“Affordable” Projects’ Tax Breaks Advance

Four tax break deals for four different affordable housing projects have won approval — for now.

The deals won preliminary recommendations of approval last week after a marathon five and a half hours’ worth of aldermanic committee meetings.

But the support came with promises that the full Board of Alders will continue to work through the details before each proposal gets a final vote of approval.

The deals came up during three back-to-back-to-back meetings that were held last Tuesday night. One meeting was held by the Board of Alders Community Development Committee, one by the Board of Alders Tax Abatement Committee, and one by a joint group of committee alders from both Community Development and Tax Abatement. All three meetings took place online via Zoom and YouTube Live.

As the virtual meetings dragged later and later into the night, the committee alders waded through pages upon pages of financial pro formas, developer pitches, and different recommendations from the city’s Low Income and Supportive Housing Tax Abatement (LISHTA) committee.

The meetings ultimately served as a reminder of just how challenging it can be to try to apply a uniform tax-abatement standard to projects of different size, scope, and financial sustainability.

They also underscored how difficult it can be for city government to assess the gains of promoting more income-restricted affordable housing, versus the costs of cutting taxes for the developers looking to build out those apartments.

Click here, or on the embedded video above, to watch the meeting(s) in full.

The four proposed local tax breaks that won committee alders’ support last Tuesday night were:

• A 17-year deal with the Boston-based housing developer Beacon Communities for a planned new 76-unit residential development at State and Chapel Streets. The deal approved by the Tax Abatement Committee would limit local property taxes for all 60 planned income-restricted units at $400 per apartment per year, with a 3 percent annual increase over the term of the agreement.

• A 17-year deal with the New York City-based housing developer Vessel Technologies for a planned new 33-unit apartment building at 136 Hemingway St. The deal approved by the Community Development/Tax Abatement Committee would limit local property taxes for all of the planned income-restricted units at $1,500 per apartment per year, with a 3 percent annual increase over the term of the agreement.

• A 17-year deal with an affiliate of the California-based Community Preservation Partners for the existing 121-unit Fairbank Apartments complex at 355 Ferry St. The deal approved by the Tax Abatement Committee would limit local property taxes for all of the building’s income-restricted units at $1,500 per apartment per year, with a 3 percent annual increase over the term of the agreement.

• A 39-year deal with the Glendower Group — the development nonprofit associated with the city’s public housing authority — for the redevelopment of all 40 apartments at 210 – 290 Valley St. The deal approved by the Community Development/Tax Abatement Committee would limit local property taxes for all 32 planned income-restricted units at $350 per apartment per year, with a 3 percent annual increase over the term of the agreement.

All four sets of recommendations now advance to the full Board of Alders for further consideration and final votes.

Beacon: $400 Per Unit Per Year, 3% Increase

The proposed tax abatement for Beacon is associated with a planned new 76-unit development in the Ninth Square.

Beacon, which already owns the nearby 335-unit mixed-use Residences at Ninth Square complex, plans to build a new 44-unit apartment building atop the surface lot at 294, 300, and 310 State St. They also plan on converting existing upper-story commercial and office space at 742, 754, 756, and 76 – 768 Chapel St. into an additional 32 apartments.

Beacon has already won approvals from the City Plan Commission and the Board of Zoning Appeals to build out this development, with only three on-site parking spaces.

While 16 of these planned new apartments would be rented out at market rates, Beacon Communities CEO Dara Kovel told the committee alders, the project would also add ​“60 units of affordable housing in the heart of downtown.”

Beacon Director of Development LeAnn Hanfield said that 15 of the apartments would be reserved for renters earning no more than 30 percent of the area median income (AMI), 31 would be reserved for renters earning no more than 50 percent AMI, and 14 would be reserved for renters earning no more than 60 percent AMI.

The 30 percent AMI apartments ​“are targeted at folks at risk of homelessness,” Kovel said.

“This is a really complex project,” Hanfield said, given that it is new construction with deep affordability restrictions. She said Beacon plans to apply for Section 8 federal housing subsidies to help cover the costs of some of the most affordable units. Beacon also plans on applying to the Connecticut Housing Finance Authority (CHFA) in January for low-income tax credits for the project, and it is seeking $2.5 million in ​“soft debt” from the state Department of Housing.

