Unlocking the Public Sector's Land Wealth

Moneybox
A blog about business and economics.
March 18 2013 10:39 AM

Public Agencies Should Unlock Their Land Wealth

I'm often struck in D.C. by how sad it is to see dilapidated-looking public school structures in very expensive gentrifying areas. It seems like it should be easy enough to raise huge sums of money by selling some of the school-owned land and using the proceeds to rebuild the school as a newer, better, less dilapidated, more vertical structure. Apparently, the Brooklyn Public Library system is thinking along these lines and has entered into a deal to redevelop the parcel that currently houses the Brooklyn Heights Library. Instead of a small, old library occupying the parcel, there will be a large modern apartment building. And on the ground floor of the apartment building? A brand-new modern library that unlike the currently library structure doesn't need a $3 million overhaul of its climate control systems. And that comes at $0 cost to the taxpayer.

The New York Times article where I read about this rather oddly describes the process as "in effect leveling public facilities to make sure the agencies are financially secure."

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Now that'd be perhaps a fair way to characterize selling a library building to the private sector to shore up the remaining libraries. But in this case they are leveling the public facility to replace it with a new, better public facility. That seems like a great way to improve public facilities.

My main criticism of the practice is that for too many government agencies this kind of deal is seen as a last resort, when it should be closer to a first resort. That's because looking at the basic fiscal cost of operating a library—so much for books, so much for librarians salaries, so much for air conditioner repairs—underestimate the real cost. In large, expensive cities, the lost real-estate development opportunities involved in holding the land is itself costly. Now of course it's worth paying a price to have schools and other public facilities. But while some public facilities are genuinely incompatible with real estate development (it's not a park if there are apartment buildings on top of it), lots of public facilities can work just fine when integrated into larger structures.

This way Brooklyn is not only getting an upgraded library; it's also getting valuable new housing. That'll mean more residents and a broader tax base. More customers for local business. Less gentrification pressure on the existing housing stock. All good things. It's a scenario cities should be pursuing more aggressively—not merely as a means of funding needed repairs but as a way of unlocking a neighborhood's full potential.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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