Thrive
Subsidizing affordable housing becoming more expensive for St. Petersburg
Local officials are encountering a new impediment, soaring construction costs, in their urgent pursuit to provide more affordable housing for desperate residents.
The St. Petersburg City Council heard a request from Missouri-based developer Exact Shell Dash (ESD) Thursday for an additional $617,000 incentive to construct 10 single-family homes at 12th Ave. and 16th St. S. The increase more than doubles the original amount of city funding for the project – provided by the South St. Pete Community Redevelopment Act (CRA) – to $1.075 million.
Thursday’s request marks the second time the developer has asked for more funding incentives in just over a year due to a significant increase in construction costs and a decrease in expected sales revenue.
“I’m not typically a fan of having to do these sort of changes to agreements,” said Vice-Chair Brandi Gabbard. “But certainly, in this case, I’m very familiar with what you’re (the developer) going through and what you have faced along the way.”
City Council originally approved the execution of a lease and development agreement with ESD to develop nine new affordable townhomes and relocate the building known as the Shell Dash Cottage on Feb. 18, 2021. The cottage sits on city-owned, vacant property at 1120 16th St. S., and the agreement allocated $386,000 in tax increment financing to assist with construction costs.
On Aug. 5, 2021, the city council approved the first amended lease to replace the Shell Dash Cottage with another new townhome after a partnership with Preserve the ‘Burg and the building’s owner collapsed. The new agreement also increased the funding incentive by $72,000 to $458,000 to cover rising construction costs.
In January, city administration received a request from ESD for an additional $417,000 to cover inflationary construction material costs.
Additionally, the city requested a reduction in income restrictions from 120% of the area median income (AMI) or less to 80% of the AMI or less, over an increased term of 30 years. For a one-person household, 80% of the AMI is $47,280. Following the $20,000 reduction in the sale price for the townhomes, ESD asked for a subsidy of $200,000 to cover the lost revenue.
Based on the ESD’s expected sales revenue and construction costs, the for-profit developer projects a gap of $1.075 million, or $107,500 per unit.
“The combination of these two factors represents the need to increase the request by $617,000,” explained George Smith, director of economic and workforce development.
Smith referenced a report by the Associated General Contractors of America showing a drastic increase in construction material costs between December 2020 and December 2021. According to the National Bureau of Labor Statistics, lumber and plywood prices increased by nearly 18% during that period. Fabricated structural metal and rebar are now over 57% costlier.
The site of the 10 proposed townhomes, for sale to residents making less than 80% of the area median income. Screengrab.
“It would be my understanding that the developer could not build these units at the current price point,” said Rob Gerdes, assistant city administrator. “They would probably not go forward with the deal without the additional funding.”
Bob Mayer, president of ESD, said the company has already invested over $200,000 in the project for surveying, engineering designs and environmental reports. He said his group of partners, which includes several local contractors, are “literally shovel-ready at this point.”
“We have skin in this game,” said Mayer. “To be real candid, this is probably not the type of project that I would normally do …”
Gabriel Dilworth, president of PCS Contracting, the project’s lead contractor, told city council that he previously met with subcontractors and suppliers to lock in prices. He said those agreements lasted until May of last year.
Dilworth explained that when building townhomes in November, a truss package cost his company $11,000. Just four months later, he said identical truss packages are now $26,000.
“That’s not only with just the trusses,” he added. “That’s with the wood packages, that’s with the roofing …”
Gabbard noted the plan for the Shell Dash Cottage falling through was uncontrollable, as is the increased cost of construction. She said every developer is watching prices soar and profit margins shrink.
“That is just where we are in the marketplace when it comes to building new housing,” she said. “I don’t envy what you are facing because I know it is incredibly challenging.
“And I certainly respect that there is a contingency of residents who may question what we’re doing and why we’re doing it.”
Gabbard added that voices favoring the city subsidizing more housing are just as loud as the detractors, especially when it includes homeownership at $229,000 per unit. She called the project an amazing opportunity for those in need of long-term housing solutions and applauded the extension of the affordability period and reducing income requirements.
“For me, this checks all the boxes,” she said.
The three-bedroom, two-bathroom energy-efficient townhomes would encompass 1,2777 square feet and feature front porches and off-street parking. The developer will also upgrade the adjacent alley to accommodate parking, and the city will reimburse ESD $46,000 for the work.
The agreement calls for a 99-year lease commencing April 1. Construction on the townhomes must start by April 1, 2023, and a $1,000 per month payment from ESD to the city begins on July 1, 2023. Smith said the city expects $580,554 in incremental tax revenue over the 30-years affordability term.