To help make this project viable, Kovel said, Beacon is asking the city for a tax abatement that would keep local property taxes for all 60 income-restricted apartments at $400 per unit with a 3 percent annual increase over the course of the 17-year deal.

Are these apartments actually just going to go to graduate students who happen to have low incomes? Newhallville Alder Kim Edwards asked.

“We’re building it for the working poor and small households that can’t afford to live” at nearby luxury apartments like 360 State and Crown & College, Kovel said. These apartments are designed for people making $20,000, $30,000, or $40,000 per year, she said.

“This is going to be a transformation to that corner.”

Fair Haven Alder Ernie Santiago asked why Beacon’s request of $400 per unit is so different than the $1,500 per unit that LISHTA recommended after its most recent meeting.

“We got caught up in apples and oranges,” Kovel said, saying that LISHTA wound up choosing that higher number in order to correspond with a different tax abatement deal for a different project that was also being considered that night.

The committee alders ultimately voted unanimously in support of the Beacon tax abatement deal at the lower $400-per-unit number.

“Beacon is a great community citizen,” Downtown Alder Abby Roth said about Beacon’s track record with nearby apartments it owns in Ninth Square.

While it’s unclear exactly why LISHTA settled on the number it did, and it’s unclear exactly how much the city would have made in property taxes if there was no abatement on this project, Roth said, Beacon is ​“building quality affordable housing” that the city very much needs.

Hemingway St: $1,500 Per Unit Per Year, 3% Increase

The proposed tax abatement for Vessel Technologies is associated with their planned new 33-unit apartment building at 136 Hemingway St. in Fair Haven Heights.

Vessel Executive Vice President Josh Levy told the committee alders that his company is in the process of purchasing the 1.29-acre Hemingway Street vacant site, which includes wetlands, plot for $40,000 from the city. (Alders signed off on that sale in October.)

“Usually high-quality housing is reserved for the rich,” Levy said. He said his company’s ​“innovative housing product” would lead to energy-efficient, sustainable and ADA-accessible ​“workforce” housing for renters making between 60 and 80 percent AMI.

While his company initially asked for a tax abatement that would be tied to the revenue brought in by Vessel on those planned new apartments, LISHTA wound up recommending and the aldermanic committee approved a 17-year deal that would set all of the income-restricted apartments’ taxes at $1,500 per year with a 3 percent annual increase over the course of the deal.

Roth pointed to a recent report from the city’s Affordable Housing Commission that stated that the median rent for the Quinnipiac Meadows neighborhood is $978. The income-restricted rents for Vessel’s planned new apartments on Hemingway Street, meanwhile, would be between $1,200 and $1,300. Why should the city give a tax abatement to a project that would have ​“affordable” rents that are higher than what’s currently offered in the neighborhood?

While Vessel would technically cap rents for this project at 80 percent AMI, Levy said, ​“80 is not achievable in this market. We don’t anticipate we’ll be starting rental rates there.”

The starting rental rate is likely going to be around $1,050 per month ​“in order to be achievable in this market,” he said. He said that the median rent in Quinnipiac Meadows is impacted by just how much public housing already exists in the area, as well as by the relatively old age of most housing in the neighborhood.

Ultimately, a majority of committee alders voted to favorably advance the proposed Vessel deal to the full Board of Alders, while calling on the full Board of Alders to continue to scrutinize its details. Alders Brian Wingate, Jose Crespo, Ernie Santiago, Ellen Cupo, Jody Ortiz, and Carmen Rodriguez voted in support, while Abby Roth, Kampton Singh, and Kimberly Edwards voted against. Alder Frank Douglass abstained.

Fairbanks: $1,500 Per Unit Per Year, 3% Increase

The proposed tax abatement for Community Preservation Partners is associated with the 121-unit Fairbank Apartments building at 355 Ferry St. in Fair Haven.

The committee alders ultimately recommended approval of a 17-year deal that would limit local property taxes on all of the building’s income-restricted units at $1,500 per month with a 3 percent annual increase over the course of the agreement.

That vote came six months after the Tax Abatement Committee voted down this same tax abatement deal in May, after a confused public hearing that the developer was accidentally not invited to.

CPP-hired consultant Barry Cunningham said that all of the existing apartment building’s 121 units are now income-restricted: 25 units are at 50 percent AMI, and 96 at 60 percent AMI. That’s a deeper level of affordability than existed at Fairbank Apartments before the California-based company bought the property in May for $11 million. Cunningham said that the company is currently in the process of investing $7 million into rehabbing the entire building.

