Developers latch onto 18-year-old loophole, city aims to close it

The loophole has allowed high-density apartments along well-traveled roadways, permitted by dedicating just a fraction of the footprint to commercial uses.

Arboretum West, a new development off Military Cutoff Road that replaced a mobile home park, consists of mostly residential development mixed with 4.5% commercial use. Like many other recent apartment projects, the development took advantage of a loophole in the city's development code. (Port City Daily photo/Johanna F. Still)
Arboretum West, a new development off Military Cutoff Road that replaced a mobile home park, consists of mostly residential development mixed with 4.5% commercial use. Like other recent apartment projects, the development took advantage of a loophole in the city’s development code. (Port City Daily photo/Johanna F. Still)

WILMINGTON — For nearly two decades, a mixed-use development loophole in Wilmington sat undiscovered in the city’s Land Development Code. A few years ago, a developer realized the oversight and latched onto it. They told their friends, and eventually, more developers submitted applications that couldn’t be denied.

Soon enough, city staff noticed the pattern. No one was doing anything wrong, per se; no rules were broken.

The loophole allows developers to pack in apartments — with unlimited density — along major roadways that would otherwise never be permitted. They can do this by simply including what Glenn Harbeck, the city’s director of planning, development, and transportation, calls a “token” amount of commercial use. There’s no requirement for how much commercial space must be included in Commercial District Mixed Use (CDMU) projects. There’s no residential density cap, no open space minimums or parking requirements in CDMUs, making the option a dream for developers and a nightmare for city planners.


“So, basically, as long as you’ve got a smidgen of commercial in there, you satisfy the code,” Harbeck said.

The city’s last eight CDMU developments will add more than 1,400 new units upon completion, allowing more traffic to pour out directly onto the city’s already congested road network. Each features a paltry amount of commercial square footage — between 1% and 4.5% — to qualify as a mixed-use project.

With all but one being apartment complexes, developers were able to maximize density beyond what would have been allowed under the multi-family zoning designation permitted in the code (the intended development path for these kinds of projects).

“Some of them are extremely intense. There’s almost no open space at all and there’s no commercial space to speak of,” Councilman Kevin O’Grady said. “I was thinking, ‘How far are they going to go? Will they put out a newspaper box? Does that make it a commercial development?'”

Developers can pursue CDMU projects by-right if land is already zoned office and institutional (O&I), commercial business (CB), or regional business (RB) — zoning found along well-traveled roadways. This makes the option even more attractive to developers, because so long as they meet code requirements and have land zoned within these three designations, they don’t have to jump through hoops to get any additional city approvals to see their project through. Whereas with purely multi-family projects, developers often must rezone land to multi-family to obtain approval for their project, adding a layer of bureaucracy and oversight that slows down projects designed to meet near-term market demands.

The CDMU loophole defeats the purpose of the supposed benefits of mixed-use development — the reason CDMUs were created in the first place. In theory, mixed-use developments reduce traffic congestion by encouraging residents to walk, rather than drive, to services.

The city’s eight most recent CDMU developments all feature less than 5% of commercial space. Data Courtesy City of Wilmington. Click to enlarge. (Port City Daily graphic/Johanna F. Still)

“If you build a large apartment complex and you have to get into your car for everything — the grocery store, the pharmacy, whatever it is — if you have to get in a car for every need, then it just adds to our traffic congestion and it actually creates so much congestion that people don’t enjoy living here anymore,” Harbeck said. “That would be the ultimate problem.”

Now, O’Grady said it’s past time for the city to close the loophole. “Some of them, they took the needle and pushed it all the way over,” he said. “Over the years, somehow, it’s been rediscovered and taken to the extreme. That’s why we feel like we have to pull it back in.”

Clear-cutting

Besides traffic, the loophole has led to several other unintended consequences that run counter to the city’s original intent when adopting the CDMU option in 2002. It also led to clear-cutting, leaving just a “donut” of trees surrounding the perimeter of a property, with the center uprooted to make room for intensive development.

Essential site improvements required to make a site viable (like stormwater swales, ponds and sidewalks) are treated as somewhat exempt from the city’s standing tree-mitigation requirements, Harbeck said. An overly dense site necessitates certain site features, leaving less room to save existing trees.

“If there’s no density requirement, and there’s no open-space requirement, they just max out the density and don’t save any trees,” Harbeck explained.

At a joint planning commission and council public hearing on Monday, longtime tree advocates urged officials to take preservation seriously.

“What has happened, with the ordinance as written several years ago, has allowed clear-cutting of sites and left no open spaces, leaving essentially a wasteland effect that says the city does not care about the health and quality of life of its residents when it allows such developments,” Connie Parker, president for the Alliance for Cape Fear Trees, told council.

Parker said the city’s inaction on the CDMU issue has negated her group’s work in planting hundreds of trees across the city, to replace those lost to development or hurricanes. Dr. James Gregory, chair of the Wilmington Tree Commission, implored the development community to get on board with well-established tree preservation efforts. At the hearing, Gregory said he hopes developers can begin to see trees as valuable assets to a site and “not just obstacles to remove.”

‘Stop the bleeding’

Oleander Commons will feature just 1% of commercial space (shown in red), occupying just one road-facing unit along Oleander Drive at the site of the old Carmike Cinema. (Port City Daily graphic/Courtesy City of Wilmington, edited by PCD)

City staff and council are working to fix the problem, or as Councilman O’Grady put it earlier this month, “stop the bleeding.”

