1823 North Hall Street: Good spot for a Kroger?

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Dallas Approves Tax Breaks for Kroger and Apartments Near Downtown

Most of the debate before the 11-3 vote hinged on a hypothetical: What would the developers do without city incentives?

The Dallas City Council on Wednesday approved about $2 million in tax breaks for developers planning to build a Kroger grocery store and apartments at 1823 North Hall St., just northeast of downtown Dallas.

The incentives will effectively halve the property taxes due on the land for 10 years. (It’s a better figure for the city than was presented several weeks ago, when the City Council punted a previously scheduled vote on a 90 percent abatement that would have foregone about $4 million in tax revenue.)

Plans for the One City View development call for 375 apartment units to be built, with 75 of them (or 20 percent) set aside for residents making 60 percent of the Dallas area’s median family income, which comes out to $36,000 for a one-person household and $51,000 total for four people. Council members who supported the tax breaks say it’s the affordable housing—and not the grocery store—that the city is subsidizing here.

Councilwoman Carolyn King Arnold, who represents District 4 in Oak Cliff and southern Dallas and voted against the incentives, noted that there are parts of town in much greater need of a grocery store. “Kroger has not done the southern sector well,” she said.

But most of the debate before the 11-3 vote—Mayor Eric Johnson, who tested positive for COVID-19 this week, was absent—hinged largely on the affordable housing, and on a hypothetical: What would Georgia-based Southeastern Development and Kroger do without the city incentives? 

When Kroger bought the land from the Dallas Housing Authority in 2015, the property was deed-restricted: If any housing was built on the site, at least 20 percent of it would have to be affordable. It’s a big “if” that several council members in support of the project said was absent in “misinformation” shared via social media and good-old-fashioned media

“They are only required to build affordable housing if they decide to build housing,” said Councilman Paul Ridley, whose District 14 includes the property. “They could build just a grocery store or a movie theater or an office building with a minor amendment to the development plan.”

It’s expensive to build in Ridley’s district, which includes much of downtown and booming Uptown and was by far the council district with the greatest population growth recorded in the 2020 U.S. Census. Ridley said that’s been a barrier to getting new affordable housing built by developers who are, after all, in business to make a profit.

Councilwoman Cara Mendelsohn, who voted against the incentives, also made reference to developers’ profit motive. This land is too valuable to under-develop. To make money, to put the real estate to its highest and best use, the developers almost certainly will build housing, with or without any tax breaks. And because of the deed restriction, some of it will have to be affordable. 

The city is subsidizing what the developers were going to do anyhow, Mendelsohn said. “We are giving tax cuts to these large corporations to do things that they [already] would have had to do.”

Councilman Omar Narvaez agreed with Mendelsohn, a rarity. “We are incentivizing them to do the bare minimum,” and letting other companies know that the “bank of Dallas” is open, he said.

Cities across the country rely on incentives to get developers to build affordable or “workforce housing,” the latter a term used to describe households that make too much to qualify for many forms of housing assistance, but not enough to afford to live in a city that’s growing less affordable by the day. In recent years Dallas has rarely, if ever, used tax abatements like this to help spur affordable housing, more often relying on cash subsidies or entitlements. 

This is a better deal for taxpayers, and important to encouraging affordability and density within the city, Councilman Chad West said. Before the vote, West asked the Office of Economic Development whether the city had tried abatements in the last 10 years. Staff told him no, that “every deal has required a cash subsidy from the city.” 

The city has subsidized just 13 developments with affordable housing over the last decade, which totaled 828 units. Those subsidies ranged anywhere from $3.2 million to $14 million, but averaged out to $8 million. The Kroger deal would result in about $2 million in foregone tax revenue over the next 10 years. 

With subsidies, the city effectively spent $159,989 per unit. This deal, it’s spending about $28,000 on each. 

“If we can’t do affordable housing here, I don’t know where we can do it,” West said.

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