By Michael Canfield, originally published in Buffalo Law Journal / Buffalo Business First on Dec 18, 2017, 6:00am EST.

BLJ: Economic Development — Don’t forget East Side in area revival

SPECIAL REPORT: Economic Development

While some say that the East Side of Buffalo has been ignored for 50 years, there are reasons to be hopeful about economic development opportunities there.

In order for development to be effective, however, it must include residents instead of pushing them out, said Adam Walters, a partner at Phillips Lytle LLP.

“I think there are reasons to be optimistic about the East Side in particular,” he said.

In discussing prospects for that part of the city, Walters said it’s important to talk about housing opportunities there. The city recently commissioned a housing study through Washington, D.C., consulting firm czb LLC that was released at the beginning of the month. The report lays out several areas where Buffalo can improve in providing safe housing for residents, especially on the East Side. While some spots, including near Canisius College, were deemed “moderate market demand” in the report, others were categorized as “lower and lowest market demand.”

In Buffalo, Walters said, there has been a “dichotomy” between people who say the city isn’t affordable and rents not covering the cost of new construction. The study sheds light on why the dichotomy exists and suggests ways to work toward a solution.

“It focuses on the city as a whole, but it really does present a bit of a road map for opportunities that could focus on the East Side,” he said.

Developers want to be in “hot neighborhoods,” he said. However, buying property in hot areas is expensive, which can throw off the cost of construction.

“How do you balance those?” he said. “Sometimes you can do projects in up-and-coming neighborhoods, where you see long term the value.”

The study takes a look at up-and-coming areas, Walters said, ranking neighborhoods from highest to lowest demand.

“A lot of the low neighborhoods are directly adjacent to the highest-demand neighborhoods,” he said. “To me, that’s a huge opportunity to kind of move demand into lower areas. Geographically, it’s not a heavy lift. You’re basically moving the economic development lines across neighborhoods that are low demand now.”

While it creates “real opportunities,” he said, it stresses the need for social and economic integration.

“If we’re going to be a successful city, we have to be socially and ecnomically integrated,” Walters said. “Right now, we’re not.”

The housing study provides a guideline to address those challenges.

While the city of Buffalo has not officially announced a plan in conjunction with the housing study, there could be movement on that front soon.

Development is, in fact, happening on the East Side, according to Walters. In the housing study, areas east of Main Street and north of the medical campus up to Canisius College range from moderate to lower demand. With targeted investment and strategic thinking by the city over the next decade, the areas could be in high demand, as well as become economically and racially integrated neighborhoods.

“That would be exciting for our city,” Walters said.

Buffalo and Erie County are some of the most segregated areas in the country, the study found.

“This divide is reflected in housing and residential patterns in the city, which themselves are a reflection of an earlier prosperity that was defined by great wealth and high levels of segregation and exclusion,” the study states. “This was exacerbated during the postwar years when suburbanization of the white middle class both mirrored and reinforced earlier divisions.”

According to Walters, a key finding in the study is that affordability might be less of a housing issue and more of an income issue. Affordability is considered roughly one-third of a person’s income.

“The challenge we have is that many incomes are so low that even very low rents are more than one-third of income,” he said. “There’s actually an affordability issue on the East Side and you’d say, ‘That’s crazy.’ ”

Job creation becomes an important part of any housing strategy because incomes are low.

“We have to take a closer look at what is driving that, whether it’s job opportunities or educational opportunities,” he said.

It may be cheaper to buy a $25,000 home and have a mortgage than it is to rent, Walters said. However, there are obstacles to purchasing a home for lower-income residents.

“It’s a catch-22. It’s a cycle, a negative spiral,” he said.

Grace Andriette, interim executive director of Neighborhood Legal Services, said in order for lower-income residents and areas to participate in the region’s revival, there must be awareness of what services are needed in the community, as opposed to something that wouldn’t benefit people living in low-income areas. For instance, high-rent housing does not benefit people who can’t afford to buy food at month’s end.

“A project that brings in fancy restaurants or specialty markets does nothing for a family who can’t afford the rent,” Andriette said. “Many of the services that are brought in through gentrification or neighborhood revitalization are not services that are needed or accessible to the thousands of low-income people who reside in Buffalo.”

Development in low-income areas such as the East Side should be viewed through the lens of the people living there, she said. Conversely, the city’s revitalization does offer opportunities.

“We can start looking at public-private partnerships that create opportunities for low-income people,” she said. “We can look at job opportunities. We can look at employment programs. We can look at stores that aren’t just providing fancy cheeses and beer but good, healthy food. Farmers markets are accessible and that accept food stamps and offer produce at a reasonable price.”

She said Buffalo has been economically challenged for so long that there’s some danger in looking at any type of revitalization in a positive way.

“I think it’s far more nuanced than that,” she said.

In the last year, Walters has seen development take hold. There have been two major housing projects on Jefferson Avenue and construction started on the Northland Corridor Redevelopment Project. That project, which is state funded by Gov. Andrew Cuomo’s Buffalo Billion initiative, aims to bring dilapidated factories online to create jobs in the area. The corridor, which runs along Northland Avenue, is boxed in by East Delavan Avenue to the north, East Ferry Street to the south, Fillmore Avenue to the west and Grider Street to the east.

One of the buildings is slated to house the New York Workforce Training Center.

“That’s an incredible opportunity,” Walters said.

While development of the Central Terminal has gone cold, there’s still activity on Fillmore Avenue, he said.

“Larkinville is spreading north along Fillmore,” he said.

A significant issue that could hurt development is the termination of the federal historic tax credit in the proposed tax bill making its way through Congress. As of press time, both houses of Congress had tentatively agreed on the basics of the plan, with votes planned for this week.

“That’s going to hurt development in Buffalo,” Walters said. “There’s no question.”

The federal historic tax credit, coupled with the state historic tax credit, has driven development in the city and specifically on the East Side, he said.

“It’s going to take some time to adjust to life without the federal historic tax credit,” he said, “assuming they do, in fact, kill it, which looks to be what’s happening.”

And while he understands wanting to rewrite the cumbersome tax code, tax credits are a way for governments to spur policy.

“it’s the most effective way to target a federal policy,” he said.

Killing the federal historic tax credit makes “no sense,” Walters said. “It’s pretty disheartening. It seems like the baby’s getting tossed out with the bathwater on that one.”

If the tax bill moves forward with eliminating the federal historic tax credit, the state will have to develop something to replace it. Currently, the state’s historic tax credit piggybacks onto the federal credit.

“Historic tax credits – great program, makes a lot of sense, but it’s just one tool to get you where you want to go,” he said. “The bottom line in Buffalo is that you still have rents lower than the cost of new construction. Those two are going to have to continue to balance out.”

He wants the city to use the housing study to drive strategic thinking on housing throughout the city.

“There’s no doubt that these are complex problems, but with a strategic approach, we can work to address it,” he said.

Despite the challenges, he’s optimistic about the future.

“I’m bullish on the East Side,” he said.