As Seattle-based market-priced home developer Weidner Apartment Homes suspends future construction at St. Paul’s Highland Bridge, some affordable home developers will be on the same site for the future. Some are considering how to structure the financing of the project. One type of real estate was expected to be supplied to another type using a tax transfer known as Tax Increase Loans (TIFs).
With market-priced apartment construction pending, TIF subsidies for affordable homes may continue.
“It may definitely slow us down,” said Chris Wilson, director of real estate development at the Project for Pride in Living, a nonprofit organization in Minneapolis. , Straddles 75 units of labor housing.
“I’m not worried about these projects, but I’m not worried about the years ahead,” Wilson said. “One-quarter or one-third of the money will be lost from them. That’s the way we planned to fund some of the homes — a pretty good percentage of that.”
20 percent of units expected to be affordable
Financing for real estate development on the vast land that once had Ford Motor’s manufacturing campus, market-priced units use property taxes on the premises to subsidize affordable homes on the same street. It is configured as follows.
Overall, 20% of the site’s 3,800 homes are expected to be affordable.
Overlooking the Mississippi River in Highland Park, non-profit developers such as the Project for Pride in Living, CommonBond Communitys, and Habitat for Humanity are planning about 760 affordable apartments over the next decade. Half of these are directed towards the resident down the income ladder.
Most home advocates call the vision of Highland Bridge development ambitious by all standards. This is because new construction is rare for residents who are less than 30% of the median income in the area (less than $ 32,000 for a family of four). Even within a charity.
Task
Two new challenges can further complicate these plans.
As construction costs rise, non-profit developers dig deeper as they layer loans, grants, and other financing on complex financial layer cakes, or what is known in the real estate industry as the “capital stack.” Have been forced to negotiate.
Looking further out, the challenge of long-term financing is how the private sector’s reaction to St. Paul’s new rent management ordinance will help raise funds for affordable homes in Highland Bridge. Is it affecting? Revenues generated by tax-increasing loans, or the construction of market rates for onsite infrastructure instead of property taxes, were expected to fund more than one-third of affordable units.
The Rent Management Ordinance does not officially limit rent until May 1. Nevertheless, many of those TIF funds are currently in the air.
In light of the ordinance approved by St. Paul’s voters in a vote last November, Weidner Apartment Homes has suspended everything except the first 10% of planned up to 2,000 market-priced apartments. ..
Construction of a collection spanning the new Lunds & Byerlys store connected to 230 future market-priced apartments off Cretin Avenue has progressed and is already about 80% complete, but Weidner’s remaining Highland Bridge projects are pending at least to the city. Establish possible rent management amendments and exemptions.
“This is a math problem,” said Greg Cerbana, Vice President of Government at Weidner, who said the voter-approved ordinance did not include inflation adjustments. “3 percent of a $ 1,000 unit (upper rent management limit) will result in a $ 30 monthly increase. Look at your home and the cost of replacing your dryer, washing machine, and roof.”
Cerbana has real estate in at least 13 US states and some Canadian provinces, although other developers have stated that they have lost lenders willing to fund projects in St. Paul as a result of the ordinance. Weidner, who develops, owns, and manages, has no such restrictions.
“We have more capital access than any other company,” Cerbana said. “Our decision is entirely ours.”
Corrected: Do you see the letter C? The Cretin Avenue (non-orange) building has been successful and is 80% complete. It will be Lunds connected to a Weidner apartment with a market price of 230. The orange building is pending. Weidner’s market-priced apartments subsidize affordable units nearby. pic.twitter.com/5jKNb3Ll8Q
— Frederick Melo, Reporter (@FrederickMelo) March 5, 2022
The TIF area of the Highland Bridge is organized like a Russian nesting doll, with one large redevelopment area spread across 135 acres of land. Among them, a series of smaller, affordable residential areas are expected to provide tax subsidies for affordable housing projects both within the Highland Bridge and elsewhere in the city.
Part of that first “pairing” is already underway, and Weidner and Ryan will continue to pay for the land lots reserved for future affordable housing projects at the Highland Bridge.
“Opportunity to stay with your neighbor”
Marvella, a market-priced senior housing complex developed by Presbyterian Homes, will fund $ 5 million of the $ 22 million Emma Norton Place project and $ 8 million of the $ 24 million Nellie Francis Court building. Produces enough TIF. An additional TIF fund will subsidize Lumin on the Highland Bridge, a 60-unit senior residential building developed by CommonBond Communities for households with a median income of 30% or less.
Cecile Bedor, Executive Vice President of Real Estate at CommonBond, said: “It’s really hard for low-income older people to stay in the Highlands. Someone will live in their home for 40 or 50 years, it will be rewarded, but in retrospect to pay the rent somewhere. This property offers the opportunity to stay in the neighborhood. “
The two non-profit developers are set to begin construction this summer as well, and have since alternated one affordable home development each year. Without the market price unit to generate the TIF, the real estate authorities of both nonprofits have admitted that it would be more difficult.
Stakeholder group to consider changes
Some home advocates predict that real estate lenders will return to St. Paul, given the high demand for homes and the attractiveness of neighborhoods like Highland Park. In January, a series of Pulte Homes row homes in Highland Bridge hit the market in a two-day bidding war with a starting price of about $ 600,000.
Even so, according to Cerbana, even a one- or two-year suspension of homebuilding can cost thousands of homes to St. Paul when the rental market is near zero vacancies. .. Warning of that outlook, the mayor’s office formed a group of 41 stakeholders, raising the 3% cap on annual rent increases, automatically adjusting inflation, and other changes to the ordinance. I examined the possibility of.
Tony Baranco, vice president of Ryan, the master developer of Highland Bridge, voted because the housing ecosystem is closely interconnected and sends a powerful message to wealthy developers. Voters who went said that they may not understand the possibility.
“I think that’s one of the unintended consequences of the Rent Management Ordinance,” Baranco said. “It was hard to make a very affordable unit. Highland Bridge had this moment when all these market priced projects coming at once could be combined at a very affordable price. “
Baranco added: We want men and women to engage in construction, but when funding is suspended, we can’t raise money without a construction loan and an equity partner like Weidner. “
