Will the pause on housing at market price in Saint-Paul have a ripple effect?

0

As Seattle-based market-priced housing developer Weidner Apartment Homes pauses future construction at St. Paul’s Highland Bridge, some affordable housing developers are weighing how they will structure financing for future projects on the same site. One type of real estate was to fund the other using a tax transfer known as tax increment financing, or TIF.

As the construction of market-priced apartments is suspended, TIF grants for affordable housing may follow.

“It could definitely slow us down,” said Chris Wilson, director of real estate development for Project for Pride in Living, a Minneapolis nonprofit that plans to soon open the Emma Norton Residence, 60 supportive housing units and Nellie Francis Court. , which will span 75 workforce housing units.

“I’m not worried about these projects, but about things that are a few years away,” Wilson said. “A quarter or a third of the money would be missing from these. That’s how we planned to finance some of the housing – a reasonably good percentage.

20 PERCENT OF UNITS SHOULD BE AFFORDABLE

Funding for real estate development on the vast acreage that once housed the Ford Motor Co. manufacturing campus is structured so that market-rate units subsidize affordable housing on the same streets, using on-site property taxes .

Overall, 20% of the site’s 3,800 units are expected to be affordable.

Overlooking the Mississippi River in Highland Park, nonprofit developers like Project for Pride in Living, CommonBond Communities and Habitat for Humanity are planning another 760 affordable apartments over the next decade. Half of them will be for residents at the bottom of the income scale.

Most housing advocates call their vision for the development of Highland Bridge ambitious by any measure, as new construction for residents earning no more than 30% of the area’s median income – or less than $32,000 for a family of four – have become rare, even within charity circles.

CHALLENGES

Two new challenges could further complicate these plans.

Construction costs have risen, forcing nonprofit developers to dig deeper and negotiate harder as they layer loans, grants and other funding into a complex financial pie, or what is known in real estate circles their “capital stack”.

Looking further ahead, long-term funding questions loom over how the private sector’s reaction to St. Paul’s new rent control ordinance could impact funding for affordable housing in Highland Bridge. Tax increase funding—or revenue generated from construction at market rates for on-site infrastructure instead of property taxes—was to fund up to a third or more of affordable units.

The Rent Control Ordinance does not officially cap rents until May 1. Nevertheless, a large portion of these TIF funds are now on hold.

In light of the ordinance, which was approved by St. Paul voters in the ballot last November, Weidner Apartment Homes has paused all of the top 10 percent or so of its up to 2,000 planned apartments in the market price.

Construction of The Collections – covering a new Lunds & Byerlys store connected to 230 future market-priced apartments off Cretin Avenue – will go ahead and is already around 80% complete, but the remaining Weidner Highland Bridge projects are on hold, at least until the city establishes possible modifications and exemptions from rent control.

“It’s a math problem,” said Greg Cerbana, vice president of government affairs at Weidner, who noted that the voter-approved order does not include adjustments for inflation. “A 3% (rent control cap) on a $1,000 unit gives you a monthly raise of $30 a month. Look at your own home and the cost of replacing a dryer, washer, or roof.

While other developers said they lost lenders willing to fund their projects in St. Paul as a result of the order, Cerbana said Weidner — which develops, owns and manages properties in at least 13 U.S. states and several Canadian provinces – has no such restrictions.

“We have access to capital more than other companies,” Cerbana said. “Our decision is entirely ours.”

Highland Bridge’s TIF quarters have been organized much like Russian nesting dolls, with a large redevelopment quarter covering the entire 135-acre site. Within this, a series of smaller affordable housing sub-districts are expected to provide a tax subsidy for affordable housing projects both in Highland Bridge and elsewhere in the city.

Some of this initial “twinning” is already underway, and Weidner and Ryan will continue to pay the holding costs on the plots of land set aside for future affordable housing projects in Highland Bridge.

‘OPPORTUNITIES TO BE ABLE TO STAY IN THE NEIGHBORHOOD’

Marvella, a market-rate senior housing complex developed by Presbyterian Homes, will generate enough TIF to fund $5 million from the $22 million Emma Norton Place project and $8 million from the 24 million Nellie Francis Court building. millions of dollars. Additional funds from TIF will subsidize Lumin at Highland Bridge, a 60-unit seniors’ apartment building being developed by CommonBond Communities for households earning no more than 30% of median income.

“It’s the most affordable you can get in terms of affordable housing development,” said Cécile Bedor, executive vice president of real estate for CommonBond. “It’s really difficult for low-income seniors to be able to stay in Highland. Someone is going to live in their house for 40 or 50 years, it pays off, but turn around and rent somewhere? This property offers opportunities to be able to stay in the neighborhood.”

The two nonprofit developers still plan to innovate this summer, then take turns scaling affordable housing development each year thereafter. Without units at the market rate generating TIF, property managers at both nonprofits acknowledge that it will become more difficult.

“If there is no development (at market rate), there is no TIF, and there is a gap,” Bedor said. “That doesn’t necessarily mean affordable housing won’t happen.”

“That means we’re going to have to find a different source for the discrepancy,” she added. “The TIF was never guaranteed anyway. It is an expectation that it is a reasonable source that the city can use to meet affordable housing goals for the city.

STAKEHOLDER GROUP TO CONSIDER CHANGES

Some housing advocates have predicted that home lenders will heat up in St. Paul, given the high demand for housing and the appeal of neighborhoods like Highland Park. In January, a series of Pulte Homes townhouses in Highland Bridge went on the market in a two-day bidding war, with prices starting at around $600,000.

Even if that were the case, Cerbana said, even a one- or two-year pause in housing construction could cost St. Paul thousands of units down the line at a time of low vacancy rates on the rental market. Alarmed by the prospect, the mayor’s office convened a 41-member stakeholder group to consider potential changes to the ordinance, including raising the 3% cap on annual rent increases or automatically adjusting to inflation.

Tony Barranco, vice chairman of Ryan Cos., the master developer behind Highland Bridge, said the housing ecosystem is highly interconnected and voters who went to the polls thinking they were sending a strong message to wealthy developers weren’t may not have understood the potential. repercussions.

“I think that’s one of the unintended consequences of the rent control order,” Barranco said. “It has been a struggle to make units deeply affordable. Highland Bridge had that moment when all of these market-priced projects coming at the same time could be paired with deeply affordable projects.

Barranco added: “We are a union builder. We want to put our men and women to work in construction, but when capital sources are on hold, we simply cannot finance it without construction loans and partners like Weidner. »

Share.

Comments are closed.