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New Louisville government fund seeks to reinvigorate downtown with more office workers

Looking up at a modern skyscraper from street level
J. Tyler Franklin
/
LPM
The 500W building is one of the largest towers in Louisville's central business district, where the office vacancy rate has risen since the pandemic.

Louisville lawmakers allocated $3 million this year to a capital project that aims to generate more activity in the central business district. Development leaders say the specifics aren’t final yet.

On Wednesdays from June to October, food trucks line a block on 4th Street downtown. The afternoon event can get crowded, but it’s a welcome sight for Tammy Boutiette, who runs a diner and local food truck called Get It On A Bun At Booty's.

A co-founder of the Louisville Food Truck Association, Boutiette said after a regular 4th Street event in August that other owners were just now returning to the central business district since the COVID-19 pandemic.

“It’s still less frequent, but we are seeing the numbers return. And just today alone, I had spoke to a couple of the other trucks that were like, ‘Yeah, we're ready to come back downtown,’” Boutiette said.

Three years on, the impact on cities’ business hubs remains a concern: remote work and related low office occupancy and perceptions of rising crime are recent top issues.

Using samples of cellphone data to measure activity, the University of Toronto’s School of Cities ranked North American downtowns by how much they’ve recovered since the pandemic. It found that from this March to May, only four cities reached and surpassed their activity levels from four years earlier, in 2019.

Louisville’s downtown wasn’t one of those four.

The researchers, who examined the 40202 ZIP code, said the area had less than half its pre-COVID activity this spring, and ranked 56th out of 63 downtowns in terms of recovery.

Earlier this year, Mayor Craig Greenberg’s administration proposed a capital project to establish the Downtown Revitalization Fund. Originally proposed as an $8 million investment, Metro Council members reduced it to $3 million and it in June as part of the city’s 2023-24 fiscal year budget.

During a May budget committee hearing, Jeff O’Brien, chief of Economic Development, said the fund’s goal was to get more people working and living downtown.

With reduced funding, O’Brien said last month that leaders’ ambitions have now slimmed to instead focus on office occupancy. But he acknowledged housing needs remain.

“I think the desire from [city government] is… ‘We need more jobs downtown. We need more residents downtown to create the ground-level activity that we need to support the ground-level businesses,’” O’Brien said.

Pat Mulloy, who was appointed city’s first deputy mayor for economic development in May, said the fund is meant to serve as a tool to incentivize downtown growth and stay competitive.

“Workforce in downtown doesn't work the way that it did before COVID. And so we've got to adapt, and we're trying to be creative and flexible,” Mulloy said.

Mulloy said the city is exploring how to provide incentives for new office tenants to move downtown.

He added plans for the fund are still in the draft stage, with specifics under wraps. But the city plans to share them with Metro Council to demonstrate how they intend to use the money, potentially opening the door for future funding.

O’Brien said that presentation is planned for later this month.

Rebecca Fleischaker is the executive director of the Louisville Downtown Partnership. She leads an agency that helps the neighborhood through initiatives like fundraisers, strategic planning, and events like the 4th Street food trucks.

She said while downtown currently attracts tourists, the area also needs residents and office workers to keep a core part of the city healthy.

“It has the biggest office-working pool of people. It has the biggest set of attractions. You just don't have that density of tax-generating revenue in any other neighborhood. And that's what makes it unique and that's why you want it to remain strong,” Fleischaker said.

The partnership is also preparing to release a 10-year downtown strategy later this year, according to Fleischaker. They’re also working on a market analysis for residential development in the area.

Existing challenges

When the new fund was first proposed, it joined other citywide initiatives that aim to promote downtown development as well as affordable housing opportunities.

The federal government defines “affordable” as housing and utilities that cost no more than 30% of a household’s monthly gross income. Government subsidies can help keep rental prices lower than market rate values, which can assist lower-income families.

Current city initiatives include:

  • The Louisville Affordable Housing Trust Fund, which is required to use at least half of its funds to provide loans and grants for units affordable to households at or below 50% of the area’s median income. 
  • The Louisville Creating Affordable Residences for Economic Success program, which provides loans to help finance units for households at 80% of the area’s median income or below.
  • The Louisville Downtown Partnership’s Downtown Housing Assistance Loan Fund, which focuses on market-rate housing, and its Downtown Commercial Loan Fund.

Fleischaker said tourism is doing well in the central business district, but there aren’t enough people regularly on the streets.

“We want people to be in downtown. I mean, you get vibrancy with feet on the street, literally. You need people to have vibrancy. The daytime pedestrian traffic has changed because of that increase in remote work,” Fleischaker said.

Nearly half of Jefferson County’s office space, about 9 million square feet of rentable area, is located downtown. That’s according to a recent report by CBRE, a commercial real estate company that regularly surveys office buildings with at least 20,000 square feet.

The report found nearly a quarter of that space was vacant from April to June this year. It’s a nearly 10 percentage point increase in vacancy from four years earlier, before the pandemic.

While the city wants to refill some of those offices, officials also recognize the possibility of converting them into housing.

Mulloy said that the old fiscal court along 6th Street, one of several vacant downtown properties the city wants developers to transform, could become residences.

“There are certain buildings down here that are not likely to be office spaces in the next generation. Some of them are functionally obsolete, but they might make really good housing opportunities,” he said.

Economic Development chief O’Brien said there isn’t room in the $3 million fund to expand housing. He said it was originally intended to supplement the Louisville Downtown Partnership’s housing assistance loan fund with funding for workforce housing.

