St Petersburg bets on affordable housing at the Trop. Can it deliver?

ST. PETERSBURG — Getting developers to build affordable housing is a tough sell.

It means making apartments plush enough to lease to doctors and lawyers but renting them for as little as half the going market rate for the next 50 years.

That math only works with hard-to-obtain subsidies from local and state government. Even then, most affordable housing projects are at best a piecemeal solution that add some 50 or so homes built on the cheapest land available.

Related: St. Petersburg bulldozed a Black community on Trop site. What’s next?

With his decision to rip up his predecessor’s plans for the Trop site and prioritize affordable housing for the historic Gas Plant district, St. Petersburg Mayor Ken Welch is hoping to turn that pattern on his head. Building lower-rent housing on the city’s marquee redevelopment project would honor the predominantly Black neighborhood that was razed to make way for an industrial park that was never built, he said.

Eventually, the land became home to Tropicana Field.

The four development groups bidding for the project promise several thousand new affordable homes within touching distance of the city’s affluent downtown. Two of the groups have pledged that as much as half of the more than 5,000 new apartments planned would be either affordable or workforce housing.

Related: 4 developers make their pitch to redevelop St. Petersburg’s Tropicana Field

But the city’s strategy comes with risk.

The complex financing needed for such projects could add years to its completion date. Developers would be dependent on success in the cutthroat market to obtain housing tax credits. A high concentration of low-income housing could also make it harder to attract developers of hotels, stores and medical offices that make up the rest of the proposals.

Whichever developer is chosen will also face a much tougher market. High inflation has hiked up the cost of lumber and other construction materials. Developers must also contend with rising property insurance premiums and higher interest rates.

In a letter sent to Welch last week, Jason Mathis, St. Petersburg Downtown Partnership chief executive officer, described all four proposals as “ambitious” and urged the mayor to pick the development team most likely to follow through on its proposal rather than being swayed by “bold promises.”

No single development can “address every challenge our city currently faces,” the letter states.

Officials from Hines and the Tampa Bay Rays, whose proposal to set aside 23% of the homes as affordable housing is the lowest of the four, say their plan reflects “economic reality.”

Michael Hines, a senior managing director with Hines, said in an interview that Chicago’s decision to mandate 20% affordable housing in new downtown developments is why no new apartment complexes have been built there since.

“The reality is that made development in downtown Chicago unviable,” he said.

Related: Suddenly, we have plenty of Rays stadiums we can’t afford

Nonetheless, affordable housing advocates are lauding St. Petersburg for its ambitions. The chance to redevelop 86 acres of publicly owned land represents a once-in-a-generation opportunity to address the city’s affordable housing crisis, said Ashon Nesbitt, the CEO of the Tallahassee nonprofit Florida Housing Coalition.

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Rents in the city have risen by 37% since the start of the pandemic, according to apartmentlist.com. Across Pinellas County, about a third of households are considered cost-burdened, meaning they spend more than a third of their income on the roof over their heads, according to census data compiled by the coalition.

“The city won’t get this opportunity again to really tackle the issue on such a large scale,” said Nesbitt, who grew up in St. Petersburg. “There are few things as important as affordable housing, and I hope the mayor sticks to his guns on this one.”

Related: A reset in St. Petersburg: A look at Mayor Ken Welch’s first year in office

Equitable equation

Swanky, upscale apartment complexes line Central Avenue in the city’s burgeoning Edge District, just two blocks from Tropicana Field.

The spaces are small, some just 1,100 square feet. But they are priced too high for many in the city.

Monthly rent for two-bedroom apartments at Fusion 1560 start at $2,500.

It’s more expensive still at the nearby 930 Central Flats, with rents upward of $3,500, according to the complex’s website.

A couple living there must earn a combined $126,000 — almost double the city’s median household income — to avoid spending more than a third of their earnings on housing.

That disparity shows why the city needs to push affordable housing at the Gas Plant site, said Amy Foster, the city’s community and neighborhood affairs administrator. While negative stereotypes about affordable housing persist, she said, new subsidized homes are indistinguishable from regular apartments.

