Study Finds Plan For Housing Rehab, Resale Program is Feasible

By Sue Wuetcher

Release Date: July 16, 1998

BUFFALO, N.Y. -- A plan to revitalize the neighborhoods around the University at Buffalo South Campus by improving the area's housing stock through a housing acquisition, rehabilitation and resale program is feasible and would have a positive impact that would be "unparalleled in the region," a marketing study commissioned by the University Community Initiative (UCI) has determined.

As envisioned, the program would stabilize housing -- and thus renew the "University Community" around the South Campus -- by attracting young households, including renters, and baby-boomers to University Heights, the most visible and influential neighborhood in the area surrounding the South Campus.

UCI staff is working to identify a site near the South Campus at which to begin the housing initiative.

The program, which would be the first, large-scale housing-renovation project in the history of the region, "is an ambitious effort to revitalize an important community in Buffalo that is at a crossroad," according to the study by Phoenix Associates, Inc. of Rochester.

It is one of several inaugural projects of UCI, a collaborative partnership led by UB, the City of Buffalo and the towns of Amherst, Tonawanda and Cheektowaga to stabilize, rebuild and revitalize the neighborhoods surrounding the UB South (Main Street) Campus.

UCI, along with UB's intention to invest $100 million over 10 years in the South Campus, represents one of the most ambitious community-development initiatives ever undertaken in Western New York.

"We have begun work on the South Campus perimeter -- sidewalks, signage and landscaping -- that is designed to compliment the Main Street image upgrade that Councilman Kevin Helfer's office has begun," said Mary Gresham, interim vice president for public service and urban affairs, under whose auspices UCI falls.

"The housing program would be the next step in the effort to revitalize the neighborhood."

UB President William R. Greiner noted that the marketing study confirms UCI efforts to renew the University Community.

"By building collaborative efforts between the university, our partners in governance and the private sector, UCI has demonstrated that there are opportunities for real growth and long-term investment in the area," Greiner said. "UB is committed to making the South Campus and its neighborhood a thriving gateway between the city and suburbs. The marketing study proved that not only is this possible, but that UCI can have an impact well beyond any other neighborhood revitalization program in this region."

The marketing study, which was funded with a $30,000 contribution from Fleet Bank, examined the demographic and qualitative indicators of housing demand in the "University Community," an area defined by UCI as the Buffalo neighborhoods of University Heights, Kensington-Bailey, Bailey-Delavan and a portion of North Buffalo and Central Park; the Kenilworth section of the Town of Tonawanda; the Eggertsville portion of Amherst, and the Cleveland Hill section of the Town of Cheektowaga.

The study also defined acquisition and resale pricing parameters and presented a 10-year financial plan.

The project as outlined in the marketing study would involve the creation of a real-estate development organization -- under the working title University Development Corp., Inc. (UDC, Inc.) -- to undertake the acquisition, rehabilitation and resale of housing in the "University Community."

UDC, Inc.'s success, the study says, "is predicated on providing a product -- a newly renovated, older home -- not widely available in the University Community, mobilizing a market for such homes and, in doing so, establishing a critical mass of moderate- and middle-income homeowners to stabilize the neighborhoods."

Stabilization, the study says, is the "intermediate step" in the transformation of a community that is in decline to one that is developing.

To stabilize housing, it continued, UDC, Inc. will have to attract young households, including renters, and capture baby-boomers. And if rehabilitation efforts are concentrated in target areas, "stabilization should come more rapidly and UDC, Inc. will be in a better position to push the market and sell houses for a larger percent above market value in the area."

The study recommends UDC initially concentrate its efforts in the University Heights neighborhood near the South Campus because the neighborhood "is the most visible and the most influential in hastening or stemming deterioration and destabilization of the entire community."

The study noted that its analysis of acquisition and resale pricing parameters indicates that the gap between acquisition cost and likely resale price is sufficient to cover rehabilitation costs, including soft costs, and that enough homes are available to rehabilitate 52 homes per year.

However, due to the time lag between acquisition and sale, the study only projected that 15 homes would be sold in the first year.

In order to operate for 10 years under the assumptions outlined in the financial plan, UDC, Inc. would need a start-up grant of $760,000, the study projects. The organization also would need rent-free space for three years, or an additional $14,700 in operating money, and a $1.8 million line of credit to proceed with the program.

Marketing would be critical to the success of UDC, Inc., the study says, noting that the business plan allocates two pools of money for the effort. One would be part of the operating costs for UDC, Inc., and would be used to promote the program, the University Community and the neighborhoods that would be target areas. In addition, a 3 percent marketing charge would be added to the price of each house to cover the costs of specifically marketing that unit.

The study pointed out that UB's investment of $100 million in the South Campus should have a positive impact on the housing project. The investment, which includes improving the aesthetics of the campus, converting traditional dormitories into apartment-style housing and establishing the Comprehensive Health Sciences Education Center, would "improve the attractiveness of the neighborhood and increase the desirability for potential homeowners.

"For households who have given thought to purchasing a house in the University Community, UDC, Inc. will be providing a superior product for them to consider," the study says. "For those target segments who have not considered the University Community, the marketing component should inform them of the program and introduce them to the opportunities that exist in the University Community."

The study is being reviewed by UB President William R. Greiner and the Corporate Partnership, a collaboration of 16 corporations -- including numerous banks -- that have expressed support for the effort.

"We are now in the process of identifying a site near the South Campus at which to begin the housing initiative," Gresham added.