Last week, St. Paul-based developer MetroPlains LLC broke ground on Audubon Crossing, a 30-unit affordable housing project in northeast Minneapolis.
The project is the latest in a string of recent starts for local affordable housing projects which are being jump-started by federal stimulus dollars. For these projects, federal dollars are breaking the financing logjam that has kept many projects on the sidelines.
The $7.7 million project at 2510 Polk St. NE in Minneapolis received $1 million in federal Tax Credit Exchange Program (TCAP) dollars, allocated by the city of Minneapolis. The project also includes an additional $1.12 million from the city of Minneapolis.
The Low Income Housing Tax Credit (LIHTC) system is a staple of affordable housing development. But the current dilemma for developers is that tax credit pricing has fallen sharply. Despite the prospect of higher yields for investors, the current glut of available tax credits has made it tough to find buyers.
TCAP offers a way to close the financing gap. The grant program is designed specifically to provide capital for stalled projects dependent on tax credits. The American Recovery and Reinvestment Act of 2009 allocated $2.25 billion for the TCAP program. Under the federal program, priority is given to projects that are expected to be completed by February 2012.
Originally, MetroPlains had hoped to start the project early this summer.
“About half of the buyers disappeared,” said Rob McCready, one of three principals with MetroPlains. “We had to go back in for stimulus funds.”
Now, thanks to the feds, the project is under way.
“Not only does [TCAP] get these stalled housing developments going…it was a really quick way to create construction jobs in the city of Minneapolis,
which is what’s occurring as we speak,” McCready said.
The Audubon Crossing project is set for completion in August 2010.
TCAP to the rescue
The Minneapolis-based Plymouth Church Neighborhood Foundation broke ground in October on Creekside Commons, a 30-unit affordable housing project in Minneapolis. The site has been a parking lot for the Mayflower Congregational Church at Stevens Avenue and 54th St. E.
Lee Blons, executive director of the foundation, said that the $8.6 million project includes $1.2 million in TCAP funds.
“There’s no doubt without [TCAP] we wouldn’t have closed,” Blons said.
Blons praised the federal program as a canny solution to a complicated problem.
“It was clearly written by someone who understood the Low Income Housing Tax Credit program,” Blons said. “It was a pretty sophisticated program that came out of Washington fairly quickly.”
The city of Minneapolis is also kicking in $800,000 of TCAP funds towards the Near North Community Housing Project being undertaken by Minneapolis-based nonprofit developer Project for Pride in Living (PPL). That project calls for renovating 62 units in 10 buildings in north Minneapolis. The project is slated to close on March 1.
Wesley Butler, manager of multifamily housing development for the city’s Community Planning and Economic Development (CPED) department, notes that affordable housing projects are providing construction jobs in an otherwise slow market.
“It’s a big piece of what’s going on out there,” Butler said.
Alan Arthur, president/CEO of Minneapolis-based nonprofit developer Aeon, estimated that low income housing tax credits have been devalued by about 30 percent over the last 2½ years.
Arthur said that the tax credits usually account for at least half of the capital in a project. In round numbers, Arthur said, that translates into a 15 percent gap in financing that must be made up by other sources.
“The federal stimulus has helped make up for that shortfall,” Arthur said.
But Arthur noted that federal programs won’t necessarily be a fix for every development deal.
“There are projects that are just not going to get done,” Arthur said.
In late August, the city of St. Paul touted federal stimulus dollars with providing the final push to get several affordable housing projects moving, including Aeon’s long-languishing plan to rehab the Renaissance Box building in downtown St. Paul.
Aeon held a groundbreaking event for the project in October, but the project has yet to begin. Arthur said that he now expects the Renaissance Box deal to close in the first quarter of 2010. The $16.2 million project calls for 70 affordable housing units.
McCready notes that federal stimulus money now has his company very busy. Just this month, MetroPlains has closed three other projects in Iowa, Oklahoma and Cambridge, Minnesota. Another Wisconsin closing is imminent.
The company is suddenly under construction on several projects that had been stalled due to financing.
If the Wisconsin project closes, it will mark the fifth closing of the month for MetroPlains.
“It was an interesting year,” McCready said.