“The units available in our community that are affordable look and feel just like high-end units that are built all over the city,” she said.

The city’s guidance for developers doesn’t set a benchmark for how much affordable housing should be built but it does require that at least half of any subsidized housing be for lower-income families.

The golden ticket for developers to defray costs are tax credits, which are awarded by the Florida Housing Finance Corporation. The credits can be sold to companies looking to shelter large profits from the taxman. The highest-value tax credits, the most competitively sought, typically cover around 70% of the cost of subsidized homes.

Credits can be so key to a project’s success that officials with the city of Tampa and Hillsborough County publicly clashed in 2017 after a county-backed developer highlighted mistakes in the paperwork submitted by the Tampa Housing Authority for The Boulevard at West River, delaying it for a year

Related: $21 million mistake delays Tampa Housing Authority’s West River project

To qualify for an award, a project must be set aside a significant number of homes for low-income families with rents no higher than a third of their income. For a family of three making just half of the city’s median income, that would mean monthly rents of about $1,026.

All four development groups state that they would compete for the tax credits, but Sugar Hill, headed by former NBA player Kevin Johnson, may hold an advantage when it comes to low-income housing.

The group’s development partners include the St. Petersburg Housing Authority. The public agency administers housing choice vouchers — formerly known as Section 8 — that tenants take with them if they move. The federal government allows housing authorities to allocate a portion of vouchers to a particular housing development.

If approved by the US Department of Housing and Urban Affairs, that would mean the federal government subsidizing rents paid by very low-income families, said Dan Coakley, the principal of PMG Affordable, another of the group’s development partners.

The Sugar Hill group’s plan is for 5,200 housing units, half of which would either be affordable or workforce housing.

“For us, it’s just all housing; it’s going to be tied together and indistinguishable from each other,” Coakley said. “So, you’ll have affordable and workforce and market-rate buildings all throughout the site in a way that’s seamless.”

The Tempo at Encore, one of six buildings constructed as part of a Tampa Housing Authority urban renewal project on the edge of downtown Tampa. The project includes affordable housing for families and seniors. [ KAIJO, CHARLIE | Tampa Bay Times ]

Making the math work

St. Petersburg officials looking at how tough it is to build affordable housing on a similar scale to what Sugar Hill is proposing need only look across Tampa Bay.

It’s been more than a decade since the Tampa Housing Authority demolished the Central Park Village public housing and embarked on Encore, a $425 million urban renewal project for a 12-block site on the edge of downtown Tampa.

The first building — an apartment tower for seniors — broke ground in 2012. But 11 years and five more apartment towers later, the authority is still working to attract private investment to buy and develop lots, including one earmarked for a grocery store.

The project’s newest apartment block includes 70 market-rate apartments, but across all six buildings, most tenants are still in affordable units.

Leroy Moore, the Housing Authority chief operating officer, sees reasons for optimism after the agency inked a deal in November with Miami-based developer LD&D to build a 28-story building that will include apartments, a hotel and retail.

“It’s a bedroom community now,” Moore said. “Three years from now it will be 65% market rate. It will have a hotel, offices, a grocery store. You’re creating synergy and excitement and value.”

Moore said providing the development team knows how to navigate the highly competitive tax credit application process, sizable affordable housing projects are possible.

But he warned that the finance packages are far more complex than private sector real estate development, which is typically funded through a construction loan and paid back through future rents.

Financing both Encore and West River meant tapping into multiple different sources, including housing tax credits, bond debt, federal home loans, Housing and Urban Development revenue replacement and state programs that provide loans.

Still, Moore said it makes sense for St. Petersburg to set the agenda for developers who want a slice of profits from publicly owned land.

“They’re holding the cards; they own the land,” he said of city officials. “They’re in the most enviable position to demand what the vision is that they want for that community.”

Staff writers Colleen Wright and Rebecca Liebson contributed to this story.

The post St Petersburg bets on affordable housing at the Trop. Can it deliver? first appeared on Daily Florida Press.