Durham County

Priorities vs. pocketbooks: Affordable housing in downtown Durham could be costly

The push to bring affordable apartments downtown may pit the city’s goals against the taxpayers’ pockets.

Developers who want to build up to 120 apartments on a city-owned lot next to the Durham bus hub said the city might need to provide at least $4 million to $6 million to subsidize the project, on top of donating two acres valued at $2.3 million in 2015.

Councilman Don Moffitt said, including the land value, they were looking at $80,000 to $100,000 per affordable unit.

“It’s just worth keeping in the back of our minds,” he said. “For anybody that thinks I am against affordable housing or against affordable housing downtown, absolutely not. But I am for effective development of affordable housing.”

Councilman Charlie Reece acknowledged the numbers are higher than expected.

“One of the things that we have to come to grips with as a council is ... the importance of making affordable housing available in downtown Durham and leveraging city-owned property to do that,” he said. “And if we are going to live up to that commitment, it will require more subsidy.”

Durham-based Self-Help Ventures Fund and Raleigh-based affordable-housing developer DHIC want to build an up to 120-unit project in which 80 percent of the apartments would be affordable.

The L-shaped, 1.9 acre lot is on the east side of Willard Street and the north side of Jackson Street right next to the Durham Station Transportation Center.

What’s new: DHIC President Gregg Warren presented rough cost estimates Thursday as the City Council considers authorizing City Manager Tom Bonfield on June 5 to negotiate an option to purchase contract with Self-Help and DHIC.

The deal would let the organizations eventually buy the site for $1 and move forward now with development and financing plans, which include applying for federal Low-Income Housing Tax Credits.

The organizations would pay for developing those plans. If the city decides not to move forward with the project, then it would reimburse up $125,500 of their pre-development expenses, estimated at about $188,000.

How much will it cost the city: The city is essentially being asked to donate the property and then pay from $4 million to $6 million to subsidize the project.

“That is a pretty big range, and we are going to narrow that down over the next few months,” Warren said.

Recent affordable developments DHIC has worked on have had a $40,000 per unit subsidy associated with them, Warren said.

Initial estimates indicate the project would cost from $40,000 to $60,000 per housing unit, not including the donation of city property.

“Downtown sites you know are going to more expensive,” Warren said.

Why is the council considering this project: It would address a city priority to provide affordable housing in the increasingly expensive downtown market. City staffers have expressed concern about such a development due to the lot’s size, shape, slope and proximity to the bus station.

The city was considering different options for the site but the priority shifted to affordable housing after Durham Congregations, Associations and Neighborhoods successfully asked council members to commit to that purpose.

According to online residential real estate site Trulia, the median rent in Durham is $1,130 per 2-bedroom unit; rents are typically higher in the center city. Current plans call for renting 80 percent of the apartments to families who make less then the 60 percent of the area median income ($36,420 for a family of three as of June 2015) and 30 percent of the area median income. The rents would range from $412 to $825.

The city sought qualifications from interested developers in October for a mixed-use proposal with 80 percent of the housing units going to families making less than 60 percent of the area median income.

Self-Help and DHIC were the only ones to apply.

What’s next: If the City Council tells Bonfield to negotiate the option to purchase, DHIC and Self Help would follow up in October with more concrete details on costs, parking options and financing and development plans.

The council would need to make a commitment to subsidize the project by the end of the year. Then the organizations would apply for the Low-Income Housing Tax Credits and, if successful, start construction in fall of 2019.

Virginia Bridges: 919-829-8924, @virginiabridges

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