Real Estate: Impacts & Strategies

Ninety-five percent of the artist space development (ASD) process is the same as any other real estate development project. Moreover, financing ASD projects is similar to other types of projects in terms of the investors’ metrics for success, the drivers of costs and revenues, and the amount and sources of subsidy. Extensive research conducted by the Urban Institute has found that there is a considerable degree of diversity in the types of artist spaces, developers, and sources of financial support, as well as the social and market conditions in which artist spaces are developed, and that ASD projects are unique in their valuing of live-work and studio projects and the types of regulatory barriers that most affect ASD projects.1 This research is represented briefly below.

Impact of the Diversity of Artist Space Developers

Today, developers of artists’ spaces are almost as varied as the projects. Nonprofit development organizations, investors, civic and political leaders, foundations, community members, intermediaries, and others have all participated in creating successful ASDs by broadening their existing housing, commercial, and community-building agendas. And in many cases, artists become “accidental developers,” taking on the task of acquiring and renovating artists’ spaces to satisfy a one-time need of their individual artist-community. As the claims of economic, social, and physical impacts of ASDs are substantiated, other more conventional developers like businesses or nonprofit development organizations see the benefits of capitalizing on ASDs and carry out ASD-related real estate project. Therefore, the types of projects and developers involved strongly influences the development process. For example, developments carried out by “accidental developers” are often done in steps, as time, money and the availability of volunteer labor permit. Nonprofits, on the other hand, often carry out projects within a community-accepted planning framework that shapes project purposes, financing, and occupancy.

Impact of the Diversity of Motivations

The diversity of developer types demonstrates a range of motivations for becoming involved in ASDs, including:

  • To respond to artist need for appropriate, affordable spaces
  • To create spaces suitable for artists’ special needs2
  • To create or enhance artists’ communities and stimulate the production of innovative art work3
  • To catalyze economic investment in disinvested neighborhoods4
  • To bring more vibrancy to blighted areas, sometimes as a business venture5
  • To give places a competitive economic edge as well as an advantage in terms of quality of life6

The most compelling motivation for the creation of artists’ spaces is the shortage of appropriate spaces that are both affordable and available on the market. Artists and their supporters have, therefore, a strong interest in ensuring that projects remain affordable, and occupied by artists, for as long as possible. For-profit landlords are generally free to raise rents as overall housing prices rise, however this oftentimes displaces artists once they can no longer afford their units. One solution to this problem is the development of policies and programs that help artists own their units, whereby their mortgage payments would typically by fixed, shielding them from most serious effects of rising prices. The initial cost of ownership is a barrier to many, so another way of solving the affordability problem is to develop units owned by nonprofits committed to keeping units affordable. In this situation, these owners will keep rents down to only those amounts needed to cover costs. In sum: for long-term affordability, artists are best off as renters in properties owned by nonprofits or as owners. For long-term occupancy as artists, they are best off as occupants of cooperatives or of rental projects owned by nonprofits dedicated to artists support.

Impact of the Existing Community and Economic Development System

Research has shown that artist spaces and all other types of municipal planning initiatives and public purpose real estate developments often share the same underlying revitalization goals held by the community at large.7 Thus, in order to increase support for the development and maintenance of artist spaces, people involved in the development of artist space should play a more active role in their local community and economic development systems. This would help artist spaces developers create relationships and build their social capital with other community leaders who possess a great deal of experience building projects efficiently and mobilizing the community.

Impact of Markets

Developments of artists’ spaces do not occur in a vacuum: the willingness and ability of various parties to invest is linked to aspects of the market, community, and political environments that raise or lower the overall payoffs and risks.8 It has become conventional to distinguish between strong markets and weak markets, each of which poses unique challenges. In strong markets, demand for land and buildings threatens the affordability of ASD projects, drives up the amounts\ of public subsidy required, and reduces risks to private investors. In weak markets, softer demand makes property acquisition more affordable, and leads to cheaper overall development costs, but also yields correspondingly higher risks for investors.

Specific Recommendations

The Urban Institute’s findings concluded with eight focused recommendations to harness potential support of ASDs across existing networks of local community and economic development systems:9

  • Appeal to developers: Supporters of artist space development would do well to recognize, and appeal to, the arts-related motivations of many nonprofit and for-profit developers and lenders, many of which seem to recognize the value of artists as project residents and community activists.
  • Introduction of mixed-use project elements: Commercial and nonprofit space, for example – as well as community programming, like youth arts education, are good ways to reinforce and demonstrate the community value of artists’ spaces. These spaces should become standard practice in artist space development.
  • Include artist studios in mixed-use projects: Development of scattered-site, mixed-use properties is an interesting and promising new strategy for revitalization of older commercial corridors, a growing focus of community economic development practitioners. Artists’ studios and living spaces along these corridors represent one of the few suitable uses for spaces no longer appropriate for most modern retail.
  • Form co-ops: Artist space development supporters should encourage formation of limited-equity cooperatives as a way to promote both long-term affordability and continuing occupancy by artists in the projects they develop. Cooperatives retain some important advantages over rental properties on the one hand (even nonprofit-owned ones) and condominiums on the other.
  • Encourage the arts in community plans: One of the most concrete strategies for longer-term support of artist space development is to encourage inclusion of arts and cultural elements in community plans, and government agency observance of the priorities outlined in the plans.
  • Tailor public subsidies for artists: Public subsidy programs should be tailored to the various types of artists’ spaces and the different ways these get created; e.g., a menu of financing options should match the different types of subsidies that live-work and studio projects require.
  • Studio space = economic development: Promotion of concentrations of studio spaces would appear to be a low-cost way to promote creation of new clusters of economic activity. In weak market cities, where other prospects for economic growth are few, artist space creation may be an important springboard for both economic and residential market strengthening.
  • Work with CDCs: Because the strength of the nonprofit development system seems to be an important contributor to the likelihood that affordable artists’ spaces will be developed, cities with a strong community-based nonprofit sector would appear to be fertile ground for national promotion of artist space development as a revitalization strategy.

1 Walker, Chris and the Urban Institute, Artist Space Development: Financing (Washington, DC: Urban Institute, 2007).

2 Jackson, Maria Rosario, Florence Kabwasa-Green, the Urban Institute, Artist Space Development: Making the Case (Washington, DC: Urban Institute, 2007).

3 Ibid.

4 Ibid.

5 Ibid.

6 Ibid.

7 Walker, Chris and the Urban Institute, Artist Space Development: Financing (Washington, DC: Urban Institute, 2007).

8 Ibid.

9 Ibid.