Defunct Land Deal Back In Play

Markeshia Ricks PhotoA builder is a step closer to getting a second chance to construct a residential building on a Chapel Street lot — as long as he agrees to include four affordable apartments this time.

That’s the deal that the city is looking to strike with Shneur Katz, who owns a vacant parcel at 1198 Chapel St.

The governing board of the city’s anti-blight agency, the Livable City Initiative, voted last week to authorize the city to draft a new version of a land disposition agreement (LDA) with Katz to build 24 apartments on the lot with four of the units guaranteed to be rented at affordable rates for at least 20 years. The apartments are expected to be studios and one-bedrooms.

The renegotiation offered a glimpse into what could happen with a series of defunct LDAs that the city is looking to revive. It also could be one strategy to chip away at the growing dearth of affordable housing in the city, particularly downtown.

The city has about 16 defunct agreements under which city-owned property was sold under an agreement that a buyer would build a project or the land would revert back to city control. Ten of those agreements are with private developers like Katz for projects that were never completed because of the Great Recession.

Of those 10, only three of those LDA were for large-scale projects. Those three deals’ developers are Chapel Lofts II LLC., LaSaraghina LLC. and Beulah Land Development.

Katz, who leads the Chapel Lofts II partnership, bought 1198 Chapel St. in 2005 for about $80,000 with the intention of building nine condos above two retail spaces. Two years later, the real estate market tanked and the project was never built. (He did build apartments in the building next door.)

Now that the market in the city’s downtown has rebounded and the zoning in that part of the city has changed to allow denser development, Katz has signaled his interest in apartments instead of the nine condos. But he would need an amendment to his original LDA to erect a building with first-floor retail and 24 apartments above.

Members of the LCI board initially balked at the city’s proposed plan for giving developers a second chance—a plan that would have allowed the developer to proceed without penalty or specific public benefit. There had been some consideration for making the developer pay the difference between the original sale price and its current market value.

The 1198 Chapel St. property is now estimated to be worth about $300,000. The city could have gone after the difference between the original sale price and the current appraised value—minus the taxes paid over the years — and could have gotten maybe $140,000 to $150,000, city Economic Development Administrator Matthew Nemerson estimated.

He said initially he and LCI Executive Director Serena Neal-Sanjurjo asked Katz to write the check for that money. But Katz wasn’t as keen on that idea. The city didn’t want to sue Katz. Ultimately city officials reasoned that it would be more beneficial long-term to taxpayers to get a viable project built.

Nemerson said the LCI board’s concerns sent his team back to the drawing board, and the idea to attach a public benefit like affordable housing as part of the condition for amending an LDA was born.

“Your questions in fact ... created a public policy opportunity,” Nemerson told the board Wednesday. “My bet is that we will get far and away more than $150,000.”

At its monthly meeting last Wednesday, the LCI board voted to take the first step toward a project finally being built at 1198 Chapel St. LCI will draft an amendment that allows Katz to build 24 apartments instead of nine condos with the condition that four of those apartments be set aside to be rented to households earning no more than 80 percent of area median income, or $70,480 out of an $88,100 benchmark for a family of four. Those four apartments are to be set aside to be rented at that rate for a period of 20 years. Additionally, Katz would have to adhere to the city’s rules for hiring New Haven residents and minority contractors.

Evan Trachten, LCI acquisition and disposition coordinator, said that Katz will receive no financial assistance from the city to supplement the affordable housing component of the proposed new development.

Neal-Sanjurjo said that Katz will also have to adhere to the timelines and performance measures that are now standard in all LDAs. Once all the legal language is hammered out, the proposed deal will come back to the LCI board for a final approval. Then it also will have to be approved by the Board of Alders.

Nemerson commended the commission for raising the questions that resulted in a new way forward for some of the defunct LDAs. There ultimately could be a different option for Beulah Land Development. Nemerson said the property at 328-350 Dixwell Ave. has, in fact, decreased in value.

“I believe your asking these questions has resulted in a public policy result, so that’s good. That’s why we have these commissions and all this input is needed,” he said.

Hope For 433 Chapel St.

Tom Breen Photo

Real estate developer Peter Chapman of LaSaraghina LLC, commended the board too. He was in attendance at Wednesday’s meeting and spoke about why he never built his project. He also got a glimpse of what he might expect for his own ideas about reviving his long-defunct LDA.

Chapman owns a six-story building at 433 Chapel St. that sits on a 30,000-square-foot lot, and has a 5,000-square-foot footprint. Chapman purchased the building, which is at the corner of Hamilton Street, from the city in 2002 with plans of creating 14 apartments above a street-level commercial space. Years of delayed development and political troubles thwarted his first attempts to rehab, and then to sell, the building. Chapman now seeks to build 23 apartments above the commercial space that he envisions as a café or microbrewery.

Chapman is looking to put in four two-bedroom apartments on each of the top four floors, and four one-bedroom apartments and one studio apartment on the second floor. Each of the two-bedroom apartments would be a little over 1,000 square feet, and each of the one-bedrooms would be about 700 square feet. The bottom floor would house two more apartments and a commercial space.

