Affordable housing comes with strings

Affordable housing comes with strings

COMMERCIAL REAL ESTATE by Roger Drouin | Contributing Writer

Developer asks city of Sarasota to partially fund affordable housing units. At the top end, he is asking for $250,000 in tax increment financing for each unit to be built.

After a series of setbacks, a $200 million project that could bring as many as 72 affordable housing units to Rosemary District is back on the table.

But the affordable housing portion of the project comes at a steep cost to the city.

Developer Wayne Morehead is preparing to submit modified plans for his City Pointe project to the city. In the meantime, he has worked with the planning department to schedule a series of neighborhood meetings as the first step of a zoning change request that would increase the density from 25 units per acre to 50.

Morehead is asking the city for tax increment financing to partially finance construction of the affordable units. His proposal gives the City Commission an option to contribute a range from $1.2 million to $18 million.

For $1.2 million, the developer would build 66 one-bedroom units, for a selling price of $250,000 per unit. For $18 million, the project would include 72 one-, two- and three-bedroom units, sold at $150,000. Without the subsidy, Morehead says, it would not be possible to sell the units at the goal of $150,000.

Under the developer's proposal, to sell the 72 units at $150,000, the city would have to chip in up to $250,000 for each unit.

The City Commission recently identified affordable housing as it's top priority, but Morehead's proposal may appear to come at too high a price.

"I wouldn't be willing to put $18 million into it," says City Commissioner Ken Shelin. "That would eat up a big chunk (of tax increment financing) in one project."

Shelin says he would consider a lower subsidy. He wants to make sure some of the funding set aside for affordable housing is left to use in areas such as the proposed Newtown Redevelopment Area.

The City Commission previously decided to set aside one-third of tax increment financing (TIF) dollars on attainable housing. That comes to $22 million, based on finance director's Gib Mitchell's latest estimate of the fund until 2016, when it sunsets.

Morehead says he realizes that commissioners may not go for the high-end subsidy. "I wanted to give them a range," Morehead says.

In 2004, Morehead convinced the City Commission to approve his project. Commissioners granted him a zoning change that allowed him to build more than 300 units on six acres of land. Morehead persuaded commissioners to approve the change when he told them he would include 20% affordable units. At the time, he did not ask for city funding to build the units.

After getting approval, Morehead even began accepting checks from prospective owners who had reserved units.

But because of the slowing market and financial difficulties the project never got off the ground.

Morehead now has to seek another re-zone in order to change the density from 25 units to 50 units an acre. Morehead says he is confident that he can make the project happen this time, if he gets the zoning change.

He talked to city planners about building two 10-story buildings, instead of several shorter buildings. Also, Morehead says he plans to reduce the retail component from 90,000 square-feet to 12,000 square-feet.

With proposed projects such as Sarasota Bayside and Pineapple Square providing competition, Morehead says he is concerned that his project could not support a high volume of retail.

On April 12, Morehead will ask residents to support his latest plans. Then he has to go before the City Commission.

"The City Commission will have to decided two things," says Mike Taylor, director of the city's redevelopment department. "Whether they want to allow taller buildings at a higher density, and whether they want to subsidize the affordable units."