WILMINGTON — Wilmington City Council unanimously approved Tuesday a “historic investment” in affordable housing. The city will grant $3.5 million in gap financing to the developers of the 278 planned apartments for the Starway Flea Market property.
“Starway Village” is expected to house residents earning 60% of the area’s median income; first responders, educators and healthcare workers will make up the community.
“The city has, in the past, been able to provide gap financing to help leverage other financing for other affordable housing projects, but nothing of this scale,” Suzanne Rogers, the city’s community development and housing planner, said on a call Wednesday. “It’s a great step in the right direction toward addressing the affordable housing gap.”
Bradley Housing Development and Kelley Development Company are seeking a 4% low-income housing tax credit from the North Carolina Housing Finance Agency to bring the project to life, but explained to the county and staff that they needed gap funding to help purchase the $4.25-million piece of land and construct a roughly $1 million extension from Maryland Avenue to Carolina Beach Road.
“Because 4% LIHTC projects are subject to market rate real estate, construction and operating costs but commit to cap their rents … they often require gap funding from local Cities and Counties to proceed,” the funding request to the county states.
The allocation from the city will come out of Wilmington’s approximately $26 million in American Rescue Plan Act (ARPA) money. Intended for Covid-19 response and economic recovery, the city has acted quickly to begin doling out the federal funds in the form of grants to nonprofits and arts groups, investments in food security, bonuses for city employees, assistance for a substance abuse program and seed money for a film job-training program.
Rogers said the latest investment demonstrates “the city’s commitment to helping people who are most impacted by Covid, which are those essential workers, and helping them get on track and have a good place to live.”
Council was first introduced to the project in September when the land was posed for a rezoning to accommodate the multi-family project. At the time, council members made clear their support of affordable housing but still hesitated to rezone the 15 acres to MF-MH. Several expressed fear that if the federal funding for the project fell through, the property owner would resell it at greater profit, and the city would wind up with more luxury apartments.
Kelley Development Company’s Ted Heilbron reiterated his confidence in obtaining the state’s 4% tax credit. Still, the city attorney’s office almost penned a contract to ensure the land was rezoned back to commercial if the developers failed to deliver affordable units. A month later, though, staff suggested the land instead be rezoned to MD-17, a district that only allows for high-density developments when workforce housing is incorporated in the project.
During Monday’s agenda briefing, council member Neil Anderson questioned if the gap financing was under consideration during those initial conversations: “Was this already in the cards?” he asked.
Rogers said she believed the developer had submitted an application to the city at the time of the rezoning. In the past, the city has supported the production of affordable housing with gap financing but never to this magnitude.
Former projects have included Lockwood Village Apartments; Lake Ridge Commons, affordable housing for seniors; the redevelopment of Taylor Homes; Elderhaus’ Pearce House for those who are elderly and disabled; and Good Shepherd’s Lakeside permanent supportive housing.
The developers will not need to repay the lien. Councilman Kevin O’Grady floated the idea of creating a revolving loan and funneling those repayments back into other projects, but the attorney’s office advised against “push[ing] the envelope” of the complication and yet-to-be finalized federal guidance for spending ARPA funds.
Once complete, Starway units will be available for about half of the market rates: $754 for a one bedroom, $900 for a two bedroom, and $999 for a three bedroom. The community is expected to serve local workers earning between $27,634 and $47,550 annually.
New Hanover County is contributing $1.8 million in gap financing from its ARPA funds as well, which the commissioners approved in October.
Since the early stages of developing the city’s ARPA spending framework, staff has included affordable housing in the strategy, as one of the increasing priorities of council. A recent assessment by the city and county reinforced the notion that the affordable housing gap has become drastic. Over half the renters in the county are spending more than 30% of their income on housing expenses. This year council dedicated a total of $5 million in the current budget to raising the stock of affordable housing.
Wilmington needs more than 4,000 affordable rental units within the next five years to keep up with demand. A study by the developers of the Starway project found more than 2,700 households are in the market for the types of units they will provide.
“There is a real need for housing that aligns better with the incomes that people have, and that’s especially true in our service industry and healthcare workers and teachers, teachers aides,” Rogers said. “All of those essential workers that we need in our community are really not able to find housing that really fits in their budget. They pay more than they can afford because everybody needs a roof over their head, and that impacts all of us because those folks aren’t able to participate in the local economy.”
Construction is expected to get underway in 2022, with the first tenants likely picking up their keys by 2024.
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