He defined workforce housing as units affordable to residents making close to the area median income. There isn’t as much of a shortage of those kinds of homes in Louisville, according to a city-commissioned housing assessment in 2019.

O’Brien said while the city considers traditional affordable housing necessary for downtown, the new fund is addressing a need not yet met.

“We're looking at something we don't have, and that's [that] we don't have a real good tool right now to help out with repopulating the vacant office towers,” O’Brien said.

Storefronts on an urban street
J. Tyler Franklin
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LPM
Small businesses line the corner of 5th and Market Streets in downtown Louisville.

He added that plans for the fund, both now and in future years, aren’t set in stone.

But the need for more living units in Louisville, particularly low-cost ones, is critical.

More than 31,000 units are needed for households making 30% or less than the area’s media income, according to the 2019 report, which analyzed data from 2012–16.

It reported there wasn’t enough affordable housing stock for more than half of those lowest-income households, a gap that can be caused by a lack of built homes or higher-income households occupying those lower-cost properties, according to the report.

Louisville’s low-income housing crisis has only grown since the 2019 report, said Tony Curtis. He’s the executive director of the Metropolitan Housing Coalition, which advocates for accessible and affordable homes and publishes Louisville-area housing reports.

He said more residents are getting priced out of rental units since the pandemic.

“We know that rents have continued to skyrocket, we know that interest rates are continuing to go up. So that prevents people from entering home ownership, which puts more demand on rentals,” Curtis said.

While campaigning for the city’s top seat, Louisville Mayor Greenberg said he would add 15,000 affordable housing units across the city during his first four-year term. He plans to release a specific plan for accomplishing that by the end of the month, according to Caitlin Bowling, a Economic Development spokesperson.

At the start of the year Greenberg’s administration allocated $24 million to create permanent affordable housing.

More recently, in late June, Metro Council approved $15 million in the fiscal budget for the Louisville Affordable Housing Trust Fund, a bump from the usual $10 million annually. The city also awarded developers about $22 million to build more than 700 housing units, with at least 272 designated as affordable housing.

A future for downtown

According to Ameerah Palacios, downtowns are the place to be.

“My entire life I've always loved downtown. The people, the activity, all the fun things to do. They are the heart and soul of every city, the downtown. And when I moved back to Louisville [in 2019], I knew I wanted to live in downtown. Like, nowhere else was even under consideration,” Palacios said.

Now president of the Louisville Downtown Residents Association, she’s tasked with advocating for a group that has witnessed the transformation of the central business district firsthand. That includes having conversations with city officials and groups like the Louisville Downtown Partnership, and representing a “dichotomy of extremes.”

“If you look at income levels, we have people who are on affordable housing, so they're kind of at one part of the spectrum. And then you have people who are literally kind of living in Waterfront Park and paying a lot of money to have a beautiful view of the Ohio River every day,” Palacios said.

She said she wants to see more accessible housing downtown for working-class people and families, as well as community spaces that aren’t transactional, like parks.

Metro Council Member Jecorey Arthur is an Independent who represents downtown as part of District 4. He spoke with O’Brien at the May budget hearing about the revitalization fund, back when the city was seeking $8 million.

Arthur said he isn’t often directly contacted by downtown businesses over the lack of office workers around to support them, but he has heard a lot about the need for housing.

“I still think what [the fund] was decreased to can still be used for affordable housing,” said Arthur in an interview after the budget passed.

An empty urban sidewalk
J. Tyler Franklin
/
LPM
A 2019 assessment determined around 1,300 housing units affordable to Louisville's lowest-income residents needed to be built in and around downtown.

He pointed to the 2019 housing assessment’s specific look at an area in and near the central business district. It found more than half of households are at the lowest income levels, and that about 1,300 affordable units were needed for them. Meanwhile, there was a small surplus of units for households reaching up to 80% of the area’s median income

The assessment also reported more than 95% of the area’s residents were renters, and determined downtown residents had one of the city’s lowest median household incomes at below $25,000.

“Whenever I'm looking at projects that need approval from the Metro Council, that's something I'm always thinking about, ‘Is there affordable housing? Which incomes is it affordable for? How long will it be affordable? How many units are affordable in those projects?’” Arthur said.

While some private developers own downtown units supported by affordable housing programs, the city is also a landlord: the Louisville Metro Housing Authority, a public agency, operates at least 300 affordable units in the central business district, according to data provided by Lisa Osanka, its executive director.

That agency has faced criticism for property maintenance issues.

Meanwhile, in 2018 there were more than 3,200 market-rate housing units in the central business district, per data from the Louisville Downtown Partnership. About 2,800 were rental units.

Curtis, the affordable housing advocate, said a successful plan for downtown housing would be able to provide units for people across the financial spectrum.

“Anybody who works in and around downtown, anyone who works in the city of Louisville, has to have an opportunity to have housing wherever they want to, an opportunity that they can afford,” Curtis said.

In March, the Downtown Residents Association released survey results showing how community members felt about their neighborhood.

While the survey had just 115 responses — a recent estimate found nearly 5,000 Louisvillians living in and around downtown — participants generally reported feeling satisfied living downtown and identified shared needs, like grocery stores and a better response to the city’s homelessness crisis.

“I think that we're a very close-knit community of people who care about where downtown is going. And so we're just really focused on really trying to understand how we can be part of conversations that directly impact us,” Palacios said.

Palacios said she’s optimistic that community collaboration will help meet downtown residents’ goals for their neighborhood.

Jacob is LPM's Business and Development Reporter. Email Jacob at jmunoz@lpm.org.