Workshop Item - Elizabeth Showalter, Community Development Specialist
Title
Title
MWF Apartment Proposal for 3795 Restwood Road
end
Background
MWF Properties is proposing construction of a 60-unit affordable apartment building at 3795 Restwood Road. The 4.3-acre parcel is adjacent to two manufactured home parks, commercial uses in the City of Lexington, and two nonconforming single-family homes. The project details are still being refined, so some details may change as the project progresses.
Comprehensive Plan Amendment
The property is zoned R-3B (Medium Density Multifamily) and guided Medium Density Residential, meaning townhomes are the intended use. The property has been for sale for several years and most inquiries about the property have been for apartment uses. A comprehensive plan amendment is required to allow for an apartment use on the property. The adjacent property in Blaine is guided for Manufactured Home Residential and Medium Density Residential, both of which are located adjacent to high density residential uses elsewhere in the City. The adjacent properties in Lexington are guided for commercial redevelopment which can include residential uses. Over the past few years several developers have considered developing apartments on the large parcel immediately to the east of the subject parcel, although no projects have come to fruition.
The project meets the following goals of the comprehensive plan:
1. Provide housing opportunities which meet the needs of all generations and income levels
2. The City supports the development of well-designed and appropriately located multifamily housing projects when these developments improve access to affordable housing and transit, create positive community impacts, and preserve natural resources
3. The City’s allocation of regional affordable housing need is
a. 527 units at or below 30% AMI
b. 299 units between 31-50% AMI
c. 313 units between 51-80% AMI
Financial Request
The proposed project includes 60 units with a mixture of 1-4-bedroom units. Currently, eight of the units are proposed to be affordable to people with extremely low incomes who either qualify as High Priority Homeless or Persons with Disabilities. To qualify for funding, the developer will contract with a social service provider to assist with supportive services for residents receiving support from either program. About half of the remaining units are currently proposed to be affordable at 50% of Area Median Income (AMI) and the rest at 60% of AMI. Currently 50% of AMI is $52,450 and 60% of AMI for a family of four is $62,940. Rent for a one-bedroom apartment is currently $1,000 at 50% AMI and $1,200 at 60% AMI. Rent at the three newer market rate apartment buildings in Blaine ranges from $1,400 to $1,900.
The proposed project provides a deeper level of affordability than other recent projects, which have been for households at either 60% or 80% AMI. The deeper affordability better meets the needs of the community. As of 2016, 2,500 households in Blaine had incomes at or below 50% AMI and were unable to afford their current housing compared to 1,300 households between 51-80% AMI who are unable to afford their current housing.
Since rental incomes are reduced by offering below market rents, the cost of the project cannot be met through traditional debt and equity alone. The developer is proposing to apply for competitive tax credits which cover about 65% of the project cost and is likely able to obtain a private mortgage for 25% of the project cost. The remaining costs gap needs to be covered by other financing. The developer has applied for, and anticipates receiving, HOME funds from Anoka County and energy rebates. This leaves a funding gap of $780,000 ($13,000 per unit) based on current construction costs. The developer anticipates the cost of the project increasing due to increasing labor and materials costs, so the final request may be larger.
If the Council supports the use of City/EDA funds to finance the project, staff recommends allocation of pooled housing TIF funds to the project. The City currently holds $1.1 million in pooled housing TIF. The funds can only be used for projects that meet the requirements for housing TIF districts (affordable housing projects) and cannot be used for general redevelopment/development.
Previous allocations of pooled housing TIF include:
|
Project |
Description |
Affordability |
Total |
Per Unit |
|
|
|
|
Contribution |
|
|
Habitat for |
8 For Sale |
80% AMI |
$80,000 |
$10,000 |
|
Humanity |
Homes |
|
|
|
|
(Woodland |
|
|
|
|
|
Village) |
|
|
|
|
|
ACCAP |
30 Townhomes |
80% AMI |
$450,000 |
$15,000 |
|
University Ave |
|
|
|
|
|
Townhomes |
|
|
|
|
|
Legends of Blaine |
192 Apartments |
60% AMI |
$1.45 Million |
$7,500 |
Alternative methods of gap financing could include park dedication fee waiver (a 50% waiver of park dedication would amount to $133,000) and the establishment of a new housing TIF district. Due to the large amount of administration associated with the pooled TIF funds, staff recommends spending down funds on hand.
Staff Recommendation
Discuss and provide feedback on the following questions:
1. Does the Council support the required comprehensive plan amendment from Medium Density Residential to High Density Residential to allow for the construction of an apartment building on the property?
2. Does the Council support providing $780,000 in pooled housing TIF? If construction costs increase, does the Council support providing additional pooled housing TIF (up to a maximum of the $1.1 million in the fund)?
Attachment List
1. Location Map
2. Concept Plan
3. Developer Narrative
4. Developer Background and Previous Projects
5. City of Lexington Land Use Map