“I mean, we made a mistake here,” he said at an agenda meeting. “We’re getting some terrible developments. So we’ve got to stop that.”

O’Grady’s impulse to get the ordinance changed immediately is complicated by its replacement; the city has proposed a working alternative to change the loophole, but there isn’t yet consensus among staff and the development community on how to address the issue.

Plus, the city’s attorney warned council the city was likely to get a rush of CDMU applications before a new rule is enacted. In the interim, developers legally could choose which version of the code they’d prefer to follow.

According to Harbeck, there are a few developers on alert, waiting to see what happens, with one project, the 264-unit Hanover Center development, having submitted plans already.

At the hearing Monday, officials debated where to draw the line in imposing a minimum commercial requirement for CDMU projects. Staff proposed a 20% minimum commercial requirement, and members of the development community have responded, saying it’s far too high and doesn’t reflect market demands.

The new rules would also cap density in CDMUs at 17 units per acre — the same cap included in the city’s existing medium density multi-family zoning designation.

This cap comes with an exception, including the city’s first-ever proposed affordable housing incentive. If 10% of a project’s units are designated as workforce housing for 10 years, it won’t have any cap on density (the city defines workforce housing via HUD’s high home rent calculation: $776 for a one-bedroom and $966 for a two-bedroom in the Wilmington area).

Steve Spain, director of Cape Fear Habitat for Humanity, told council though he would make suggestions to extend the length of time workforce housing is required and expand its availability, he was delighted to see the city inch closer to a starting point.

Finding a balance

Arboretum West, a new development off Military Cutoff Road that replaced a mobile home park, consists of mostly residential development mixed with 4.5% commercial use. Like many other recent apartment projects, the development took advantage of a loophole in the city's development code. (Port City Daily photo/Johanna F. Still)
Arboretum West, a new development off Military Cutoff Road that replaced a mobile home park, consists of mostly residential development mixed with 4.5% commercial use. Like many other recent apartment projects, the development took advantage of a loophole in the city’s development code. (Port City Daily photo/Johanna F. Still)

As presented, most recent and planned CDMUs would not meet the city’s proposed changes.

Take, for example, Oleander Commons, the new 223-unit development currently under construction next to Tidal Creek, where the old Carmike Cinema used to be. It features just 1% of commercial space, occupying one 5,600 square-foot corner unit facing Oleander Drive.

Zoned O&I, Greensboro-based Evolve Companies is able to develop the densely-packed apartment as a CDMU, though it barely mixes residential and commercial uses. If the company were to have pursued the multi-family zoning designation, it would not meet the 35% minimum open space requirement and would have had to build 73 fewer units.

It also would fall just shy of the city’s proposed CDMU open-space requirement of 20%, imposed on projects that have fewer than 50% commercial square footage; projects with a majority of commercial square footage would continue to have no open space requirement, as proposed.

The open-space requirement — or lack thereof — accounts for how developers piece together projects. The bigger the open-space requirement, the less room developers are left with to build. In the absence of a requirement, they can cram units in, leaving less space for trees, landscaping, and other features that both reduce stormwater and improve quality of life.

Why aren’t developers pursuing multi-family rezonings? Is the 35% open space requirement too burdensome?

“I think the market would show you that. Nobody’s doing it,” Tyler Newman, president of Business Alliance for a Sound Economy (BASE), answered.

According to Newman, it’s more than just open space. Given the red-hot pace of the residential real estate market, and uncertainty in the office and retail sector amid the pandemic, he said recent developments, particularly Arboretum West, do match market demands. Pushing these types of projects all the way up to 20% commercial may cause even more unintended consequences, he explained.

“You’re not going to get anybody to go all the way to 20[%]. And I don’t think you want to kill the entire district outright. It’s finding that balance,” he said. “So don’t re-craft the CDMU to quote-on-quote close a loophole and then you take away the potential ability for people to get workforce housing when people come in or even more multi-family housing. So it’s a trade-off.”

In trying to close the CDMU loophole, the city is also looking to make the multi-family development path more attractive as part of its ongoing rewrite of the outdated Land Development Code.

The city is proposing a credit system that would allow projects to count environmentally protected areas, like wetlands, streams, and ponds, toward a lowered open-space requirement. Currently, these uses and features don’t count toward this threshold. Newman said these steps and others mark a compromise between the development community and local regulators that is headed in the right direction.

“I think we’re pretty close to being there,” he said.

When rewriting the Land Development Code and enacting CDMU changes, Harbeck hopes the city can redirect high-density residential projects away from the few developable highway-facing parcels left in the city.

“We appreciate density in the right places,” he said, “But what we don’t want to see are high density, free standing, automobile-oriented apartment complexes out on the highway somewhere. That just adds to the traffic congestion. Unfortunately, these developments, they can be out on the highway somewhere and just be totally automobile-oriented. And that’s what we don’t want to see.”

Wilmington City Council will continue its public hearing on the proposed changes to the CDMU at its next regular meeting, Tuesday, Oct. 20, beginning at 6:30 p.m.


Send tips and comments to Johanna Ferebee Still at johanna@localdailymedia.com

Print Friendly, PDF & Email

Comments