A longtime property owner in Chapel Hill wants to experiment with a new way to make rent affordable for lower-income workers.
Clay Grubb, CEO of Grubb Properties, said on Wednesday that his company will take part in a “master leasing” pilot program at the Glen Lennox Apartments in partnership with the Chapel Hill-Carrboro Chamber of Commerce.
The Glen Lennox apartments, off N.C. 54 at Fordham Boulevard, were built in 1950 and a two bedroom apartment there starts at $819 per month. Grubb has submitted plans that would slowly redevelop the property over the next 20 years to add denser housing and office space — though many of its 440 existing units will stay.
“They are the perfect partner,” Aaron Nelson, CEO of the Chamber, said. “There is the possibility that people could walk their kids to school or to the grocery store (from there), and it’s a beautiful neighborhood.”
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Master leasing is a form of subletting that would allow Grubb to continue receiving market-rate prices for the units, while the eventual subletter pays a subsidized price.
The main leaseholder, which could be a housing organization, would sublease the units at a reduced rate to qualified tenants. The tenants would pay a maximum of 30 percent of their income for housing.
For example, the master leaseholder would lease a currently available two-bedroom unit at $795 per month, and then sublet it for $400 a month to someone making minimum wage. That would be a subsidy of $395 per month or $4,740 per year that the housing organization would have to pay.
Emily Ethridge, a spokeswoman for Grubb, said private developers have an important role to play in alleviating the current affordability crisis. If the program is successful in Chapel Hill, she said, Grubb would be open to similar programs in its other markets.
Grubb, headquartered in Charlotte, has properties from Richmond to Atlanta — with three in Raleigh, including the Link Apartments in Glenwood South.
Master leasing is a form of affordable housing that the Chapel Hill-Carrboro Chamber of Commerce has been promoting recently.
Historically Chapel Hill has focused on creating affordable homeownership, Nelson wrote in a recent opinion piece, but that has not provided enough units, estimating that the community is only able to produce a few dozen units per year, with each home requiring as much as $120,000 in public and private subsidy.
For the same price, the chamber estimated it could provide subsidized rent for 25 to 40 people depending on their incomes.
The chamber is hoping the pilot program could launch later this year, but it still needs to find the funds for it. A steady stream of revenue will be needed to maintain the program. Durham Mayor Steve Schewel said on Wednesday that he was interested to see if the program could be successful in Chapel Hill.
Grubb properties said it would decide how many units to set aside for the program based on how much money the program raises, said Ethridge.
The chamber has also held talks with a local organization that would manage the leases, Nelson said.
Our next step is to “identify sources of funds — private, public or employer — and specifically ask local government (for funds) that has dedicated housing funds.”
Grubb Properties said it wanted to get involved in the effort because of a growing “affordability crisis” affecting the markets it’s invested in.
“We heard that the chamber was putting this out there and floating this idea, and we have really been focusing on the housing affordability crisis,” Ethridge said. “We as a company are looking at ways to address this problem because it seems to be building.”
She added that finding a way to attract lower-income tenants also made business sense.
Rising rent “is good until you get to a point … where you out-priced what people can pay you,” she said. “There are only so many people in this country and in Chapel Hill who can pay $1,600 a month in rent. (Apartment owners) are just competing with each other for a smaller number of people and leaving a huge audience behind.”
For the chamber, the goal is just to get the program off the ground and test it in the real world, Nelson said.
“Let’s do the first five. Let’s get to it,” he said. “We can add and expand as we go.”