Wednesday, August 17, 2022

Rouzer moves on bill that would push Starway past hurdle

Wilmington affordable housing project faces hiccup, awaits resolution in Congress

Starway Village will be an incoming apartment complex at the existing flea market off Carolina Beach Road. (Port City Daily photo/Alexandria Sands Williams)

WILMINGTON ⁠— An affordable apartment complex that earned $5.3 million in support from the local government — positioned as an exemplary solution to the local housing crisis — has hit a roadblock. But a bill filed in Congress this week may rectify the situation.

Starway Village is a planned 278-unit apartment complex to be built on the site of the existing pink-and-blue flea market off Carolina Beach Road. It is envisioned as the future home to Wilmington’s workforce, from first responders to teachers, who earn around $27,000 to $47,000 annually — or 60% of the average median income.

Bradley Housing Development and Kelly Development Company are seeking a 4% low-income housing tax credit from the North Carolina Housing Finance Agency to incentivize the development in return for capped rents. Between the tax credit program and HUD financing, it expects to receive $53.9 million. One of the developers previously explained to officials the 4% program is not as competitive as the agency’s 9% tax credit; as a result, it often requires gap financing from local cities and counties.

In the fall, the New Hanover County Board of Commissioners approved granting nearly $1.9 million to the project, and Wilmington City Council agreed to contribute $3.5 million. Both decisions were unanimous. The funding is intended to help the developers acquire the $4.25-million former drive-in movie site and construct a roughly $1-million street connecting Maryland Avenue to Carolina Beach Road. The money would come from each entity’s local distribution from the American Rescue Plan (ARP), a federal Covid-19 stimulus package, of which the county received $45.5 million and the city took in $26 million.

Per the U.S. Treasury’s guidance, affordable housing is a permissible use of the ARPA funds. However, the developers recently learned, after the awards were greenlit, that accepting grants would diminish the amount of tax credits they could obtain, according to a Mar. 4 county memo shared with commissioners. Instead, developers are now asking the local government to give the money through loans. But a loan format won’t work for ARPA money. The federal relief funds must be obligated by Dec. 31, 2024, and expended by Dec. 31, 2026.

In fact, at the time of the grant award, then-council member Kevin O’Grady questioned whether they could set up a revolving loan so the developers would repay the money, and the revenue would go toward future affordable housing incentives. Preferring to use the ARP money, staff didn’t feel his idea was within the federal spending guidance.

New Hanover County and Wilmington aren’t the only local governments to run into this hurdle when trying to leverage ARP funds to promote affordable housing. At least 20 states have set intentions to use ARP money on these types of projects, especially as building costs rise. Earlier this month, an edit to the ARP guidance was moving through Congress as part of the budget bill that would have allowed for longer-term loans, ones that would mature beyond the December 2026 spending deadline, specifically for low-income housing tax credit projects.

In an email to county and city staff, Ted Heilbron, of Kelley Development Company, wrote this was a potential “clear cut fix to this grant/loan conundrum.” However, the $1.5-trillion budget bill was signed into law Mar. 10 without that language.

Another bill was filed in Congress this week addressing the situation. Co-sponsored by Republican Rep. David Rouzer, House Bill 7078 would explicitly allow for states and localities to loan fiscal recovery funds for low-income housing tax credit projects. Congresswoman Alma Adams, a Charlotte Democrat, is also sponsoring the bill, called the “LIFELINE Act.”

In a press release Wednesday, Rouzer called it “common-sense legislation” that would enable municipalities, counties and states to repurpose unused Covid-19 dollars to back up affordable housing projects, like Starway. Payments made with relief money would be able to continue through the duration of contracts with developers.

“The legislation would incentivize new construction and also help existing homeowners make the necessary repairs to remain in their homes,” Rouzer said in the release. “The citizens of our communities need the tools necessary to have a safe, affordable place to live. This is a bi-partisan effort to address the affordability of housing and strengthen communities across the country during a very difficult time for many.”

A city spokesperson said Starway Village’s hiccup was a major discussion point for Mayor Bill Saffo during his visit to Washington, D.C. earlier this week. Along with council members Clifford Barnett and Luke Waddell, Saffo reportedly spoke with delegates about adjusting the ARP guidelines to enable longer-term loans, in addition to other matters related to Wilmington, such as the Wilmington Housing Authority.

The county and city are holding out that a legislative amendment to ARP guidance will pass, allowing the Starway Village project to proceed with ARP money. In their memo, county staff called that the “optimal solution.” The developers are also researching whether it is possible to re-budget the local capital for another portion of the project that is ineligible for low-income housing tax credits, which would require an opinion letter from the IRS, the memo explained.

Alternatively, if the legislation doesn’t pan out, the city and county can re-budget its ARP money to make the deal still possible.

“We understand that this project is very important in your efforts to allow for more affordable housing in New Hanover County,” county CFO ​​Lisa Wurtzbacher wrote to county commissioners Mar. 7. “Several solutions are being worked on to ensure that this project continues to move forward.”

The county staff has already strategized how it would re-budget the ARP money to shore up $1.89 million for Starway Village. It would likely spend the ARP money on $1.89-million worth of budgeted salary expenses, then take the freed-up money in the general fund for Starway.

“This would have a net zero impact on both funds as we would just be moving funding sources for already budgeted expenses,” the city memo explained.

City of Wilmington staff is also considering ways to move around expenses to fulfill its commitment to the project without ARP money.

Once built, Starway Village will house one- to three-bedroom units, ranging from $754 to $999 in monthly rent — about half the market rate. The county’s and city’s investment in Starway was touted last month during a joint meeting as a possible way to leverage tax money for more affordable housing initiatives down the line. This came after the commissioners announced the county would commit $15 million to affordable housing over five years in lieu of a $50-million housing bond, which residents would have had to vote on.

County officials suggested it could use the $15 million to its advantage by enticing the private sector and making an impact exceeding that of a housing bond in a shorter window of time. Skeptical, councilman Charlie Rivenbark said they were building a plan on “hope,” and councilor Kevin Spears thought the voters were “robbed” of the opportunity to vote on the housing bond referendum. (The city doesn’t have the power to proceed with the county-wide bond on its own.)

Starway Village’s developers declined to comment for this article but did confirm they’re still targeting a 2022 construction start date. If all works out, tenants are expected to start moving in by 2024.


Send story ideas, news tips and comments to alexandria@localdailymedia.com or @alexsands_

Alexandria Sands
Alexandria Sands is a journalist covering New Hanover County and education. Before Port City Daily, she reported for the award-winning State Port Pilot in Southport. She graduated from UNC Charlotte and wrote for several Charlotte publications while there. When not writing, Williams is most likely in the gym, reading or spending time with her Golden Pyrenees. Reach her at alexandria@localdailymedia.com or on Twitter @alexsands_

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