Affordable Housing Finance

REGIONAL REPORT

West

A Room With a View

AFFORDABLE HOUSING FINANCE • April/May 2009

Affordable housing opens near Zion National Park

BY DONNA KIMURA

The Red Hawk Apartments provides affordable housing options in the small town of Springdale, Utah. The project opened in December 2008 and was on pace to be leased up by the end of March.

SPRINGDALE, UTAH—The new Red Hawk Apartments had to be as special as its dramatic setting.

Nestled near Zion National Park, the affordable housing development is surrounded by soaring cliffs and sandstone monoliths.

“The goal was to make the project beautiful and affordable,” says Ty Tippets, executive director of Color Country Community Housing, the nonprofit organization that devoted seven years to the development of the project.

The attractive stone and wood buildings capture the area’s character, and affordability was achieved with the help of low-income housing tax credits (LIHTCs).

Red Hawk is the first LIHTC project in the small resort town that serves as the gateway to the national park. There are about 500 residents in Springdale, a high-cost community that has few affordable housing options.

“We clearly saw the need,” says Rick Wixom, town manager, explaining that there are many people who work in the town’s hotels, restaurants, and gift shops but cannot afford to live in Springdale and have to commute to work.

City leaders worked closely with Color Country, which has built seven multifamily projects over the years and has experience in rural communities. The group found 10 acres near downtown and committed three acres to the apartments and the rest to 15 singlefamily homes that will serve a wide range of incomes.

Big challenges

The project could have died several times during its long journey to completion, says Wixom.

One of the challenges was to prove that the development was not in a floodplain, a concern for the financing partners. This took about 14 months to resolve and required the involvement of the state’s U.S. senators, Orrin Hatch and Bob Bennett, and Utah Congressman Jim Matheson, who worked to get a letter from the Federal Emergency Management Agency stating that the buildings are not in a floodplain.

It also took three tries for the project to receive a LIHTC reservation from the Utah Housing Corp.

Even though Springdale is 46 miles from the main population area of St. George, Red Hawk is in the St. George metropolitan statistical area and could not compete in the rural set-aside. Instead, it was in a tough general pool, where it had trouble competing against other, often larger, projects.

The third time, developers reduced the project size from 30 to 24 units to compete in the small project set-aside.

The $4.05 million apartment community was financed with about $3.3 million in LIHTC equity. American Express was the investor, and Enterprise Community Investment, Inc., was the syndicator.

Enterprise came to the deal, having worked with Color Country before, says Brian Windley, director and tax credit syndication originator at Enterprise.

“We knew that they were a strong, nonprofit developer of affordable housing and that they built a quality, much-needed product,” he says. “Our third-party market analyst’s report was also very positive, telling us there was strong demand for affordable housing in Springdale, which had essentially no affordable rental units and that it was the most beautiful site for a multifamily project that he had ever seen.”

Tippets also credits Enterprise’s Kari Fitzpatrick, vice president of investment management, with keeping the deal together.

The city helped by deferring $149,900 in impact fees for 99 years. Kier Construction and Schiel Collaborative Architects also worked on the project.

Twenty-two of the units are affordable, targeting families earning as low as 37 percent of the area median income (AMI).

On average, the units are serving residents earning about 44 percent of the AMI, with monthly rents at $322 for a one-bedroom apartment and $382 for a two-bedroom unit.

Two of the apartments are marketrate, which provide some additional cash flow to the project. A two-bedroom market-rate unit rents for $750.

The 15 for-sale homes being developed include seven that will be aimed at families earning no more than 80 percent of the AMI or between 80 percent and 125 percent of the AMI.