that the available land is continuing to be more and more difficult to find, so that also [drives] people to look into the city.
"Part of the overall strategy is to get the city in the position where they are actually able to collect taxes on real estate that has value, and that is what has been missing for a long time," Kortecamp said, adding that the focus of the partnership will be to develop sites that are in and around the city's hottest spots. "That is where these efforts are going immediately."
"We are going to bring real people who have real incomes down to the city who are going to spend their dollars in the city and increase the city tax base," said Janice Strauss, a principal with Ashley, who said the Canton Gables townhouses will be in the $230,000 range. "If you live down there and bring viable people into the city, it's a domino [effect]. For each neighborhood that you complete and you move farther east ... you are cleaning up neighborhoods and bringing in a different element of people to the city."
Said Frank Coakley, the new head of the Fannie Mae Partnership Office in Baltimore: "No city can be built just on low-income housing product. You need a diversity. You must have product for middle-income and upper income as well. That is what makes a city a city. You have people from different walks of life, different income, and that is what we are looking at, making sure that we have product that goes along the lines."
Marenberg, because of his ties with Struever Bros. Eccles & Rouse - developers of The American Can Co. and Tide Point in Locust Point - knows the potential of the city.
"It looks like a whole new era," he said. "As long as I've been building in Baltimore there has not been a demand from the public for new housing that we have today.
"We've gone from, say four years ago, where if you were a builder and asked the question, 'Where are the buyers?' to today where the buyers are saying, 'Where are the builders?'"
But now what the city wants is fewer builders with an outstretched hand asking for subsidies as an enticement to come into the city.
"We certainly welcome the suburban builders into the city, and we hope that many of the builders and developers who have been in the city will recognize the improvement in the market and will look to do more market-rate housing," said JoAnn Copes, development director for the city's Department of Housing and Community Development.
"We are paying as we go. We are not getting any subsidies from the city," said Strauss. "From their standpoint they must be loving it. I don't know what the taxes are but I bet you they are $1,500 on that property [site] right now. And you take 27 units [paying property taxes] ... just think about it, and it takes an eyesore of an empty lot that has weeds growing on it and makes it into something classy and desirable."
Although Canton Gables will be the largest townhouse development to hit the area since the Canton Square townhouses were erected in the late 1980s, it isn't the only one coming down the pipe.
Ruppert Homes Inc., a medium-sized builder in Baltimore and Harford counties, is in the planning stages on developing a 35-unit townhouse project at the corner of Foster and Kenwood avenues where an old Super Fresh grocery now stands.
Ed Griffiths, project manager for Ruppert and president of the Harford County chapter of HBAM, knows the potential of Canton, but has reservations about working within the city culture.
"You take a Struever Bros., somebody like that, hell, they know the city backward and forward. They're down there doing that stuff on a day-to-day basis," Griffiths said. "But you take somebody like an Ashley, [or] ourselves, a couple of other people ... you talk with builders especially in my position and you tell people you are doing work in the city and they cringe.
New set of challenges
"Harford County and Baltimore City aren't real far apart, but in the sense of doing business in the city, and doing a building development in the city, they might as well be from here to Idaho. It is just a whole different ballgame.
"I am sure of a certain number of our subcontractors and suppliers aren't going to be willing to go into the city. And even if they are willing to go into the city, they'll probably go at a much increased price because of the inherent risk of doing business in the city. And we are aware of that as well," Griffiths said, adding, "it's a whole new experience doing work in the city."
Copes realizes there are those fears. "It is a whole new set of challenges for them especially if they have worked in one particular geographic area and have gotten very comfortable with that," Copes said, adding that the city has talked about pulling together an inter-office agency task force to create a series of workshops to help suburban builders cope with city procedures.
"We could also create a forum for them to tell us what they want to do so the various agencies are aware of what might be coming down the line and how we can coordinate between and among ourselves," Copes said.
"God knows we want them to feel welcome here and so we are going to do what we need to do to make sure that happens," Copes added.