A street-level art installation, an original piece by American conceptual artist Sol LeWitt titled “Wall Drawing #1012,” was acquired by the developer and installed by professional Sol LeWitt installers at 1400 Mission Street in San Francisco but has been defaced and adds little to the streetscape. (Kuba Snopek)

Smarter investments in art could benefit real estate developers and the communities in which they invest. In the long term, a well-designed art intervention will add value to the property and create impact.

Each year, real estate developers invest billions of dollars in art, making them one of the largest patrons of the arts in America. This is rarely acknowledged because of the fragmentation of the construction business. The art budget of a single development alone is not impressive, but in a trendy neighborhood with dozens of construction sites, developers’ art budgets have a cumulative impact.

The relationship between the worlds of real estate development and art has been formalized by “percent for art” ordinances, which exist on both the state and municipal level across the country. The ordinances differ in detail but have a common approach: developers who invest in an area are obligated to pay a small percentage of their hard costs to support the arts. Although the first percent-for-art ordinance was introduced in 1959 in Philadelphia, the concept has seen little evolution over the years.

But percent-for-art ordinances do not exist in a vacuum. They rise from a fragile social contract: developers, who reap benefits from the urban land, are expected to give back to the community by reinvesting in that community. By introducing such ordinances, local governments aim to accomplish a handful of social goals—to democratize access to fine art for residents, promote distinctive crafts and art techniques, and celebrate local history and traditions. The large sums of money injected into the economy through these ordinances are also expected to support artists, a traditionally underserved group.

Developers are ambivalent about such ordinances. Many do believe art generates value. It has been proved to benefit retail spaces: glamorous art pieces increase foot traffic and drive retail sales. High-quality art can also be a sales catalyst for the high-end residential market. Investing in art also may have a political dimension: developers hope to gain a good reputation in the community and garner goodwill toward their next project.

However, these arguments are not valid for everyone. Mandatory investment in art is not equally productive for all types of businesses. Some developers interviewed for research cited in this article see the fee as merely a costly hurdle on the way to obtaining a building permit.

My research, which involved interviews with more than 50 real estate developers, social scientists, and art experts in the San Francisco area and other North American cities, has shown that percent-for-art ordinances are not achieving the intended social outcomes, a consequence of their flawed internal mechanics.

This installation, titled “Caruso’s Dream,” by Brian Goggin and Dorka Keehn at 55 Ninth Street in San Francisco, consists of pianos hanging from the facade. The commission came through a nationwide competition. (Kuba Snopek)

Developers are required to pay for art once, upfront, which favors creation of singular objects rather than recurring events. This allows no funding for performances, temporary interventions, actions, and other “ephemeral” forms of art. The average art budget for a development project, which can range from the hundreds of thousands to millions of dollars, limits the possible types of art even more: percent-for-art ordinances are, in practice, perfectly tailored to fund monumental sculptures and murals.

But the infinitely diverse world of contemporary art, which has developed since the 1960s and ranges from video and media art to performance, temporary installations, and social practice, is left outside this financial framework. Even in the case of sculptures, the value is rarely transmitted to the people who create the work: the bulk of money goes to remotely located specialized manufacturers.

Commissioning artwork is a multiple-step process that involves a long chain of subcontractors and consultants—and rarely includes art specialists. Like real estate development, all risks are mitigated and all the stakeholders negotiate to reach consensus. In practice, the participants may negotiate every aspect of the artwork—material, method of manufacturing, even the artistic vision. In many cases, the artist loses control over the work and the artistic idea gets lost. In order to be successful, art requires a margin of freedom. The consequence of too much control is low artistic quality.

The experts from the world of fine art interviewed for this article confirm this observation: as a rule, developer-funded art has very low artistic merit. If true, this undermines the fundamental goals of percent-for-art ordinances: municipalities cannot “democratize access to fine art” if the art is worthless. Developers who fund bad art may find themselves in the uncomfortable position of having financed a gift for the community that brings them criticism rather than gratitude, and the use of social media exacerbates the developer’s risks. Countless examples exist of developer-funded bad art that has turned into an internet meme. The risk-mitigation strategy that strips artworks of their artistic value poses a great reputational risk for the developers.

This piece titled, “Not out of the Woods Yet,” by British artist Richard Deacon, shows the importance of the proper exhibition of art, not always easy in a dense urban environment at 500 Howard Street in San Francisco.

One way out for developers is to closely cooperate with the professional arts community—art institutions, collectors, and curators. Big developers sometimes do this, acquiring sculptures by established artists from art collectors. However, because this approach requires a certain scale of operation, it is reserved for the biggest players.

I propose an alternative way of employing available funds: investing in living art—the existing and ongoing practice of creating art in the community. Arts practices, which have evolved in the community, involve diverse local talent creating art and depend on local skill and knowledge.

Artists are often the first residents to be displaced by rapid development. One of the most important reasons artists leave is the lack of spaces where they can practice their craft. As areas are redeveloped, real estate once used for creating art is transformed to accommodate the highest and best commercial use of that property. The living art—often a reason the neighborhood became trendy in the first place—quickly moves to other areas.

