Welcoming Greenfield Place to Chapel Hill
For some things, apparently the second time is charm. On its second bid for low-income housing tax credits, DHIC Inc., the Triangle’s oldest and largest nonprofit housing organization, garnered an allocation of $785,000 in annual tax credits for its first project in Chapel Hill. The federal low-income housing tax credit program is “the most important resource for creating affordable housing in the United States today,” according to HUD. It has facilitated the creation or renovation of more than 2.6 million housing units nationwide. Additional financial resources that will allow the project to happen include a $1 million loan from the state’s Rental Production Program, $300,000 from Orange County and Chapel Hill combined, and a $300,000 investment from DHIC.
Greenfield Place, as it will be called, will consist of 80 apartments: 14 one-bedroom, 52 two-bedroom, and 14 three-bedroom. The rent will be priced for families earning up to 60 percent of the area median income, from $271 for a one-bedroom to $870 for three bedrooms. The AMI for a family of four in Chapel Hill is $67,000.
In January, DHIC plans to apply for tax credit funding to build the project’s second phase, Greenfield Commons: around 60 apartments restricted to age 55 and up.
That’s a total of 140 new apartments. That’s 140 families/individuals who will be able to enjoy Chapel Hill amenities, to attend Chapel Hill schools, to work at jobs within the community without long commutes, to contribute to the diversity and vibrancy of our town. Its residents will enjoy all the “neighborhood effects” that their peers in nearby neighborhoods enjoy. At the lowest end of the income scale, these will be people emerging from homelessness and people with disabilities and special needs. At the high end will be people who keep our town running: people who work in retail, or for the university, or for the school system, or for the town, etc. Further, given DHIC’s track record for quality design, we can be sure that the apartments will be an attractive addition to Chapel Hill.
I asked Gregg Warren, president and executive director of DHIC, to elaborate on the types of families he expects to attract. “These are hardworking families looking for a break,” he said. “They’d like not to have to choose between paying rent and paying for health care.” Even many of those in the age-restricted housing will be working, contributing members of the community.
I appreciate the way Warren refers to DHIC housing as “workforce housing.” It’s a subtle rhetorical counterargument to the way people use the term “workforce housing” to refer only to market-rate affordable housing. (As I’ve said before, Miriam Axel-Lute of Shelterforce is right on when she says the use of “workforce housing” to exclude subsidized affordable housing is insulting to everyone who accepts a subsidy and works, or would like to work, for a living.)
Tax credits are awarded on the basis of the cost per unit to produce. The move that made it possible for DHIC to be competitive at all, given the high cost of land in Chapel Hill, was the Town’s commitment to sell DHIC 9 acres land for $100. The property was assessed at $2 million in value. The Town’s willingness to make such a major investment represents new thinking about solutions to the crisis in availability of affordable housing.
The new thinking is this: when it comes to affordable rental housing, cities and towns need to put their money where their mouth is, because the problem is too great for the private market to solve. In the words of one researcher,
Why isn’t the private market filling this gap? The answer is relatively simple. With a few exceptions, the economics do not pencil out.
In Chapel Hill the story is no different. Although the amount of public investment needed to create affordable apartments varies dramatically by project, the costs can run staggeringly high.
According to Warren, for Greenfield Place, the amount of tax credit investment going into the project ($785,000 a year for 10 years) will generate some $90,000 in equity per apartment. Some of the project’s anticipated $10.5 million cost stems from difficult topography: the site comes with high costs for things like grading and building retaining walls, costs of around $1 million.* The success story here is that DHIC has the resources to pull off a project this ambitious, and that the Town has leveraged the value of its property exceptionally well. The challenge is how to replicate this success.
Greenfield Place and Greenfield Commons are within the Ephesus-Fordham form-based code district. They are a key part of the affordable housing plan for the district. Conversely, the availability of form-based code was critical to DHIC’s ability to propose this project at all. The timeline for applying for tax credits is rigorous. DHIC was able to meet the timeline with its first application in 2014 because the enactment of the code district in May 2014 fit within the strict time frame that it had for demonstrating that it had its “entitlement” (final approval from Town Council) in hand. If DHIC had had to go through our traditional special use permit process, there would have been no way of predicting how long that process would take. It’s likely that the process would have simply taken too long to meet the tax credit deadline.
With the DHIC project now advancing to the CDC for design review, other work is under way, at the Council’s direction, to determine what can be put together to incentivize affordable housing on the south side of Elliott Road, at the south end of the district. According to Dwight Bassett, the Town’s economic development officer who is leading these efforts, the challenges are great here as well: it’s not a simple matter of offering two or three stories of extra density in exchange for affordable units. Bassett has enlisted help from the Development Financing Initiative, based in the UNC School of Government. Over 12 months, DFI will perform market and site analyses to determine the financial feasibility of developing affordable housing on those parcels, with the intent being to create a structure for incentives that enables us to achieve our affordable housing goals.
And Bassett is proposing this project as a catalyst to a systematic study of barriers to and incentives for the production of affordable housing townwide. That’s a welcome idea, consistent with our priorities and values, and consistent with our recent decision to allocate a penny of our tax rate annually to affordable housing. With our Affordable Rental Strategy adopted (adding to existing policies for homeownership), and our new Housing Advisory Board up and running, we have the structures in place to take on this tremendous challenge.
For now, a hearty congratulations to Gregg Warren, Natalie Britt, and other members of the DHIC team, and welcome to Chapel Hill!
*UPDATE 11/1: As a rough estimate, DHIC officials project a total of $300,000 to $400,000 in site development costs for retaining walls, stormwater retention systems, and the like (in total for both phases) and another $500,000 for fill dirt.