Friday, December 9, 2022

U.S. Treasury changes ARPA guidelines, clears path for Starway Village loans

The Starway Flea Market is set to be the site of a 278-unit affordable housing development. (Port City Daily photo/Alexandria Sands)

NEW HANOVER COUNTY — An affordable housing project’s efforts to receive sufficient subsidies was recently made easier after the U.S. Treasury amended its American Rescue Plan funding guidelines. 

On July 27, the department determined ARPA funds may now be used for long-term loans — 20 years — to support gap financing in affordable housing. Previous guidance mandated loans had to be expended by the end of 2026. 

READ MORE: Rouzer moves on bill that would push Starway past hurdle

The change will benefit the 278-unit Starway Village apartment complex, proposed by Bradley Housing Development and Kelly Development Company, planned for Carolina Beach Road.  

Last November, New Hanover County Board of Commissioners and the Wilmington City Council approved granting $1.9 million and $3.5 million, respectively, from ARPA funds for the workforce housing development. The money would be used to finance the $4.25-million site buyout, formerly the Starway Flea Market (and a drive-in decades ago). It also would require building a $1-million street connecting Maryland Avenue to Carolina Beach Road.

The developers received a 4% low-income housing credit from the North Carolina Housing Finance Agency in July. It authorizes 40% of construction costs to be returned to developers after the project is completed, as long as units are affordable and occupied by households at 60% or less of area’s median income ($51,137), along with other requirements.

The U.S. Department of Housing and Urban Development is also financing the project. Developers reported an expected project total of $53.9 million in March, though with gap financing from the city and county, it would bring the total up to $59.3 million.

After the ARPA money was approved, Bradley Housing Development and Kelly Development Company learned accepting grants would diminish the amount of tax credits they could receive; however, a loan would not affect their eligibility.  

Yet, the policy on Coronavirus State and Local Fiscal Recovery Funds mandated loans had to be spent by Dec. 31, 2026. The deadline would prevent the developers from using funds beyond that date — until now.

The Treasury updated its guidance in the final rule for Coronavirus State and Local Fiscal Recovery Fund. It specifically allows for affordable housing financing to be used “following the SLFRF program’s expenditure deadline,” lifting a time constraint on the loan. 

Stipulations include the project provides affordable housing at least 20 years from the time the units become available for occupancy.

If the developers are also applying for a low-income housing credit, they must waive any right to offer a portion of the property at market value rather than affordable rates.

Starway Village is aimed at housing Wilmington’s workforce that earn between $27,000 and $47,000 per year. Rent prices for the units, which range from one- to three-bedrooms, will span $754 to $999. That price is half Wilmington’s market rate. 

Should the development fall into non-compliance with its low-income housing credit commitment, the developers will be required to repay the loans.

In March, Mayor Bill Saffo and city council members Luke Waddell and Clifford Barnett discussed Starway Village and other housing challenges facing Cape Fear residents with lawmakers in Washington, D.C. Saffo specifically addressed adjusting the ARP guidelines to enable longer-term loans, according to previous PCD reporting.

Soon after, U.S. House Rep. David Rouzer sponsored the LIFELINE Act, explicitly allowing state and local governments to loan fiscal recovery funds to low-income housing tax-credit projects, like Starway Village. Under that legislation, loans would need to be obligated by December 31, 2024, and have maturities of 30 or more years. Relief funds could then continue to be used for the duration of the developers’ contracts.

The bill was referred to the Senate finance committee on May 11 and has seen no action. It is unclear if the legislation will move forward following the Treasury’s update, which only requires a maturity of 20 years.

On Wednesday, Rouzer praised the Treasury’s change.

“Communities in Southeastern North Carolina, like many others around the country, are facing an affordable housing crisis,” Rouzer said. “Rather than let unspent COVID-19 dollars languish in bureaucratic red-tape, I’m pleased the Treasury Department will implement common-sense provisions included in the bipartisan LIFELINE Act to allow cities, counties and states to utilize funds that have already been allocated by Congress to support affordable housing developments across the country.”

Providing equitable home accessibility was a big part of this year’s city budget discussions, where council ultimately decided to allocate $6.5 million for affordable housing, including gap financing. The county also promised to provide more housing in its budget earlier this year, pledging to spend $15 million over the next five years on low-cost housing stock and forming a new department dedicated to these projects. 

Starway developers said in the spring they were looking to begin construction on Starway Village this year, with tenant move-in tentatively scheduled for 2024. 

Representatives from Bradley Housing Development and Kelly Development Company could not be reached for comment by press.

Editor’s Note: This story has been updated to include Rep. Rouzer’s comment.


Reach journalist Brenna Flanagan at brenna@localdailymedia.com 

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