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D.C. Council Chairman: Opportunity To Redevelop FBI HQ Site 'Seems To Be Lost'

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With the fate of the FBI HQ still awaiting a federal government decision, the head of D.C.'s legislature bemoaned that the tide appears to be turning toward the agency staying on Pennsylvania Avenue

D.C. Council Chair Phil Mendelson
D.C. Council Chairman Phil Mendelson at Bisnow's Economic and Political Forecast event

D.C. Council Chairman Phil Mendelson said the FBI being based in the J. Edgar Hoover Building, its home for over four decades, does not bring property tax or income tax revenue to the District, and creates a large block of inactive space on the ceremonial avenue. 

"We were looking forward to being able to replace that with really exciting economic development, both residential and commercial, and that opportunity seems to be lost," said Mendelson, speaking Wednesday morning at Bisnow's Economic and Political Forecast event.  

The General Service Administration missed its deadline Monday to present its plan for the FBI HQ to a congressional committee, and the Washington Business Journal reported that the agency is leaning toward keeping the FBI at the Hoover Building. It had previously narrowed its search down to three sites in Maryland and Virginia before scrapping that years-long effort in July. 

"GSA is continuing to finalize the report on the Federal Bureau of Investigation's new headquarters project and will submit it to the Senate Committee on Environment and Public Works," A GSA spokesperson said in a statement provided to Bisnow

Mendelson did say the FBI moving out of the District would be a "mixed bag," because while it would gain a prime development opportunity, the District would also lose the jobs and prestige that housing the nation's top law enforcement agency provide. 

"Initially, when the GSA said they were looking for space and it's going to be outside the city, folks said, 'Well, this is an important part of the federal government that we want in the nation's capital,'" Mendelson said. "There's something intangible about having the presence of a major agency in the city."

Holland & Knight Partner Janene Jackson, D.C. Council Chairman Phil Mendelson and D.C. Policy Center Executive Director Yesim Sayin Taylor
Holland & Knight partner Janene Jackson, D.C. Council Chairman Phil Mendelson and D.C. Policy Center Executive Director Yesim Sayin Taylor

Mendelson's discussion also focused on affordable housing. While Mayor Muriel Bowser has committed $100M per year through the Housing Production Trust Fund, Mendelson said that money too often gets tied up in projects that do not deliver until years later. 

"I would say the council is not very good at oversight over how the executive is using that fund," Mendelson said. "I think that the executive’s not using the fund as efficiently as it could be."

The council chairman also said the D.C. government needs to do a better job with shaping its planning and zoning policies — it is currently working to amend the Comprehensive Plan — to preserve existing affordable housing. 

"We have not done a very good from a planning and zoning perspective in ensuring that where there is affordable housing, it's protected, so we've lost a lot of affordable housing stock," Mendelson said. 

D.C. Policy Center Executive Director Yesim Sayin Taylor noted that the District's population has grown by more than twice the pace of its housing supply since 2010. She said D.C.'s zoning policies should allow the creation of more housing in all parts of the city. 

"It’s almost entirely a supply issue, complicated by some government policies that restrict supply and make some parts of [the] city not particularly useful," Sayin Taylor said. 

CohnReznick's Tim Trifilo, AFIRE's Jim Fetgatter, Bennett Group's LuAnn Bennett, Enterprise Community Partners' David Bowers and Abdo Development's Jim Abdo
CohnReznick's Tim Trifilo, AFIRE's Jim Fetgatter, Bennett Group's LuAnn Bennett, Enterprise Community Partners' David Bowers and Abdo Development's Jim Abdo

Abdo Development CEO Jim Abdo also advocated changes to the city's zoning laws to add housing supply to the market and bring down costs. 

"We’ve got to look more closely at zoning — not just subsidies and inclusionary zoning, but zoning in particular — taking underutilized, often industrial land that prohibits housing, and allowing that to get density to allow for market-rate affordability," Abdo said. "I really believe wholeheartedly that could be the answer for this city." 

On the national level, the tax reform negotiations put at risk some of the key tools for creating affordable housing, private activity bonds and low-income housing credits, but they were ultimately preserved in the final law. While this represented an important win for affordable housing, Enterprise Community Partners Vice President David Bowers said other elements of tax reform could hurt the industry.

"With the tax rate coming down, the [tax credit] pricing is affected, so there's less equity in deals and there's a need now for more debt," Bowers said. "That's a big problem. It puts more pressure on state and local governments to try to step up and fill the gap." 

CoStar Head of Market Analytics Hans Nordby, Savills Studley Chief Economist Heidi Learner, CBRE Chief Economist Jeffrey Havsy and Colliers Chief U.S. Economist Andrew Nelson
CoStar Head of Market Analytics Hans Nordby, Savills Studley Chief Economist Heidi Learner, CBRE Chief Economist Jeffrey Havsy and Colliers Chief U.S. Economist Andrew Nelson

CoStar Head of Market Analytics Hans Nordby said the amount of nationwide supply in the for-sale housing market has reached an all-time low. 

"We have housing crisis in this country," Nordby said. "We’re not creating nearly enough housing."

This undersupply of housing is making it difficult for people to afford to buy houses and forcing people to remain renters, Colliers Chief Economist Andrew Nelson said. 

"Housing affordability is a real issue, combined especially with the student debt that we’re larding on that generation," Nelson said "People who are not already homeowners are having real trouble getting on the ladder. Unless we build a lot more housing and fundamentally change the affordability equation, we’re going to see people renting for longer."