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Bottom Up Economic Development

Deep Ellum, Texas Doughnuts, and the Challenges of Urban Renewal

A San Franciscan's take on Deep Ellum highlights the distance between our dreams of urban resurgence and the kind of development possible in 2017
By Peter Simek |

There’s an interesting read over on by John Sanphillippo, a San Francisco-based writer and developer who visited Dallas a few years ago for what sounds like the Congress for the New Urbanism, though I could be wrong. He writes about the challenges of urban renewal in places like Deep Ellum – places that, on the surface, seem primed for the kind of small-scale, mom-and-pop, “placemaking” developments that make cities feel welcoming and vibrant. In Deep Ellum, Sanphillippo discovered more than the average amount of opportunity. Not only are there historical, human-scale buildings and pedestrian-friendly streetscapes, but the effort to tear down the elevated highway — I-345 — that ravaged the neighborhood and disconnected it from downtown when it was constructed in 1973 holds the potential of unleashing lots of land and economic potentiality for large-scale urban redevelopment.

If only urban renewal were so easy. The problems start, Sanphillippo argues, when you start running the numbers on the land and creating projects that are marketable in a car-driven society:

The reality of how land is redeveloped in this context is simple. The cost of buying distressed property, site remediation, upgrading the infrastructure, accommodating all the requirements of multiple bureaucracies from the fire marshal to institutional investors – all while still creating a product the market wants and can actually afford to pay for… leads to this. It’s referred to as the Texas Doughnut. It’s an entire city block of multi-storied parking garages wrapped in a skin of apartments. Sometimes they’re rentals, sometimes they’re condos for sale. If your goal is to recreate the fine grained individually owned mom and pop buildings of a previous century that’s just not going to happen. Again, it’s not impossible. It’s just highly unlikely to pan out for a dozen reasons having to do with the fact that the society that build Main Street no longer exists.

So, the ground-up new construction faces some challenges, but what about all those old buildings in Deep Ellum? Why can’t new businesses move in, owners move in upstairs, and the neighborhood return to the kind of urban fervor it knew a century ago? Well, the answer again is, basically, funding, and the difficulty in getting banks to support uses that seem simple and intuitive, but are complicated when viewed through lens of financial institutions and city code:

A commercial loan with a short term – typically eight years – and a significantly higher interest rate might be offered instead of a standard thirty year mortgage. Maybe. As part of the due diligence process the right bank will make you prove that the building is structurally sound, conforms to modern codes, and has a pro forma that can cash flow properly. And then there’s the cost of renovations, complying with the Americans With Disabilities Act, the fire code, and existing zoning regulations… It can be done. But something as basic as installing fire sprinklers or an elevator can easily kill a proposed project. It’s just too expensive in a building with too little value. Sorting out all this stuff takes real skill and experience. I know several seasoned mid-size property developers who lost everything to bankruptcy because their high quality projects came on line just in time for a big market correction and they couldn’t service their debts. And these folks were light years ahead of an ordinary person looking to invest in a modest property.

So how do you work out of the situation? Well, one way is to approach the redevelopment of Deep Ellum in the way that Scott Rohrman has: redeveloping at a scale large enough that banks and investors can make sense of it. Even then, it’s not easy. The good news is it works. The bad news is that the approach doesn’t create the kinds of urban neighborhoods Jane Jacobs loved so dearly, the ones we wished we lived in today, but have, sadly, likely vanished with the cities of the past:

The scenario I see all over the country is formulaic. Older buildings in formerly derelict neighborhoods are bought and renovated by well funded and skilled firms who specialize in this kind of development. Shops and apartments are then rented to individuals. These legacy districts become amenity centers that add value to new large scale infill development of the Texas Doughnut variety. There are exceptions, but that’s mostly what I see. It’s neither good nor bad. People sometimes complain about gentrification, but the alternative is for these neighborhoods to continue to decline until they can’t be saved at all. It might be nice if every aspect of society changed to allow other options, but I’m not holding my breath. At the end of the day we live in the world we live in. We have the rules and procedures we have. Shrug. Mom and Pop need to find a new gig.

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