State College Borough Council on Monday adopted a zoning ordinance change aimed at pausing new student apartment high-rise development in the downtown.
After discussion at multiple meetings, council voted 5-2 to approve the ordinance update, with members Gopal Balachandran and Janet Engeman saying they would have preferred to return the issue to planning commission for further review.
The action, which repeals a 2013 zoning amendment, still permits 12-story buildings in certain areas of the downtown but takes away an incentive that opened the door to a spate of purpose-built student high-rise housing with largely empty commercial space over the last five years.
“I think that this action is something that we should have done long ago and we didn’t,” Councilman Peter Marshall said prior to the vote. “Personally, I will not be part of any action to delay this.”
Council members and staff agreed that the move is an interim measure while the borough considers what the right “recipe” is to encourage future development in a desirable way during the ongoing comprehensive zoning rewrite.
“This is an action to give council some measure of control for a moment to look at how we can get more of what we want and to change the recipe in a way that is favorable for future growth for the community,” Mayor Ezra Nanes said.
At issue is a non-owner-occupied housing “bonus” enacted in 2013 that allowed for higher density residential use — and additional floors — within the Signature Development Overlay of the Commercial Incentive District at the east and west ends of downtown. Council later narrowed the area where large, primarily student housing complexes can effectively be built downtown with a zoning amendment in 2017 that removed the bonus from the west end of the overlay but left it in place at the east end, which has historically had the highest concentration of student housing in the borough.
The bonus is based on floor area ratios for commercial and residential space in a building. In 2005, when council adopted the Signature Development Overlay that eventually enabled construction of the Fraser Centre, it was aimed at creating predominantly commercial projects, with a minimum of 40% non-residential space and a maximum residential floor area ratio of 3.0.
But in 2013, council made the commercial floor area ratio 1.0 and increased the residential to 5.0. in the Signature Development Overlay. It was first used for The Metropolitan, which opened in 2017, and subsequently five more 12-story buildings that have been constructed or are in development.
The more permissive zoning coincided with a national wave of purpose-built student housing fueled by equity looking for a return on investment after the residential housing market crash, borough Planning Director Ed LeClear said.
The 2017 amendment reduced the non-owner-occupied bonus area to six blocks east of McAllister Alley, where it has since been used by developers for The Maxxen, which opened in 2020 on the site of the former Garner Street parking lot, oLiv State College, which is expected to be completed next year at the corner of East College Avenue and Hetzel Street, and the recently submitted plan for The Mark at the corner of East College Avenue and South Garner Street. (Twelve-story buildings have never been permitted in the historic core downtown or elsewhere in the borough.)
Eliminating the bonus area means a developer could still construct a 12-story building in the overlay, but it would have to be predominantly commercial.
“You could still build the Fraser Centre but you would not be able to build The Standard or The Maxxen,” LeClear said.
The remaining areas where a developer could assemble the necessary 30,000-square-foot lot size and 100 feet of street frontage for a 12-story building were few and would require agreements among multiple property owners. But they still included the block of East College Avenue between Sowers and Garner streets, where long-running businesses like McLanahan’s and Sharkie’s are located, as well as East Calder Way between Locust Lane and McAllister Street, which houses a number of businesses and the Americana House apartments.
“I know they’re getting offers. I know that there’s interest in these buildings,” LeClear said of the latter block during a work session last week. “Primanti Bros., the old Friedman cinema would have to be consolidated with Americana House and the house next to that in order to make that work. But we’ve seen stranger things already in the last eight years happen in downtown.”
Once the newest high-rises are completed, more than 5,200 beds will have been added to the downtown, something several council members said should have positive residual effects by increasing the quality housing stock, placing more students within walking distance of campus and potentially driving down rents while increasing availability in older buildings.
“My understanding is it’s helping to ease some of the housing issues just as a matter of logic,” Balachandran said last week. “If you have 5,000 beds being built downtown that means you have 5,000 beds available somewhere else in the State College area, especially when there has not been an increase in students… Part of the problem with this is trying to find good data on how to approach this issue.”
A $30 Million Problem
But some council members said the high-rises have not helped with affordable housing needs, and Marshall noted that while the buildings are adding to the property tax base, student residents largely do not contribute to the earned income tax base.
All council members, however, were in agreement that something needs to be done about the empty commercial space that has accompanied the new buildings, which in some cases have replaced local businesses.
“I think it’s very bleak to walk down a street in State College and see nothing but empty windows,” Engeman said. “We really need to do something that will encourage businesses.”
That’s something the borough’s Redevelopment Authority is working on in conjunction with the Downtown State College Improvement District and CBICC. A business recruitment study is underway to identify ways to assist fitting out empty commercial space and filling vacancies.
The challenge, however, is significant.
LeClear said that with few exceptions, developers of the new buildings have likely “zeroed out” commercial revenue in their planning.
“So they could build and operate these buildings in perpetuity with vacancies on the first and second floors and the numbers still work,” he said. “That’s the challenge we’re dealing with. They wouldn’t have built the commercial space if the zoning didn’t require it.”
That was apparent, LeClear said, with the redevelopment of the former Days Inn and Mad Mex property on Pugh Street, where Core Spaces is building the six-story, all-residential oLiv Highland in a zoning district where commercial space is not required.
“I literally begged on my knees to try to get commercial space,” LeClear said. “The whole planning staff said ‘How can we get commercial in that space?’ because I think we all wanted Mad Mex to stay, right? This was what it is going to take and the answer was, ‘The numbers don’t work. Thanks, but no thanks. We’re just going to build entirely residential and there’s nothing you can do in the zoning ordinance to stop us, so that’s what it’s going to be.’ It was a lot more cordial than that, but at the end of the day we didn’t want Mad Mex to go anywhere and it unfortunately it didn’t work.”
About 200,000 square feet of new commercial space is vacant and in what is known as “gray shell” condition. That means the space is unfinished with just concrete walls, conduits and a sewer connection.
LeClear said that an architect looking to fit out office space in The Standard estimated the cost of fitting it out at $147 per square foot. At that rate, it would cost at least $29.4 million to fit out all of the empty new commercial space — not accounting for the higher costs that would accompany businesses like restaurants that would have more complex and expensive needs.
“I personally think we need to make a significant economic development effort in commercial,” Marshall said. “Other places do it and I think we can do it.”
With the non-owner-occupied bonus repealed, the borough will look to its long-running zoning rewrite to shape high-density growth in the future. Former council member Evan Myers, who urged council not to repeal the bonus area in part because it could encourage sprawl of low-rise apartments into neighborhoods, said the zoning should incorporate inclusionary business requirements for commercial space, much as the borough already has affordable housing requirements for new buildings.
“This would lower rents for qualifying businesses, aid local residents in finding space to rent and fill some of the space,” Myers said.
Marshall and Council President Jesse Barlow both noted that they frequently have heard from residents who simply do not like the 12-story buildings and how they have changed the character of downtown.
But most of council agreed high-density growth will need to be a part of the borough’s future. How to achieve it in the best way remains the question.
“We actually have a really nice vision for downtown State College, the west end and the east side, and I think if we can continue to evolve that vision through these changes with encouraging density but with an eye toward encouraging commercial occupancy of the existing vacant space while encouraging density of [housing] on the east side, I think we can have a really beautiful downtown State College that we can all get excited about,” Councilwoman Deanna Behring said last week. “I think we’re moving in a really good direction. I’m excited about it and want to stay positive about what we have and where we’re going.”