The city council unanimously approved the resolution to increase city funding for the project by $617,000.
Mike
March 13, 2022at5:43 pm
Hi Steve! My comments get censored here. Sorry.
steve sullivan
March 13, 2022at4:26 pm
Attorney’s give their opinion based on the law and they never said it couldn’t be done. They said it would be difficult. City of Tampa lawyers said same thing; that it would be difficult. The Legislation provides a road map to getting there and council voted to not advance the resolution and you still have not provided me with the statute that say’s it’s not legal. ?????? You do know what codified in statute means right. Codifying legislation makes the associated statute legal by its very nature. So, whatever that is whether it’s outlawing something or allowing something makes it legal. In the case of rent control the text provides rules and guidelines
Mike
March 13, 2022at3:12 pm
Steve. WATCH THE COUNCIL MEETING! It’s not legal! 2 lawyers explained that and exactly that for 50 consecutive minutes.
I am not bringing a mentality. I am relating to you objective reality. Learn the rules. Learn the strategies.
steve sullivan
March 13, 2022at1:04 pm
Mike open up your mind. First, rent control is not illegal. Once it has been codified in FL statute with a process it is not illegal. And if they wanted it to be illegal it would be stated as such in statue. Secondly, there is a place for rent control in high demand environments such as we are experiencing. This survival of the fittest mentality of yours is why we have this crisis. Stop stating your opinion as fact. Where does it say in state law that rent control is illegal? and please provide the statue
Mike
March 13, 2022at11:23 am
Steve. We’ve been over this. Rent control is the worlds worst idea. Its illegal. The government has no business in these programs to begin with.
steve sullivan
March 12, 2022at4:39 pm
Thank’s for the sentiment Dennis Stephens. Unfortunately it’s worse than I alluded to. For the last 30yrs the state has redirected funds from the Sandowski Housing fund to balance the state budget. In addition they have cut the percentage of documentary stamps that goes towards funding it. In other words they are double dipping a fund meant to provide affordable housing, they are using it as a slush fund, so to speak. Don’t believe the hype about a balanced Florida budget every year. Its done on the backs of the needy. Mayor Castor, Tampa is indicative of the wrong headed mindset out leaders espouse – rent control may hurt developers – yes it would but for all the right reason’s. Government should not be trying to subsidize development to the determent of it’s citizens . It should provide public resources and guidelines for organic growth to the benefit of the larger community. Growth is a two edged sword. These municipalities are planning their cities by proxy to organizations like ULI (Urban Land Institute). This is why these cities are beginning to look alike and with the same local issues associated with growth
Dennis Stephens
March 12, 2022at11:07 am
Bravo, Steve Sullivan. Your comment is a sea change above several of the opposing comments here.
steve sullivan
March 12, 2022at9:54 am
And where are these manufacturing jobs supposed to go? The reality is its has been a failure of foresight and planning at the very top of (state and local) government’s to change the narrative about Florida’s economic development focus and resources for 40yrs. They promoted and implemented right to work laws, cheap wages, low taxes to the business and developer industry. All this while stealing from the state housing fund every year to pay for general budget needs. That money was supposed to go for purchasing and building affordable single family and multifamily across the state. Now look at this mess. Next time you think about pulling that lever for a candidate research that person and vote for societal interest for once
Charles Sorensen
March 12, 2022at9:34 am
This is what happens when the people don’t manage the budget the people are used to managing budgets we don’t make enough money to offset the red from the Black if we would allow the people to be involved and show them how we manage budgets we will be able to show them how to keep the cost down by working with people that make the construction affordable
Mike
March 12, 2022at7:21 am
I find this unbelievable and outrageous.
rose hayes
March 11, 2022at10:35 pm
Amen, we need more higher paying jobs. Dollar Tree pays $8.90 an hour and they are now hiring minors as are the fast food places. The nice homes are great if folk can afford them. Very possible folk from up north will snatch them up.
Ryan
March 11, 2022at6:58 pm
Scrap the project.
Council must acknowledge that global economic factors, rampant inflation, and war in Europe will bust any and all “affordable” pro-formas.
Council and the economic developers should focus on bringing more manufacturing and small-scale manufacturing jobs to the area to bolster wages – over-reliance on service industry jobs is the real driver of unattainable housing –
instead of funneling more money into housing projects while labor and material costs are sky-high.
Kari
March 11, 2022at5:49 pm
Bob Mayer has made continual efforts to add these quality homes to South Saint Petersburg and these are below market units eligible for workforce housing. He has joined our neighborhood meetings to keep us updated over the last two years. It will be a quality addition of housing to the area and it took many years to get to this point.