The proposed tax break would drop the local taxes on the property from the current rate of $2,150 per unit to $1,500 per unit, with a 3 percent annual increase, Cunningham said. ​“It helps them keep inside their [debt-coverage ratio requirement of 1.15] without losing money,” Cunningham said about the new owners. Without the local tax abatement, he said, the city’s coming revaluation of the property’s worth ​“could make it insolvent in one swoop.”

Cunningham and CPP’s Seth Gillis also said that none of the apartment building’s existing tenants will be displaced due to the renovations and the deepening of the income-restrictions at Fairbanks. And, because a majority of the units are supported by Section 8 federal subsidies, tenants will continue to pay no more than 30 percent of their income on their share of rent — even if the overall rents for these units will increase after they’re renovated.

Roth was the only committee alders to vote against advancing the proposed tax abatement favorably to the full Board of Alders. ​“If everyone in the building is going to be able to stay in the building, in actuality it’s not making it more affordable,” she said. ​“It is great they’re doing renovations and improving housing,” but the deal would also significantly lower what the developer pays in taxes.

“It seems like it’s just basically going to pay for renovations and they’re not really lowering AMI,” she said.

Her colleagues on the committee wound up voting in support of the proposed deal with the understanding that the full board will continue to look through the numbers and might propose an amendment before taking a final vote.

Valley St: $350 Per Unit Per Year, 3% Increase

And the housing authority tax abatement deal is associated with the housing authority’s planned demolition and redevelopment of all 40 apartments at 210 – 290 Valley St.

The committee alders unanimously recommended approval of a 39-year deal that would limit local property taxes on the 32 planned income-restricted apartments at $350 per unit per year with a 3 percent annual increase. The housing authority would pay full taxes on the remaining eight planned market-rate units.

“The current development is really plagued by moisture and mold issues,” Elm City Communities Vice President of Development Edward LaChance told the committee alders. The decades-old apartments are ​“rundown and tired.”

The housing authority plans to convert the ownership of the properties from the Housing Authority of New Haven to the affiliated nonprofit Glendower Group through the federal Rental Assistance Demonstration (RAD) program. 

That’s the Obama-era federal initiative that allows public housing authorities to leverage public tax credits to attract private investment in rebuilt affordable housing. Through the program, the housing authority would transfer ownership of the property to Glendower, and then tap into the Section 8 program to subsidies the rents at 32 of the new apartments.

LaChance said that the total development cost for the Valley Street project should be around $23 million. He said the housing authority will bring in $8.7 million in tax equity funding and another $6.2 million in private loans to help make the project a reality.

Thirty-one of the apartments are currently occupied, he said. All of the to-be-displaced tenants will be given the opportunity to return to the rebuilt project after the 15-month development is complete. They’ll also be given portable vouchers if they want to move elsewhere.

Why such a high per-unit cost for construction? Roth asked.

Because ​“we’re doing full demolition,” LaChance said, and then building ​“completely new infrastructure,” including subsurface water and sewer, in addition to the 40 new apartments.

“Our developments tend to be on the high side,” he said, in large part because the housing authority pays Davis-Bacon wages for contractors working on its projects, and because of the high cost of building out new infrastructure in addition to new housing.

How will the housing authority ensure that these new Valley Street apartments are maintained well and don’t fall into disrepair like the current buildings have? Hill Alder Carmen Rodriguez asked.

LaChance said that Glendower plans to enter into an agreement with the 360 Management Group, another nonprofit affiliate of the housing authority, to manage the rebuilt properties. He also said that ​“syndicators” — that is, the groups that raise money from investors for tax-credit-funded low-income housing projects like Valley Street — do annual check-ins on properties they’re involved with, thus providing an extra layer of oversight ensuring the upkeep of these properties.

Dwight Alder Frank Douglass recalled growing up in the old Elm Haven projects. ​“A lot of the maintenance people lived on the grounds” of the property, and felt like they had a stake in its upkeep, he said. He encouraged the housing authority to hire from among Valley Street tenants themselves for the property’s maintenance.

And Beaver Hills Alder Brian Wingate recommended that the housing authority work with New Haven Works to find locals to help fill some of those property maintenance jobs at the rebuilt housing complex.