Though living art is not a direct source of revenue, it is an important cultural asset for a neighborhood. For the developer, an original cultural activity can be a differentiator of the area and increase its value. For new residents, the existence of local living art can be a factor that facilitates their integration into a neighborhood. Artists, the bearers of local traditions and crafts, provide the link with the neighborhood’s present and past. For the community, living art helps increase social cohesion.

“Reflections,” a work by Gordon Huether at 680 Folsom Street in San Francisco, is a composition of metal and dichroic glass panels, the most popular materials for such installations, according to art manufacturers interviewed.

Investing in living art requires a new strategy. Instead of commissioning art objects, developers should provide art spaces where the works of art can be created, and percent-for-art funds could be redirected to fund them. Instead of paying for a sculpture, the developer of a 100-unit residential building, for instance, would be able to fund a small art space for five to seven years. Providing the necessary infrastructure for the artists’ creativity instead of buying a product of their labor challenges the mechanics of the percent-for-art approach. At the same time, it leads back to the original idea of the ordinance: by mitigating the displacement of local artists, the ordinances would bring about an authentic social impact.

Art spaces offer much more flexibility in their social impact than do art objects. The art produced does not have to be limited to a handful of media—sculptures and murals, for instance. Instead, art spaces can support infinitely diverse types of art: production of singular objects; organization of recurring events; and deployment through ephemeral media, such as performance, dance, or digital art. Art spaces can be curated by local nonprofit organizations that support underserved minorities, specific age groups, or artistic groups that are important to the community. Unlike a sculpture, an art space is a flexible instrument of impact. Consciously curated, it can generate desired outcomes for the developer and for the community.

This point of view is shared by a handful of developers I interviewed who decided to challenge the usual execution of the percent-for-art ordinance and develop community spaces for artistic activities. One designated a small portion of its property for a community space for local children, providing them with art classes. Another negotiated with the local government for an exemption from the standard art requirement, instead preserving a workshop used by a community of sculptors—an established existing space with history and character.

For developers of residential buildings, providing a space for living art helps integrate their buildings into the social fabric of the neighborhood. This, in turn, has a positive impact on rents and vacancy rates in the long term. Another important benefit for the developer is that providing a space for living local art can also improve the developer’s reputation: by providing opportunities for local artists, the developer comes to be perceived as a local art patron.

The pandemic has provided yet another reason to look into art spaces. Because of the crisis, many small businesses that once occupied ground floors are gone, and with them the liveliness of a walkable urban neighborhood. The economic downturn could leave these spaces vacant for years. Providing spaces for art could enliven the streetscape and restore the creative energy.

Critics of providing art spaces note that this approach is dramatically more complex for developers, a view based on the belief that by commissioning a sculpture one can quickly be done with the art requirement. But public sculptures require insurance, continuous maintenance, and security. The latter can be costly: some municipalities use percent-for-art in-lieu fees from new developers to pay for the maintenance of the art pieces funded by developers in the past. The other common problem is copyright protection: disputes between the property owner and the artist regarding the positioning or alteration of a sculpture can lead to a lengthy legal battle.

For a percent-for-art arts space, maintenance could be outsourced to a local nonprofit. Such organizations not only can operate art spaces, but also program them—selecting artists, finding additional grants, promoting their work, and managing other activities. In such a case, the relationship between the property owner and the operator of an art space follows the same rules and contracts as those with any other tenant. In this way, and in contrast with commissioning pieces of art, in which developers are forced to explore fields not remotely connected to their own, developers providing spaces for art play on their own strengths.

Art has a limited financial impact on the developer’s pro forma. During construction the focus is on other aspects of the business, like fluctuating costs for materials and labor. However, when buildings are complete, public art is among the most noticeable elements of the new project. Exposed in plain sight, art is a visible testimony to developer’s values and tastes. It attracts the attention of the public, popping up in photographs and discussions about the new development. Social media intensifies this situation.

The earliest American percent-for-art ordinances are now more than 50 years old, and many of their original assumptions fail to address the problems cities face today. Wandering the streets of San Francisco this past summer, I passed dozens of sculptures fronting deserted retail havens—glaring evidence of the irrelevance of the current approach. The pandemic offers a good opportunity to revise the approach to public art and update percent-for-art programs.

Experiments with living art can be carried out within the present percent-for-art system. A regulatory back door already exists: many local governments are open to negotiating the terms of the fee. Instead of demanding an art object, they may require the developer to pay a lower in-lieu fee. A handful of developers interviewed for this article negotiated other solutions, like supporting an existing art workshop or a community in need. This article offers some of the arguments developers might pursue in conversation with local governments.

Spaces for the practice of art offer the most viable solution for the current problems faced by artists in American cities—displacement, gentrification, and the lack of affordable spaces where one can be creative. The specific solutions can vary according to the size and format of the new development, its location, and the local context.

I encourage real estate developers to ask themselves a question: for my business, what is the goal of investing in art? The options go beyond sculptures and murals, and some could be more transformative than others for your business.

KUBA SNOPEK is a ULI member and consultant for real estate developers who invest in art. Research incorporated into this article—conducted as part of his capstone project for the Master of Real Estate Development and Design Program at the University of California, Berkeley—. More about the project can be found at https://realestateart.co/.