After decades of decline and disappointment, downtown may be experiencing the beginning of resurgence. It's not being led by the big retail stores that many people want to return. It's not even being led by the much-debated Renaissance Square.

It's being led by housing.

From the East End to West Main Street, small and mid-size housing projects are in construction or are being proposed. The new development comes on the heels of a surge in downtown housing growth over the past seven years. And the vacancy rate continues to be low. Clearly, more people are interested in living downtown.

Since 2000, nearly 600 new housing units have been built downtown. An additional 105 are under construction, and 125 more are in the planning and development stages.

"When I first started watching downtown space and construction more than 20 years ago," says Heidi Zimmer-Meyer, president of Rochester Downtown Development Corporation, "my list of projects being proposed was pretty short, and most of them didn't come together. But about five years ago, something changed. Now I am tracking 31 projects, and more than half of them are in development."

The city's downtown housing market, says Zimmer-Meyer, reflects a dramatic change in the real-estate market on the national level. While most of the country's housing market is in a slump, there are some exceptions. One is the growing market for "urban dwellers" - empty nesters, singles, gays, and young couples - who are attracted to density, diversity, and cultural activities, says Zimmer-Meyer.

Those people don't make traditional housing choices, which are usually based on proximity to good public schools. They are either childless or can afford a private education for their children. They don't want a house with a yard to maintain, and they're not put off by living next door to, or in some cases, above shops and restaurants.

"Look at Corn Hill Landing," says Zimmer-Meyer. "You have units over restaurants and retail. You even have units over parking and driveways. And there is a waiting list."

The RDDC has just released its annual first-quarter survey of the downtown housing's vacancy rate. According to developers, property owners, and managers, vacancy for both market-rate and subsidized housing units was 6.7 percent in early 2007. That's up from 4.6 percent in 2006, but Zimmer-Meyer says most of the increase can be attributed to three older apartment buildings, two of which are undergoing ownership and management changes.

"What we're seeing is strong evidence of a demand for the newer housing units with more amenities," she says. Although the vacancy rate has increased, she says, "it's still not bad."

"It shows developers that there is clearly a market for the right product," she says. "Now we have to capture it. I'm not saying that if you build it, they will come. I'm saying they're already coming."

The development of downtown housing is not always as visible as it was with The Sagamore on East and Corn Hill Landing, both new-construction projects. In the Grove Place neighborhood, for instance, a third generation of town homes has been completed and, where space permits, developers are in-filling, building one to three units between existing housing. The technique increases density, and the architecture typically reflects the character of the neighborhood, so well that in some cases the units don't look new.

Many of downtown's older commercial buildings are also being converted to housing. Projects have been completed or are underway in the Cascade District, the High Falls District, St. Paul's Quarter, and the East End.

"We're blessed with a community of developers and designers who respect these old buildings and are giving them a new life," says Zimmer-Meyer. "And I believe the reason that these buildings are seeing such a low vacancy rate is because we have a younger generation of developers and designers coming into the market. These are not your run-of-the-mill lofts and apartment conversions. We're starting to see some edgy designs that target specific groups of people."

The Halo building in Grove Place is an example, says Zimmer-Meyer. "They have taken an old church and given it a particular treatment conducive to the Eastman School students," she says. "The bedrooms are small. But the kitchens and living space are more open, and there are sound-insulated practice rooms. In the Temple Building and the Medical Arts Building, you have these very unique treatments of space that really give them that wow factor. It's not like you're going into ordinary box-like apartments. These developers seem to know intuitively that something like that would not appeal to this demographic."

Most of the housing units being built downtown are rentals - everything from studio apartments to lofts to work-live units. Demand is highest for one-bedroom and loft units. Off-street parking is the most important amenity, regardless of the type of unit, Zimmer-Meyer says.

"There are some buildings where secured parking is just not available," says Zimmer-Meyer. "But one of the first things we tell developers if they are interested in a particular site is to get your engineers in there and see if the building can support underground parking. In order to remain competitive, it's an important factor, and it is something that is critical to downtown development as a whole."

Other amenities include updated kitchens with new appliances, security, laundry facilities, high ceilings, and free high-speed internet connection. Aesthetics are important, too: fireplaces, views, gardens, and balconies.

Some critics say that not enough housing is being developed for owners, and that what is being developed for rent or purchase is expensive. Lofts are commanding the highest monthly rents, which are averaging $1,168. Ownership town homes in Grove Place, however, are selling in the high $200,000's to low $300,000's. Most of the projects under construction or being planned are expected to be similarly priced.

That doesn't dissuade Rob Guenste, who recently moved up from Westchester County for a job at Marketplace Mall. Early last week, he was looking for a new home in the St. Paul's Quarter area, hoping to find a loft.

"The idea is basically to find something in the downtown center," he says. "These old buildings down here are really attractive to me. I looked in the Park Ave area, and some of the houses looked really quaint and cute from the outside. But I thought the apartments were pretty rundown and ordinary."

Though he says that the Temple Building is out of his price range, Rochester's downtown rents are still are bargains compared to what he has been paying downstate.

"It's just amazing," he says, "but this is half of what I was paying in Westchester, and it's a quarter of what you would pay to live in Manhattan. And everyone says I would be so far away from work down here, and I think: compared to the commutes I am used to, you've got to be kidding me."

Even though downtown housing is attractive to a niche real-estate market today, what it will be like in 10 years is anyone's guess. The city hired the consulting firm Zimmerman-Volk to analyze Rochester's housing market. In its report to the city earlier this summer, Zimmerman-Volk didn't project saturation in downtown housing anytime soon.

