Insider Only News Government New Castle County Residential Real Estate

New Castle legislation hopes to spur office-to-apartment projects

October 11, 2024 |By Katie Tabeling

Townhome construction — New Castle County hopes to see more mixed housing options with the passage of an ordinance that allows more incentives for those projects. | DBT PHOTO BY KATIE TABELING

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The New Castle County government has recently enacted new zoning regulations to encourage developers to invest in mixed-use housing projects, namely turning offices into apartments and building more complexes for walkable communities. After crafting the law and listening to developers and residents for more than a year, County Executive Matt Meyer signed Substitute No. 1 for Ordinance 24-057 last week. The ordinance opens the door for “multi-family conversions” or turning existing office and commercial spaces into apartments, for the first time. “In the past, we don’t think redevelopment has been properly incentivized. Developers often think it’s easier to develop on green fields than to redevelop an old site. It should be the reverse, so we hope this is a step forward in making redevelopment more attractive,” Meyer said during the ordinance signing ceremony on Oct. 4. “If we can create new units or revitalize existing units in commercial areas, that will hopefully reduce the pressure on green spaces and potentially reduce sprawl. We want to try and create more housing for everyone,” he added. Multi-family conversion projects may include one unit per 800 square feet of gross floor space, with the average size of such unit at least 800 square feet. These projects are only allowed in office and commercial zoning districts with approval from the county Land Use Department. In the past few years, commercial real estate brokers have been watching carefully to see whether office workers will return to the office since the COVID-19 pandemic started and Wilmington is no exception. However, Delaware’s largest city has seen more apartment conversions, older buildings coming off the market, while others opted to leave for newer buildings outside Wilmington. Reports from Cushman & Wakefield found that the suburban New Castle County office market had about 15.9% space leased as of the second quarter of the year. “With the pandemic, many office property owners are re-evaluating the market and finding that residential housing is a way to bring back use and revenue into that building,” New Castle County Land Use General Manager Charuni Patibanda told the Delaware Business Times. “I don’t believe we’ve had any inquiries yet, but the idea is if we provide a tool to the developers that encourages reuse, it can gain some interest especially with interest rates coming down. We won’t have to require total demolition of a building just to build more residential options.” These conversion projects will also be required to provide moderately priced dwelling units (MPDUs) for qualified renters whose annual income is 90% of the county’s median income. For an office-to-apartment conversion project with 25 units or more, 10% of the units must be set aside as rental MPDUs. Another key shift in New Castle County land use policy is refining the definition of mixed-use projects. Now, those projects are intended to “facilitate development” that is planned for a walkable community so that residents could walk to work, stores or transit centers. Mixed-use developments are required to include five units that make up at most 75% of the total floor space on site. In the past, New Castle County exempted new mixed-use projects from MPDUs, but this ordinance now requires those buildings that have 100 units or more to set aside 10% for the affordability program. For all future mixed-use projects, office conversions or new builds, the affordability window is raised from 10 to 15 years from the date of the first sale or lease signed for each unit. “The idea is to provide more options and affordable types of units,” Patibanda said. “That type of diversity typically leads to more people having opportunities, and targeting redevelopment projects puts the focus on areas where the infrastructure already exists and could make it economically viable.” New Castle County is also paving the way for more residential development near transportation centers, like the new Claymont Transit Station that opened last fall. The new ordinance reduced the required open space to 25% and the parking lot to 12% for transit-focused projects, and also gave the rail station the option for a parking structure in a mixed-use building. Select land that is more than 15 acres in size in the commercial regional zone near the rail station must also be developed as a mixed use building. “Studies have shown that elements like train and bus service help create more multimodal communities that make the area more attractive for young professionals, and in the past, there was not much there to permit it,” Patibanda said. “In this case, the ordinance certainly makes something like a transportation center more doable in a given area.”