Fayetteville affordable housing project to help address needs, planners say

FAYETTEVILLE -- Partners of an affordable housing project in the city hope it'll serve as the first of many.

The City Council on Tuesday will consider two proposals. One is to annex about 30 acres north of Wedington Drive, between 51st and 54th avenues, at the western edge of town. After that, the council would rezone the land to a mix of agricultural, housing and commercial uses.

The requests come from a team of partners led by the Endeavor Foundation, a regional nonprofit organization working to fill gaps in social services. The plan is to build about 90 units of affordable housing consisting of duplexes, triplexes and cottage homes. The housing would be south of Cobblestone Farms. Rent for the units would range from $400 to $700 per month. Target annual household income range for tenants would be $29,000 to $68,000.

Jeff Webster, the foundation's president and chief executive officer, said the goal is to serve 150,000 regional residents who are employed, but struggle to cover housing costs.

"We're kind of in a housing crisis here," he said. "A lot of stuff is getting built, and if you can afford $1,000 or $1,500 for a place, then life is good. But the reality is, there are a lot of people out there who can't afford basic housing and a lot of other necessities."

According to the Walton Family Foundation's housing report released in September, median household income in the city in 2016 was $40,013.

About 35% of households spent more than 30% of their income on housing costs alone, according to the study. The U.S. Census Bureau recorded 34,480 households in 2018. The federal government considers any housing for which the occupants pay no more than 30% of their income as affordable.

The city's population in 2018 was 86,751. Fall enrollment at the University of Arkansas was 27,559.

Partners to make it possible

The estimated $10 million to $12 million project has been in the works for about a year. New Heights Church, which owns the land, would lease it to the project at zero to little cost. The church has the same arrangement with Cobblestone Farms. The farm is a nonprofit organization growing and donating food to families in need and agencies addressing food insecurity in the region.

The land was donated in 2008, said Jim Hall, co-directional leader of New Heights Church. The church considered building a new campus there, but figured with an estimated price tag as high as $30 million, it made more sense to stay in its space in the Boys & Girls Club, he said.

"It became obvious after a decade or more of owning it that we weren't going to do that," Hall said. "Why don't we just leverage the land for the good of the community, like we do with the farm?"

Anthology Real Estate is providing architecture work pro bono. A number of nonprofit groups would provide services to tenants such as counseling and financial assistance.

Having the land donated and architecture work done pro bono significantly cut the cost of the project, Webster said. A major piece of the puzzle would be receiving a tax credit through the Arkansas Development Finance Authority.

The federal Low-Income Housing Tax Credit program has helped private and public groups build or renovate affordable rental units for more than three decades. Arkansas receives an allocation of about $6.5 million in tax credits per year, according to the authority's website.

Jim Petty of Van Buren is serving as developer on the project through his company, Strategic Realty. Grass Roots Construction, the company associated with his development team, is serving as builder.

Petty has headed about 30 affordable housing projects in Arkansas and nearby states using the program with his team and associates. The program is competitive and uses a scoring system to rank applications. Considerations such as a project's proximity to grocery stores, schools, parks and other services and whether the project would serve low-income, elderly or disabled residents equal more points.

Petty said he's confident the project would qualify for the program.

"There has not been anything uniquely like this in Northwest Arkansas with affordable and attainable housing," he said. "It's very exciting."

Aligning goals

The requirements in the tax credit application dictate the income range of tenants, Webster said. About 10 additional units would be sprinkled in at fair market value, which also is required in the application. The project isn't public housing, he said.

The City Council will have to approve the two requests Tuesday to make the March 2 application deadline for the tax credit program.

The Planning Commission on Monday forwarded the requests to the council. Council member Kyle Smith added the items to the agenda.

Staff changes at the Development Finance Authority and some minor changes to the application resulted in the application being available in January, officials at the agency said. Details of the application affected details of the project, Webster said. The project's applicants then had to release the land from Washington County's jurisdiction, prompting the request to expedite a decision from the City Council.

The project clearly meets the city's stated goals for affordable and attainable housing, said Jonathan Curth, Fayetteville's development review manager. It also would help build what planners refer to as the "missing middle housing" between single-family homes and apartments, he said.

Despite being on the outskirts of town, the project meets the criteria for what planners consider appropriate infill development, Curth said.

The area already has water, sewer and emergency response service. Wedington is a major corridor with several amenities sprouting from it, he said.

The city's newly adopted 2040 plan calls for strategic annexation, meaning pieces of land that don't create peninsulas and usher development consistent with the city's goals. The annexation request would close a peninsula of the city limits, Curth said. The development pattern is a conservation neighborhood, with homes clustered together on one part, commercial uses facing a major street and agricultural uses closer to the sloping area near Hamestring Creek, he said.

That sort of pattern is more environmentally friendly than having rows of single-family homes line a landscape, which is a common occurrence in the county, Curth said. By annexing, the city can have a say in what gets built, he said.

"If we're going to have development on our periphery, we'd rather it be done to reflect the city's priorities of tree preservation and stormwater requirements and connectivity, things of that nature," Curth said.

This is the way

The "lasagna layering" of the tax credit program, nonprofit groups and a private developer is the way to keep rent low across the country, said Corianne Scally, principal research associate with the Urban Institute, a Washington think tank.

Rental properties have an owner, and those owners have to make a profit to recoup the cost of building, Scally said. Expenses such as the cost of land, construction material and labor have been on the rise over the past several years across the country, she said.

There are also taxes, development fees, the cost to manage a property, utilities and maintenance to consider, she said. All those expenses get passed to the renter, she said.

"For some reason we don't think of renters bearing all the costs associated with their units, which they do, unless there's a subsidy of some sort," Scally said. "In addition to the costs, there's whatever the profit is that the owner needs to make in order to have it be a working business proposition."

Public-private partnerships leveraging the tax credit program have a lower threshold to gain a return on the investment, which makes the lower rents possible, she said. However, the program is allocated to states based on population, so it's a limited resource, she said.

The Cobblestone Farms community project was inspired by the Walton Family Foundation's housing report released in September, Webster said. The report recommends a number of ways to build affordable housing in each major city in Northwest Arkansas. Recommendations for Fayetteville include public-private partnerships and leveraging federal programs.

"I think a lot more of this is going to happen, but it takes somebody figuring out how to do it, you know?" Webster said. "All of a sudden, you get the right parties in the room and you start to figure out how to do it."

NW News on 02/16/2020