"The forecast is for 156 to 309 units yearly over the next 10 years," says Bret Garwood, director of development services for the city. "Their estimates on previous studies have been conservative, so we could be looking at an even larger market, at least through 2015."

By those estimates, the city could add as many as 3,000 new units to its existing 2,100 over 10 years. And housing analysts say each unit typically represents 1.5 people. At the higher end, that means the number of people living downtown could pass 7,500.

But isn't it possible that renters from neighborhoods like Park Avenue and the South Wedge are just moving to new inventory? Wouldn't that depress those neighborhoods?

Garwood says he doesn't think that will happen.

"We think the key to keeping these neighborhoods healthy, both the existing city neighborhoods and the emerging ones downtown, is by keeping them unique," he says. "Park Avenue is always going to be Park Avenue, and it's always going to be attractive to people who like that area. And ARTWalk is different than Park Avenue. The last thing we want to do is to try to duplicate those neighborhoods downtown. Grove Place is very different than Corn Hill Landing. And the Temple Building is different from either of those two areas."

Zimmer-Meyer refers to the difference as "vertical neighborhoods."

"We're talking about density and diversity here," she says "We say 4,500 people would be the tipping point when a grocery store, for example, could find it feasible to come into the downtown market. It probably won't be the big Wegmans superstore. It will be something more appropriate for downtown. But we know that retail follows rooftops, so we are approaching that point where we can expect to see the need for more retail to return to downtown."

But new housing alone cannot sustain a downtown resurgence, says Zimmer-Meyer. Specific projects along Main Street are still critical over the long-term. And some have been elusive, mostly because they are so expensive and complex.

"The site of the old Rascal Café - what the city calls Block F, across from the Eastman Theatre - is a critical site for housing," says Zimmer-Meyer. "It is the centerpiece to the Cultural District, and it unites Grove Place with Main Street."

Renaissance Square, the Sibley buildings, and Midtown are the big projects, and Zimmer-Meyer says a downtown resurgence will falter without them.

"You have the Convention Center, which draws people from all over the country, bringing money into this economy every day," says Zimmer-Meyer. "When they walk out of there, what they see is the worst blocks of Main Street, chipped and broken-up sidewalks. If you're coming from Boston or Austin or other vibrant cities and you see this, especially at night, it's a little intimidating. Instead of feeling comfortable walking up to the East End, you have them staying in their hotel rooms, which is not good. That's why Ren Square is so very important. The quality of the downtown experience needs to catch up with the housing market."

Both the Sibley buildings and Midtown are complex projects as well, requiring capital and the capacity to manage projects of that scale.

"There's nothing happening right now on either of them, but I do think it will happen," she says. "But it takes a very special developer to tackle those two."

The Sibley site is actually two buildings: the former department store and an office building. "There are parking issues," says Zimmer-Meyer, "and debt from the current owner that would have to be worked out. It could be done, but it would take the right developer."

More downtown parking, including adding on-street parking to Main Street is another critical component to sustaining housing growth downtown, says Zimmer-Meyer.

"Rochester is still a city where a car is needed," she says, "so we know that off-street parking is the number one amenity for people living downtown. We also know that retail depends on street parking. For every parking space, studies show that retailers can expect $100,000 to $150,000 in sales each year for a city this size."

The city is in the middle of reviewing its parking needs, but it is also trying to support developers with both residential housing and commercial projects downtown.

"The role of government in all of this is to try to make the most desirable environment possible to invest," says Garwood. "Individual developers can only bring so much to the table, and these guys have to see a return on their investment. They have to make the numbers work. So we hope to show that this is viable."

The city has two tax-incentive programs: one, called "Choice," for homeowners in downtown housing, and another for commercial and mixed-use development, called Commercial Urban Exemptions. Both programs are designed to encourage investment in downtown.

"We also have subsidies in the form of low-interest loans and Pilot agreements [Payments in Lieu of Taxes]," says Julio Vazquez, the city's commissioner of community development. "In many cases, the developer cannot possibly address all of the issues that some sites present, but the sites are so important that we have to create a kind of partnership."

City government also tries to create the right environment for investment in downtown housing by buying property itself, says Vazquez.

"The city owns property downtown, and this allows us two things: we can have some control over how the site is used, and we can help to package the site," he says. "Maybe parking is an issue, and we can address that. Or maybe there is another property on that block that we can make available."

Eventually, says Vazquez, the city hopes to fill in the Inner Loop on the southeast side between East Avenue and Monroe.

"The challenge is wherever possible to make the connections from one neighborhood to the other," he says. "If the Loop were not there, we could bring Park Avenue right into downtown."

But by far the biggest obstacle for developers is environmental.

"There are some wonderful housing sites downtown," says Vazquez, "but the environmental issues - brownfields - require that the sites are cleaned up before they can be developed. Now we can work with the developer on those sites. But usually it means that the city, state, and the EPA have to work together, and it takes some time."

Still, Vazquez says that the growth in downtown housing and its relationship to the resurgence of Main Street is about private investment and political will.

"Hopefully, we are on the right track," he says. "Something is happening, but to sustain this takes the collective will of many people who want this to happen. I think it's there this time. Unfortunately, it's not there in some parts of the city. People always say, ‘All of this is aimed at downtown. What about this neighborhood or that neighborhood?' The fact is, there just isn't the collective will to invest in some areas. But maybe if we can do this, there will be."