ITHACA, N.Y. – The Tompkins County Industrial Development Agency’s workforce housing policy was intended to alleviate some of the area’s affordable housing woes. However, while many promises of payment have been made, the slowdown in lending and construction has left those promises unfilled.
Starting in 2020, the TCIDA adopted an inclusionary zoning policy that mandated one of two choices for applicants pursuing tax abatements for projects with ten or more units of market-rate housing. An applicant was to either set aside 20% of their units for households making 80% of area median income or less for a period of 20 years, or they were to pay a fee of $5,000 per unit into the Community Housing Development Fund (CHDF). The CHDF is the county-managed fund that disburses grants to low- and moderate-income projects in need of seed funds to help increase their chances of getting construction loans and very competitive state affordable housing funds.
Worth noting, all it takes is about $7,500 for each apartment unit to successfully leverage CHDF seed money into a construction loan for a midsize (40-60 unit) lower-moderate income housing project. Meanwhile, for-sale lower-moderate income housing requires much more, $40,000-$60,000 per unit.
This is due to limited LMI ownership grant funds at the state and federal level, for-sale housing units are usually larger, and stiffer construction loan agreements. It’s much easier to rent out a lower-income unit than it is to sell one because for-sale units require a down-payment, and lenders tend to be wary of the lower-income homeowners falling behind on their mortgage.
Since its launch, the program has been modified in detail and approach. Given the rapid rise of inflation in 2021-22, the fee was upped to $5,500 per unit. The first projects to agree to the fee are to pay in three equal installments following issuance of a certificate of occupancy allowing residents to legally move in. More recent projects are to pay some or all of their fee at the closing of a bank loan, which is the completion of a funding agreement, to pay for building construction.
The applicants providing a sufficient amount of affordable housing, such as the Cayuga Park development or Asteri Ithaca downtown, aren’t going to be paying into that fund. This policy also only involves residential buildings, so tech firms, industrial businesses or solar farm applicants do not pay into it.
To date, $4,198,000 has been pledged to the CHDF. Only $230,000 had been paid as of the start of this month. To quote IDA voting member and county legislator Rich John (D-Ithaca) at their meeting this month, “It sure seems like there’s a lot of money in the pipeline that we haven’t seen yet.”
The simple answer to why the payout has been so much smaller than anticipated is because those initial few projects reviewed under the policy have arrangements where they do not pay for 12 months after the first residents move in. Then they make another payment of similar amount each year for the following two years.
Ithaca Area Economic Development’s Heather McDaniel explained that the first of those payments, from Arnot Real Estate for their new Ironworks Ithaca development, was received the day before the IDA meeting.
“I did hear from the county that Arnot paid their first installment, so that would be one-third of the $645,000, $215,000 of that was received,” she said.
Meaning as of Jan. 19, the workforce housing policy is up to $445,000 of committed funds paid.
Then there’s issue number two — for as damaging as inflation pressures were on materials and labor, the rapid rise in lending rates made getting a construction loan much more expensive, a direct effect of the U.S. Federal Reserve raising interest rates to rein in inflation.
It’s not unlike what homebuyers have seen over the past year or so. Someone buys a house with 20% up-front with a conventional 30-year $250,000 mortgage in 2019 at 3.75%, is looking at a mortgage in the $1,150 per month range. That exact same loan now, with the interest rate around 7.5%, is $1,748 per month, and that’s not even adjusted for inflation. Now imagine the additional cost on $10+ million loans, and it’s somewhat clearer why new apartment construction has dropped off.
“We’ve got a number of housing projects that are on pause or are on hold due to rising construction costs, interest rates, just the climate in general,” McDaniel said. “I’ve been hearing that things might change later this year. I haven’t heard from anyone that their projects are dead or that they’re pulling their projects or anything. Sometimes this happens with big housing projects, it takes a little longer than you anticipated, and then some, to get started.”
The latest projects are due to pay some or all of their fees into the CHDF at the time a loan is closed on. But the lending market is so tepid and expensive right now that very few loans have been made, and very little paid into the CHDF.
The one exception to this so far is Travis Hyde Properties’ renovation of the Gateway Building at 401 East State Street into 46 units of market-rate housing, “The Dean”. That was easier to fund because it’s a smaller project and it’s a conversion of an existing building (versus a new build, building conversions have lower risks of something going awry). Travis Hyde paid $230,000 to the county for the CHDF, and those funds are already earmarked for an initial round of funding towards ten LMI for-sale units (a duplex on South Plain Street in Ithaca, two single-family homes on Dart Drive in the village of Lansing, and six townhouses in Trumansburg at Crescent Way.)
Now, aside from Ironworks fresh cash payment and the $166,667 that “The Ithacan” will make in August, there may be one more foreseeable payment coming this year. County deed filings indicate that on December 12th, a $26 million construction loan was filed for “The Breeze” at 121-25 Lake Street, Visum Development’s Ithaca Gun site redevelopment into 77 apartments. According to the filing, the paperwork that would complete closing is supposed to be completed by early March, which would result in a $385,000 payment into the CHDF at that time, presuming their are no hang-ups between now and then.
Less certain for 2024, though, is a $50,000 payment from the Cliff Street Retreat project at 407 Cliff Street in the city of Ithaca. “Do you know what’s going on with that Cliff Street Retreat? I know when they came to us in such a big rush, I don’t think I’ve seen anything going on there, is anything happening?” Asked IBEW Business Manager Todd Bruer, the labor representative on the IDA.
“We had some conversation in November, early December. They’re revising their estimates, they’re revising their ground floor, some of the commercial spaces. They said that they think they’re going to try and make a go of it in the spring, but I have not heard from them,” replied McDaniel.
For the time being, the workforce housing policy has been less an asset in dealing with housing affordability issues, and more a testament to just how slow and complicated the building and funding process is in Tompkins County. The IDA has received developers’ financial promises, but until those firms have the funds to actually build, it’s just a waiting game and cautious optimism from the IDA.