TO: Mayor and Members of City Council
THRU: Kelly Olivera, Assistant City Manager
FROM: Christopher Cauley, MPA, Director of Economic and Community Development
DATE: August 7, 2023
RE:
Title
Affordable Housing Project Updates and Direction
end
COUNCIL DISTRICT(S):
Council District(s)
All
b
Relationship To Strategic Plan:
GOAL IV: The City of Fayetteville will be a highly desirable place to live, work and recreate.
4.5: To ensure a place for people to live in great neighborhoods
4.6: To reduce poverty and homelessness.
Executive Summary:
The Economic and Community Development Department has been proactive and responsive to a variety of private developers interested in affordable housing since adoption of policies that expanded the types of activities undertaken with housing funds. City Council is asked to review each of the proposals presented by staff and outside developers, then provide consensus direction to proceed with one or more development partners.
Background:
In June of 2021, City Council adopted the City’s first Affordable Housing Study. This study showed a need for affordable rentals at the lowest income ranges (30% of Area Median Income and below) and a long term trend resulting in a 10% decrease in homeownership. In June of 2022 Council reviewed new policies and procedures proposed by the Economic and Community Development Department that broaden the type of projects and partnerships to be undertaken with City funding. This program was launched with a Notice of Funding Availability on July 1, 2022. For the past 12 months, staff has engaged with a variety of community stakeholders, investors, nonprofits, and developers to help educate and formulate a variety of projects.
Issues/Analysis:
The following projects are proposed for Council’s review and consensus direction:
• Step Up on Eastern - This nonprofit entity has a national track record and is partnered with an experienced developer. They propose to acquire and rehabilitate the Night Inn on 511 S. Eastern Blvd. for the purpose of providing 137 single room occupancy units aimed primarily at persons experiencing homelessness. The project requires $3.4M in the form of a 0% interest forgivable loan with a term of 20 years. Funding for this project would come from a special allocation of HOME funds that is limited to this purpose. Additional funding in the amount of $2M from ARPA will assist with startup and supportive services but leaves a gap for that purpose. The project is also planning to seek support from the County for supportive service funding and the Fayetteville Metropolitan Housing Authority (FMHA) for rental support in the form of project based vouchers and other assistance such as Housing Choice Voucher referrals.
• Fayetteville Gardens - Orbach Affordable Housing is a nationally recognized private developer proposing to rehab 100 units of family apartment rentals that are 40 years old. The property is located at 2915 Gordons Way (off of Raeford Rd.). While this project does not create additional affordable housing, it seeks to address ADA accessibility, energy efficiency, and much needed repairs. This project is already secured affordable housing with a 20 year contract with HUD for voucher support. The project requires $1.25M loan and the terms of the loan are not yet set but would likely be in the form of a 2% interest loan with a balloon payment at the end of 20 years. The developers are requesting ARPA funding.
• Hillside Manor - Hillside Manor-FMHA, LLC is a privately owned affordable housing development (associated with FMHA) in need of substantial repairs to address health, safety, and accessibility. Funding in the amount of $1.8M would come from the City’s annual allocation of HOME funds, the terms of the loan are not yet set but would likely be in the form of a 2% interest loan with a balloon payment at the end of 20 years.
• S. Cool Spring St. - Innovative Builds, Inc. is a private developer producing 8 rental units by renovating an existing property. The property has previously been declared a nuisance property by the City and substantial rehabilitation is needed to bring up to current requirements. Funding in the amount of $400k would come from the City’s annual allocation of HOME funds, the development requires a 2% interest loan fully amortized over 30 years.
• Blanton Green II - The City loaned this development $380k in 2009 with HOME funds. The current term of the loan is for 20 years at 2% interest with a balloon payment at the end of the term. The primary mortgage matures on Nov. 1, 2033 but the City’s loan is currently due to be fully repaid. The property management company is requesting that the City extend its loan terms to match the primary mortgage. If the City does not extend, the management company will have to refinance all the debt, resulting in a higher interest rate. Blanton Green II’s rents are significantly lower than the rents at new developments and the current requirements by the North Carolina Housing Finance Agency. Refinancing would require higher rents to support the new debt service requirements.
Budget Impact:
All projects are funded in the current plan, however, funding one project removes funding from potential later projects. Those projects could no longer be feasible or be pushed back to later years. Step Up on Eastern is not yet fully funded until other partnerships or additional funding sources are secured.
Options:
Provide consensus to move forward with each project individually or direct staff to some other course of action:
• Step Up on Eastern
• Fayetteville Gardens
• Hillside Manor
• S. Cool Spring St.
• Blanton Green II
Recommended Action:
Staff has carefully reviewed each project for adherence to funding source and legal restrictions. Staff recommends proceeding with the following and considering additional actions:
• Step Up on Eastern - Move forward with $3.4M in HOME-ARP funding and an additional $2M in ARPA funds to the project.
• Fayetteville Gardens - Move forward with $1.25M in ARPA funding.
• Hillside Manor - Move forward with $1.8M in rehabilitation funding.
• S. Cool Spring St. - Move forward with up to $400k in rehabilitation funding.
• Blanton Green II - Extend loan terms to match the terms of the primary loan.
Attachments:
Affordable Housing Project Updates and Direction Presentation
Step Up on Eastern Summary