Three or four of those apartments, should he get his LDA amended, will likely have to be set aside as affordable units. And he is amenable to such an arrangement.

Nemerson said 433 Chapel St. is valued at about $550,000. When there was an offer on the table to sell it, the property could have gone for about $920,000, which Nemerson characterized as “aggressive” and “Brooklyn prices,” for that time. He estimated that now it’s worth about $750,000. Again, the city’s not looking to take Chapman to court. It wants him to build his project because it will help jumpstart what Nemerson called an emerging “Wooster Square East” neighborhood on the east side of I-91.

Chapman said the building is empty now. His business office and the bike shop that were in the building moved out when there was a possibility of a sale. He said he has been unsure about how to proceed.

“I was stuck between a rock and a hard place to nobody’s fault,” he said. “It has been a rather frustrating experience but I am really encouraged that everybody is sitting at the table and trying to help and talk about it.”

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posted by: BetweenTwoRocks on December 6, 2017  8:50am

I think this is a really smart strategy for the city. We need more affordable housing, and when developers need zoning variances, it gives the city a chance to negotiate for affordable housing, which this city desperately needs. It’s win-win for the city and for affordable housing.

Glad to see some of these blighted/vacant properties being developed. Those are both on the edge of what people consider downtown, so glad to see it slowly spreading out.

Sharpen your stakes, Threefifths!

posted by: Esbey on December 6, 2017  10:26am

Excellent moves by the city.  At 1198 Chapel we are seeing some of the benefit of zoning for increased density.  This makes more projects profitable and therefore more likely to proceed.  When the city owns in the land it can use its leverage either for more money or to include affordable housing. 

In a dense project, with market rents covering the fixed costs of the project (site prep, the foundation, the first floor, etc.), the builder may roughly break even by adding some additional affordable units.  Thus, the city can get multiple units of affordable housing by giving up only a little on the purchase price.  It’s a good deal.

posted by: THREEFIFTHS on December 6, 2017  11:27am

posted by: BetweenTwoRocks on December 6, 2017 8:50am

Sharpen your stakes, Threefifths!

You forgot the garlic.Keep drinking the Kool-Aid.Affordable housing for who?

posted by: theNEWnewhaven on December 6, 2017  2:34pm

3/5 - This article is showing MORE units into the town with DESIGNATED low income units mixed in.

How could this be a bad thing for the city? More units means more competition MEANS low income units can stay lower income for longer.

It also means underutilized spaces or empty lots can finally become useful both for services / housing but also for TAX reasons.

WIN WIN WIN.

posted by: THREEFIFTHS on December 6, 2017  8:16pm

posted by: theNEWnewhaven on December 6, 2017 2:34pm

3/5 - This article is showing MORE units into the town with DESIGNATED low income units mixed in.

Time will tell.But I will not hold my breath.

posted by: Kevin McCarthy on December 6, 2017  11:03pm

I think the 1198 Chapel proposal is reasonable. But 3/5ths is right in asking “affordable for who?” Using the 30% of income measure, these units could rent for almost $2,000 per month, which is probably above market for this location.

posted by: Evil Incarnate on December 7, 2017  9:18pm

I am very surprised that my fellow commenters who routinely and consistently talk about one side or the other on topic of affordable seem to not know how affordable housing programs specifically or even generally work.

There are two key variables to income targeting in the arena of affordable housing: “income limits” and “percentage of income for housing costs”.  Federal public housing programs rely on Income Limits that are 80% of Area Median Income (AMI) to determine eligibility.  In the case of federal public housing subsidized units (Section 9 of the 1937 Housing Act) and the Housing Choice Voucher Program (Section 8 of the 1937 Housing Act), the households share of housing costs (rent & utilities) is capped at 30% of their adjusted gross income (adjusted for minor deductions for dependents and excess medical costs et. al.).

In the case of Low Income Housing Tax Credit (LIHTC) properties, the Income Limits are pegged at either 50% or 60% of AMI.  The LIHTC rent for a covered unit is set at what a household would pay in terms of 30% of the applicable Income Limit.

Note that LIHTC units, which often have no rental subsidy tied to the unit, require a lower household income than federal public housing programs.  The key issue is for units that no rental subsidy, the household has to actually have income within at least several percent of the actual income limit in order to pay the rent and not be rent burdened.  As practical issue, no landlord will rent to household that would pay much above 30% of their actual income for housing costs. 

HUD publishes information Area Median Incomes.  HUD is supposed to be moving to a “Small Area” approach, which means Median Incomes by zip code rather than by greater urban or rural area (county) geography.

