In the 30 years that Mel Johnson has managed large construction projects, he’s overseen jobs in airports, schools and sewage systems. But none of them prepared him for his most recent undertaking in Uptown Harrisburg.
The Harrisburg Fair Housing Council, a nonprofit organization where Johnson serves as executive director, was renovating the top stories of its headquarters on 6th and Maclay streets—a stately former bank constructed around 1900. They hoped to create eight, two- and three-bedroom apartments to rent at a below-market rate, adding much-needed quality, affordable housing in the Uptown neighborhood.
But first, they had to replace the building’s rubber roof. Then they had to reinforce a retaining wall that was liable to collapse from water damage. Due to narrow hallways, they nixed plans to build an elevator and make the apartments ADA-compliant. They rebuilt bay windows and abated asbestos. The cost of these contingent projects mounted, especially when they discovered that pigeons had colonized the abandoned structure, leaving excrement that required $20,000 of waste hauling and sanitization.
Today, three apartments are under lease, and five more are still in the works. Johnson said that the finished units, which have original hardwood floors and all-new, custom-made windows, are beautiful. And even though HFHC expects to sink $1 million into the project by the time it’s done, they’ve managed to keep rent rates affordable. Two-bedroom units go for $750 a month and the three-bedrooms for $850.
But as for the process of restoring the building to a livable state?
“It was absolutely horrendous what needed to be done here,” Johnson said.
Welcome to the world of vacant home renovations, where complications lurking from the roof to the foundation threaten to eat profit margins and disrupt best-laid work schedules. Left alone, a building’s lumber rots, its pipes rust, and its roof sags under snow and rain. Some of these conditions emerge in an inspection, but others aren’t revealed until construction is underway.
In all, Harrisburg has 4,692 vacant units representing 18 percent of its total housing stock, according to census data from 2013. That figure includes more than 400 units on a list of critical properties that the city has targeted for demolition.
Housing advocates across the city want to see some of the salvageable buildings renovated as affordable apartments. But those rehabilitations are costly, made possible only by shrinking pots of grant money from the county to federal levels.
Doing the Math
Developers in the private sector can pass the costs of an expensive renovation along to their tenants. But those who want to convert vacant houses into affordable units know that, somewhere along the way, someone else will have to eat the expense.
More often than not, that someone is the federal government, which doles out housing subsidies through the Department of Housing and Urban Development. Some nonprofit developers in Harrisburg rely on HOME grants and Community and Development Block Grants (CDBG) to raze blighted homes and renovate salvageable ones. The Fair Housing Council also got a sizable grant from the Dauphin County gaming fund for its 6th Street project.
Even with subsidies, contingency fixes can drive up rents. Johnson said that the mounting cost overruns on the 6th Street project did jeopardize the price range that HFHC had originally planned for its units.
In the end, Johnson said, price was a consideration in setting the rents, but it wasn’t the only one. HFHC was able to keep the rents below market value as it originally intended.
“We’re a housing agency, and we still have too many people in this neighborhood living in houses who cannot afford to fix them up, or too many landlords who don’t care about fixing them,” Johnson said. “We are willing to go out and get money for a project like this.”
But the funding that many developers rely on for projects like these is getting increasingly competitive. Funding for HOME and CDBG has fallen 49 percent and 59 percent since 2000, according to the Center on Budget and Policy Priorities.
Those trends show no sign of reversing, and an ever-decreasing availability of grant funds has slowed the pace of affordable housing projects across the country. That creates its own problem in cities like Harrisburg with high vacancy rates. The longer a building sits untended, the more expensive its rehabilitation becomes.
The HFHC building on 6th and Maclay had been empty for some 40 years before its renovation began in 2015, offering an extreme example of what can happen to a vacant building. But a neglected home can begin to deteriorate in as few as five years. And many structures in Harrisburg have been abandoned for much longer.
Sometimes, the cost of redressing severe neglect is enough to make a developer considering building anew.
New vs. Old
A blighted house has two fates: demolition or renovation. Deciding which path to take is a vexing question for both public and private sector developers
Even though some bids for the HFHC project came in at $3 million, Johnson expects it will cost $1 million by the time it’s finished. He estimates that building a new structure would have cost at least $3 million. As a result, he said, the nonprofit came out ahead by pursuing a gut rehab.
But Gary Lenker, executive director of the Tri-County Housing Development Corp., said that building new is almost always more cost effective.
That was what Tri-County HDC decided to do in the Mount Pleasant Housing project, which comprises five new, owner-occupied homes on 16th and Swatara streets in South Allison Hill.
Those homes were built on vacant lots where row homes had been gutted by fires. Razing and rebuilding is usually the best solution to replace unsalvageable homes, but there are constraints that make it difficult to apply on a larger scale.
Much of the South Allison Hill neighborhood is in the National Register of Historic Places, Lenker said. While this designation does not prohibit renovation or demolition of a property, it can place additional regulatory requirements on a project. If public money (such as CDBG grant funds) is involved in the renovation of a historic property, then the owner must complete a review process through the Pennsylvania Historical and Museum commission.
Tri-County got authorization to demolish one burned-out row house on Hummel Street, the site of the $20 million MulDer Square revitalization project. Other homes on the street will be gut-renovated. The first rehabbed home on Hummel Street was sold this spring for a price of $70,000, after housing agencies invested $150,000 in its renovation.
Lenker thinks that the Hummel Street project leaders could stretch their dollars by demolishing houses and building new ones. But he acknowledges the non-material value in saving an old structure.
“New is new, and old is old,” he said. “You want to keep the same look of the old neighborhood, and, if you build new, you can’t replicate it exactly.”
Jackie Parker, Harrisburg’s director of Community and Economic Development, and Bryan Davis, president of the Harrisburg Redevelopment Authority, said that the city approaches demolitions on a case-by-case basis, trying only to raze structures that pose a public health risk. They agree that the city’s historic housing stock is one of its most valuable assets, even if it is resource-intensive.
“These renovations are expensive, of course, but that’s why we concentrate money from grants and tax credits to offset costs,” Davis said. “As an entity you can’t make your money back when you’re spending a lot to fix a home, but it’s important to the city to preserve the housing we have.”
Harrisburg has adopted other policies to mitigate the costs of expensive renovations. Brad Jones, president of Harristown Enterprises, said that the 10-year tax abatement program that City Council passed in 2016 created an attractive incentive to rehabilitate vacant properties. The private-sector development company has since converted a half-dozen vacant properties in downtown Harrisburg into market-rate apartment units.
As a private developer, Harristown can execute more ambitious projects than its public-sector counterparts. It also works in the downtown business district, where vacant properties are less numerous and more well maintained than in Allison Hill or Uptown Harrisburg.
Jones said that vacant renovations may bring high costs at the outset. But, if they’re done well and offer an attractive, distinctive place to live, they pay off in the long run.
“People look at our projects and say they’re expensive, but, if you save a building, you’ve saved it for another 100 years,” Jones said. “That’s a couple of generations, and these are buildings that will never be built like that again.”
That’s how Johnson regards the former bank at Sixth and Maclay. Demolishing it was out of the question, since removing six vaults in the building would have cost $1 million apiece, he said. But he’s still happy that a structure that long sat empty now has a second life.
“You have to look at overall picture — we saved a building,” Johnson said. “It would have collapsed by this time otherwise. I’m not saying I want to do it again, but we saved this.”
August 2: This article was edited to clarify the limitations imposed on properties with historical designations. While the National Register of Historic Properties does not constrict the actions of private property owners, it does require developers using public funds to undergo a review process through state and local preservation agencies, according to Preservation Pennsylvania, a nonprofit organization.