IHFA applications are competitive in Idaho
Oct 25, 2017
Throughout Ketchum, the most significant affordable housing development in the past decade has been the 32-unit Northwood Place project.
The election for Ketchum’s next mayor has posed an important question to voters this fall: Is Northwood Place a model to replicate for future affordable housing projects, or a one-time success?
The answer depends on which candidate you ask.
Candidate Neil Bradshaw has been the board president for the Ketchum Community Development Corp. for the past 10 years.
In 2010, the KCDC partnered with a private developer, Vitus Development, to build Northwood Place on city-owned land. The project used $885,000 in federal tax-credit financing awarded by the Idaho Housing and Finance Association. That translated to $8 million in private funding for the project over a 10-year period.
It was the first housing project in Ketchum’s history to receive funds through such financing, which relies on a program created by Congress in 1986. But in early 2009, the market for tax credits fell drastically with the economic recession. The value dropped by 30 percent, according to IHFA.
That threatened the project’s viability. As a solution, Vitus applied to a credit program established through the federal stimulus program created by Congress and President Barack Obama. The company succeeded in exchanging the credits for grant funding.
Two years later, Bradshaw and KCDC Executive Director Jon Duval made a second application to IHFA for tax-credit financing for a property owned by the Ketchum Urban Renewal Agency on First Street and Washington Avenue. The application was denied in 2013.
Bradshaw wants to try again.
“We’ve only really applied twice,” he said. “We won once and we lost once, so we’re batting .500. The city still owns plenty of land.”
Incumbent Mayor Nina Jonas said the tax-credit program is tough for Ketchum. As an example, Jonas cites the parking lot at Sixth Street and Leadville Avenue.
The Ketchum City Council has issued a request for proposals to develop the site, potentially with a combination of parking and affordable housing. The city could also swap the land, Jonas said.
The city has fielded calls from four potential developers, Jonas said. The council recently extended the response period to the end of the year.
Jonas said ARCH Community Housing Executive Director Michelle Griffith was interested in the site, but concluded that ARCH wouldn’t be likely to succeed with IHFA.
The federal program has two main components. The first is a 4 percent tax credit that covers about 30 percent of the cost of the low-income units’ construction. The second is a 9 percent credit that subsidizes 70 percent of the low-income unit construction cost.
Investors can exchange a dollar-for-dollar reduction in their tax burden by supplying money to build the affordable rental housing.
“I don’t think the city of Ketchum would qualify for that 9 percent rate,” Jonas said. “Michelle looked at the RFP and she can’t make it work with the 9 percent.”
Cory Phelps, IHFA’s vice president for project planning, said his organization typically awards the 4 percent credit to larger projects with 80 or more units. That’s tough to do in small towns in Idaho like Ketchum.
“To try and do a project of that size in a smaller community—they’re typically not feasible,” Phelps said.
He said IHFA typically has about $4 million in tax credit financing to allocate throughout Idaho annually. It typically gets applications from developers that amount to $10 million to $11 million. Each state gets an allocation based on population, so Idaho’s amount of funding doesn’t change by much each year.
“It’s extremely competitive,” Phelps said. “It’s one of the only resources we have to promote and have more affordable housing out there statewide.”
IHFA evaluates applications based on 17 criteria. Those give preference to projects with a proximity to services, a history with the tax-credit program, local government or private donations of land or money and a mix of rent-restricted and market rate units, among other criteria.
Bradshaw said a developer can apply every six months, but needs the support of the local government and the community. He said the city owns land next to Northwood Place that could be used for additional affordable housing development. He said Ketchum needs to effectively deploy the KCDC, which has only been devoted to economic development and running the Ketchum Innovation Center under Jonas.
“Here’s the deal with these tax credit applications,” Bradshaw said. “You’re not always successful. You don’t have a chance if you don’t apply.”
He said the community’s willingness to come together and support the application, along with the City Council’s and mayor’s support, would lead to a good outcome.
“If you get everyone on board, there’s no question in my mind that we can get more tax credit finance,” he said.
Phelps said Ketchum’s high costs of land detract from a potential application, in addition to potential neighborhood opposition to affordable housing projects. IHFA awarded about $600,000 in tax-credit allocation to an ARCH Community Housing project in the gateway area south of Ketchum, but it died in 2015 after a neighbor sued to block the project. IHFA reallocated those credits elsewhere in Idaho.
“The land costs maybe make it somewhat more difficult,” he said. “The need is there, but you really need to have the support from the neighbors and the community.”
Jonas said the city has good opportunities to use housing in-lieu funds for acquisition and rehab of units. The council voted to set aside about $800,000 earlier this year for such a program, which taps a fund that developers pay into to satisfy community housing requirements.
The city has about $1.8 million on hand, which has built steadily over four years. The fund has $1 million from the Auberge Resort Sun Valley hotel project, which the City Council and Jonas don’t want to tap into yet if the hotel isn’t constructed.
Jonas cited a project from architects Rebecca Bundy and Susan Scovell that would consist of 16 residential units, three of which would be deed-restricted. She said the city could purchase additional units in that development and ensure they’re deed-restricted as well. The city could also partner with the KURA on a housing project.
“It’s exciting to see,” she said of the 16-unit project. “Projects like that take the will of a developer to want to build a project like that. Certainly, they’re not hitting their peak profit margin.”
Idaho law limits the funding that cities can have for affordable housing. Cities cannot institute a real estate transfer fee to create such a fund, though Jonas said she’s advocated for that at the state level without success.
She said the council would entertain a proposal to build an apartment complex in the light-industrial district, which could be done with a development agreement. However, that’s not happening, and Jonas said it’s because the real estate market in Ketchum favors large, luxury housing units.
“The market is deciding,” she said. “The density is going to the market, which is large units and maximizing their space. We want to get units. I want to see working residents living in Ketchum.”