Commenters might also be caught unaware that the Ct Department of Housing had a Bill filed last session to impose mandatory inclusionary zoning on a state-wide basis.  This is exactly what LCI is doing ad hoc.

posted by: THREEFIFTHS on December 8, 2017  9:17am

Evil Incarnate on December 7, 2017 9:18pm

Commenters might also be caught unaware that the Ct Department of Housing had a Bill filed last session to impose mandatory inclusionary zoning on a state-wide basis.  This is exactly what LCI is doing ad hoc

This bill is not law yet.But the one in Newark N.J. is and it is a better Law.

The “Inclusionary Zoning for Affordable Housing” Ordinance, which is an amendment to Title 41 of the Newark Zoning and Land Use Regulations, will require developers who are creating or rehabilitating housing projects of more than 30 units to set aside 20 percent of them as affordable housing. It mandates housing affordable to those in a different income levels ranging from 40 percent of the area’s median income to 80 percent. The marketing of the affordable units must give priority to Newark residents. Unlike New York City and other cities with inclusionary zoning, the Newark ordinance applies to all new residential development throughout the city, not just in designated areas. And, unlike other cities, the affordable units must be provided on site and not in other locations. The affordable units may involve home ownership as well as rentals. The Council also passed a measure to encourage developers to partner with Newark minority and women contractors as co-developers and to provide affordable housing. Such developments will receive tax abatements. It is part of Mayor Baraka’s strategy of creating more affordable housing throughout the city and enabling small Newark contractors to become developers in order to provide jobs and strengthen the city’s economy.Developers, with the approval of the Zoning Board of Adjustment, can make a voluntary cash payment into the city’s Affordable Housing Trust Fund in lieu of constructing all or part of the income-restricted
units required by the legislation.

Again like I said.Affordable housing for who?

posted by: Evil Incarnate on December 8, 2017  11:26am

So it your point 3/5ths that New Haven should adopt a uniform ordinance based on or exactly like the Newark Ordinance? 

When you ask “affordable for who {sic]” is you complaint that the City is making deals on a case-by-case basis without defined means and methods?

While a city-wide inclusionary ordinance would seem to good policy, why does it have to be as complex as the one in Newark that you describe? 

There are many examples of inclusionary zoning that are community-wide and cover all multifamily development.  You description also references mechanism that allows a developer to satisfy the inclusionary requirement by creating affordable units elsewhere.  For Newark, that is likely about echoes of the Mt. Laurel decision, but in a City as small as New Haven why should affordable units be shifted from one census tract to another?

I suspect that in extending/amending the LDAs that LCI has specific definition(s) of what satisfies the affordability requirement. An answer to your “affordable for who [sic]” question only requires seeing a copy of a revised LDA.  Perhaps a better written article would have included that information.

Newark’s global issues as a vert large City, Newark’s fair housing issues, Newark’s affirmatively furthering fair housing issues, Newark’s grass root politics which make programs that allow developers to buy out of their obligation attractive,  Newark’s grass root politics and sociology which make programs that promote SBE/WBE/MBE desirable (but not necessary) drive their policy towards great complexity. 

Having a simple mechanism that promotes density, which is less and less a NIMBY but rather a YIMBY issue, to get mixed income multifamily properties seems good policy.  And it can be with with simple requirements.

Seems what LCI has done here is simple and meets a sound policy objective.  And who knows, these few examples may result in the promulgation of this simple solution into a simple and clear ordinance.

posted by: THREEFIFTHS on December 8, 2017  5:30pm

posted by: Evil Incarnate on December 8, 2017 11:26am
So it your point 3/5ths that New Haven should adopt a uniform ordinance based on or exactly like the Newark Ordinance?

Not just base onNewark.In fact inclusionary zoning ordinances are on the books include: Burlington, Vermont. Barnstable County, Massachusetts, which includes Cape Cod. Princeton, New Jersey. Frederick County, Maryland. Fairfax County, Virginia, the wealthiest county in the USA. Chapel Hill, North Carolina. Davidson, North Carolina.Feel frre to look them up.

When you ask “affordable for who {sic]” is you complaint that the City is making deals on a case-by-case basis without defined means and methods?

When I say affordable for who.I am talking about low, moderate, and middle-income households.

I suspect that in extending/amending the LDAs that LCI has specific definition(s) of what satisfies the affordability requirement. An answer to your “affordable for who [sic]” question only requires seeing a copy of a revised LDA.  Perhaps a better written article would have included that information.

I do not have to look at the the LDAs t.All one has to do is look at the cost of the rents.Have you seen the rents for apartmnets downtown?

Having a simple mechanism that promotes density, which is less and less a NIMBY but rather a YIMBY issue, to get mixed income multifamily properties seems good policy.  And it can be with with simple requirements.

Seems what LCI has done here is simple and meets a sound policy objective.  And who knows, these few examples may result in the promulgation of this simple solution into a simple and clear ordinance.

LCI is weak.And going back to Newark.Aileast they havea Affordable Housing Trust Fund and passed a measure to encourage developers to partner with Newark minority and women contractors as co-developers.And as far as Hud.Forget hud Ben carson is geting ready to get rid of Housing programs.

My bad Sound like you work for the city or LCI?