On Aug. 27, ceremonial shovels hit the dirt at Lafitte Street in New Orleans, as the redevelopment of the Lafitte public housing complex got under way.
Lafitte is the third of the “Big Four” redevelopments proposed after Hurricane Katrina to begin construction, following groundbreakings on the former St. Bernard in December and the former C.J. Peete in January. Meanwhile, the fourth redevelopment, B.W. Cooper, has been stalled ever since a tax credit investor backed away from the deal last year.
But Lafitte is unique in that it’s the only development that plans to replace each public housing unit—900 in all—lost in demolition.
The groundbreaking ceremony was the culmination of three years’ worth of blood, sweat and tears for co-developers Enterprise Community Partners, Inc., and Providence Community Housing. The first challenge was overcoming public opposition to the demolition and redevelopment of Lafitte. When designing the development, Enterprise took great pains to track down about 600 of the scattered 800-plus households that lived at Lafitte before Hurricane Katrina.
A series of planning charrettes in Houston and New Orleans gave Enterprise an opportunity to win over the skeptical crowd. “The plan that exists today is very much a reflection of the priorities and interests of the residents that participated,” said Michelle Whetten, director of Enterprise’s New Orleans office. “One thing that was important to residents was that the streets of [neighboring communities] Treme and Tulane/Gravier be cut through the site, so we’ve re-established the old street grid.”
Reconnecting the public housing units to the neighborhood at large erases one major shortfall of the former 1940s-era HUD housing, which eliminated the street grid and isolated the community. But the redevelopment takes other steps in undoing some of the negative aspects of the former public housing complex.
For instance, residents wanted the buildings to be of a smaller scale than the old Lafitte, and they wanted it to look like the surrounding community. So the new Lafitte reduces the density of the former public housing by expanding into the surrounding communities.
“For the most part, the buildings are the same scale as the surrounding community, and the architecture matches the architecture specific to Treme,” said Whetten. “And by doing scattered-site redevelopment, we can not just redevelop the Lafitte site but revitalize the Treme and Tulane/Gravier neighborhoods that surround it.”
The development also takes a mixed-income approach, interspersing 600 market-rate homeownership units throughout the development.
While the developers spent much time struggling with insurance costs and navigating a volatile construction market, they also faced a tax credit equity market that was beginning to turn sour.
Enterprise was going to structure the low-income housing tax credit (LIHTC) deal as one big syndication of $110 million back in October 2006. But as the tax credit equity market began its freefall, the company worked with the state of Louisiana to break the allocation into six subphases.
Even with six subsets, it was difficult to find investors. There’s a limited pool of financial institutions that have the Gulf Coast in their Community Reinvestment Act footprint, and any active investor had the luxury of cherry-picking only the strongest deals.
“Over the last three years, we’ve gone through not just a change in pricing, which meant having to find additional sources of soft debt and savings in development costs, but also a tightening up of the credit review processes that our investors are following,” said Aron Weisner, Enterprise’s acquisition manager for the Gulf Coast region.
Since the LIHTC deal was structured in six phases, the first phase of development includes six subphases. The first subphase will feature 134 rental units and 57 for-sale homes. Enterprise expects the first rental units to be done by April, and the entire subphase to be done in early 2011. “Our intent is that there will be multiple phases being built at the same time,” said Weisner.
The 134 rental units are financed with $19.7 million in LIHTC equity, syndicated by Enterprise and purchased by Capital One, which also provided a $13 million construction loan. Louisiana provided $11.4 million in Community Development Block Grant funds, while the Housing Authority of New Orleans pitched in with a $5 million grant.
The entire development of 900 rental units and 600 for-sale units, will cost about $246 million (including demolition, infrastructure and site work), split between $175 million for the rentals and $71 million for the for-sale portion.