Council likes housing project, but unsure about a loan for it
08/01/2014 12:00 AM
07/30/2014 7:41 PM
City Council members like a developer’s plan to build low-cost apartments in the southern part of town.
They’re not so sure, though, about giving the developer the money he’s asking for.
“I think you’ve got a good project,” Mayor Bill Bell told developer Jim Yamin last week. “I just don’t understand the numbers.”
Yamin, president of Workforce Homestead Inc., proposes a 60-unit “affordable townhome community” at the southeast corner of Cook Road and Martin Luther King Parkway, in the Hope Valley Farms neighborhood.
Since last August, though, his estimated budget has gone up from $7.74 million to $7.89 million, and he wants a $193,506 loan from City Hall to make up the difference.
“I really would like to support (the project),” said Councilman Steve Schewel. “But I still have some questions; I still don’t get the math.”
Yamin and Larry Jarvis, the city’s assistant community development director, presented the project and explained why Yamin needs the money, and why the loan would be a good deal for the city, at last Thursday’s work session.
When he began budgeting a year ago, Yamin anticipated a $2.4 million loan for the project, called “Vermilion,” from the Community Investment Corp. of the Carolinas; the loan, though, was approved for only $2.16 million.
A sale of federal low-income housing tax credits helped, bringing in more than $157,000 above what Yamin expected. However, upon talking to site-preparation contractors, he learned that making the Vermilion site ready for construction will be more difficult and costly than expected.
“I would have thought you would have met with site-development companies before buying the property,” Councilman Eugene Brown said.
Yamin admitted he had not.
“I assume you wish you would have,” Brown said.
Yamin now estimates an extra $150,000 for site work, which “causes a number of problems for us,” he said: primarily, a lower return on investment, meaning less money going “to our own wallets.” Moreover, he said, a lower expected return makes a project less attractive to investors, and “puts the project at a certain degree of financial risk” because some of its anticipated funding is yet to be secured.
The city’s $193,506 at 2 percent interest would “leverage” about $7.7 million in outside funding and utilities. However, Jarvis said that, while the city has yet to analyze the project’s likely cash flow, it is not likely that the city would ever be fully repaid. The “loan,” then, would be more of a subsidy financed with the city’s property tax dedicated to low-cost housing.
Yamin‘s presentation was not a formal request for money, and council members said they wanted a cash-flow analysis, more definite estimates of site-preparation costs and clarification on the calculations Yamin used to reach the amount he’s asking before they make any decision.
Members, were, though, were pleased with the project plan itself as Yamin and Jarvis made a case for it. Vermilion’s location is in “a very desirable neighborhood” with convenient shopping and bus service, Jarvis said, and it meets a city goal of dispersing affordable housing throughout Durham to break up concentration in particular, typically poor, areas.
Six units are to be reserved for disabled tenants, and arrangements have been made for their ongoing support services, Yamin said, and utilities that the developer installs will serve future development along Cook Road.
Responding to Brown’s question, “How affordable is ‘affordable’?” Yamin said Vermilion will be within the means of households with 60 percent or less of the Durham County median, or between $18,120 and $38,880 a year depending on their size. The project has 36 two-bedroom apartments and 24 three-bedroom, with rents from $345 to $835 a month.
“We need this kind of development in Durham and we don’t have much,” Schewel said. “We’re making very little headway in this city in affordable housing that goes this deeply into the affordability spectrum.”
The City Council has seen Vermilion before, in a larger form. The larger project needed a rezoning approval, and in April 2013 the council approved a fast-track review process so Yamin could meet a deadline for tax-credit applications. Subsequently, Yamin withdrew the rezoning request after neighborhood opposition and the Planning Commission’s 13-0 vote against recommending the rezoning’s approval.
Yamin then downsized his plan to meet the property’s existing zoning; meanwhile, the N.C. Housing Finance Agency awarded a 76-unit Vermilion the tax credits, choosing his project over the Whitted School renovation, which had an identical perfect score on the agency’s rating. The reason, Jarvis said at the time, was that Vermilion had a lower per-unit cost.
Councilwoman Diane Catotti said that the Whitted project, which would put low-cost elderly housing and a pre-kindergarten program into the now-empty school near the city’s Southside redevelopment, has seen rising cost estimates as well, possibly meaning it will need more than the $500,000 the city has already committed for it.
“It is a factor and it bothers me” in considering Yamin’s request, she said. Catotti was also put off that the developer had not approached the city earlier in his planning.
“This is sort of retroactive,” she said. “I would feel better if you had come to us first.”
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