Downtown-adjacent parcel for sale could be site of new affordable homes, challenged by rising prices

When San Antonio revealed its new growth management plan earlier this summer, Mayor Ron Nirenberg stressed the city’s desire to reduce urban sprawl.

“We should be encouraging — through policy and resource planning — infill growth,” he said at the time.

But a piece of property for sale near downtown highlights the difficulties with infill development in San Antonio.

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The tract in question spans 6.8 acres at 1354 Menefee Boulevard, at the intersection of U.S. Highway 90 and General McMullen Drive, and is entitled to accommodate 42 single-family lots at around 40-foot widths.

While it’s something of a political platitude to express the desire for more infill housing in San Antonio, the trouble is that building affordable housing projects gets more difficult the closer a property is to downtown. Scarcity in the urban core has driven up land prices, and material and labor costs have also seen recent surges after the pandemic, among other challenges that make financing those builds a high-wire act.

“Smaller projects like these require all the same regulatory conditions and requirements as a larger project, so fixed costs are more concentrated,” said José Niño, principal at Urban Capital Strategies, the firm brokering the property’s sale. “And when you’re trying to deliver product to underserved communities, it’s challenging to make the numbers work. Developers say, ‘Our land costs and development costs are the same as for a mid-priced community.'”

Jose Nino Urban Capital Strategies

José Niño is principal at Urban Capital Strategies, which brokers and develops land.

Andrea Moutria-Niño

Because of this, the majority of new large-scale production housing development in San Antonio happens outside the city limits, in its extraterritorial jurisdiction where land is cheaper and more plentiful.

That’s not to say production building doesn’t happen within Loop 410. Niño said he sold a plot on the same block in 2020 to a major national production builder. He requested omitting the builder’s name to avoid compromising future transactions.

“We sold them a shovel-ready project. We were ready to do horizontal construction on that project, but they insisted on doing it themselves,” he said. On this plot, however, whoever develops the property is also incurring the risks that come along with developing in a high interest rate environment.

Niño said the Menefee property was under contract to a builder he declined to mention, but the transaction could not surmount $140,000 in tree mitigation costs required by the city.

“Those dollars add up. The tree fees were just outside the pain threshold, and we couldn’t get it over the finish,” he said.

Niño said that he met with city officials earlier this week with the goal of opening a dialogue to find a solution that will allow developers to more easily build infill affordable housing. He said it was likely that if the city wanted to meet that goal, they would have to come to the table with certain concessions.

“There’s only so much we can do about labor and materials, and land sellers also don’t want to give up their margin,” he said. He explained that one solution could be for developers to agree to cap sales prices on homes built on the property in exchange for waiving city fees.

Earlier this year, the city of San Antonio told the Business Journal it supports infill development inside Loop 410 “through various housing policies and programs,” adding:

The City offers $2.5 million in City Fee Waivers and $3 million in SAWS fee waivers for affordable housing, small business and historic rehabilitation in the inner city. The City has designated seven Tax Increment Reinvestment Zones inside Loop 410 designed to assist ongoing public infrastructure, revitalization and reinvestment into these communities.

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