Builder Clay Fowler (at center): Market's back, but construction costs rose too.
Paul Bass Photos
The vacant lot where a hotel is slated to rise.
A developer has revived the idea of building a hotel, rather than apartments, on the vacant lot that once housed Webster Bank. The city gave him some extra time to decide.
The developer is Spinnaker Real Estate Partners, which has been filling vacant lots throughout downtown with new apartments.
It had originally planned to build a 132-room Hilton hotel at 80 Elm St., at the corner of Orange. The city in 2019 gave the company approval to build that hotel. The company demolished the old Webster Bank building on the lot to prepare for construction.
Then Covid-19 hit, eviscerating the hotel market. The hotel plan went on the shelf.
Last year Spinnaker drew up plans to build housing there instead, given the hot rental market that supported its construction of The Audubon luxury apartments and the current under-construction “Square 10” complex on the site of the former New Haven Coliseum. The developer told the Independent it had an as-of-right site plan ready to present to the City Plan Commission for approval.
But when Spinnaker came before City Plan this week, VP Frank Caico said a hotel plan is back under consideration. He asked the commission to extend approval for the hotel plan, which would expire on Jan. 23, for another decade, until Jan. 23, 2034.
City Plan OK’d the request in compliance with a 2021 state law (CGS 8 – 3k) guaranteeing such extensions for projects impacted by the pandemic.
Specifically, the law requires that all planning and zoning approvals issued before 2021 and slated to expire any time after March 10, 2020, be extended to last between 14 and 19 years in total.
That doesn’t mean Spinnaker will now proceed with a hotel rather than apartments. It just means it will do some more number-crunching to figure out which makes more sense, CEO Clay Fowler told the Independent in an interview Friday.
“Hotels have come back” to their pre-pandemic market viability, he said. “In fact the numbers do suggest whatever we predicted four years ago before Covid has effectively occurred” in terms of rates Spinnaker will be able to charge.
However, construction costs have risen more than expected since then, he said. So the question becomes the ratio between the two sets of numbers.
Meanwhile, “we know we can build a rental” apartment complex that can succeed in the current market, Fowler said. Again, the company will need to balance those numbers with the rising construction costs.
An added factor could potentially cause the numbers not to work, he said: New Haven’s inclusionary zoning (IZ) ordinance, which requires developers to include 15 percent of the apartments in any new complex to rent at “affordable” rates.
In 2022, at the groundbreaking for Audubon’s phase 2 (where a studio now rents for over $2,000 a month), Fowler said that given the 10 – 15 percent profit margin on these projects, he might not have been able to finance The Audubon had the IZ law been in place at the time of its approval. Now he faces the same calculation in deciding which path to take with 80 Elm.
Affordable housing advocates nationwide have been debating whether IZ laws promote the construction of more affordable housing — or whether they unintentionally impede it by preventing the construction of more market-rate housing that then lowers rents elsewhere by increasing supply and lowering demand. Read more about that debate here.
Meanwhile, work continues apace down Orange Street on the $76 million “Phase 1A” for “Square 10” atop the grave of the Coliseum, where a crew is constructing 200 apartments, 16,000 square feet of retail space, and 25,000 square feet of public open space.
“The roof’s on,” Fowler reported. He said the company expects to begin marketing the apartments soon and moving people in by July.
While I am not a lawyer, I believe the interaction of the IZ ordinance and state housing discrimination law makes new residential developments in and near downtown infeasible. The ordinance requires that developers there give priority to Section 8 tenants for 5% of their apartments. By itself, this is fine. CGS § 46a-64c bars discrimination in housing based on lawful source of income, which the courts have interpreted to include Section 8 benefits. A landlord cannot charge a Section 8 tenant more rent for the same apartment than a non-section 8 tenant. Again, this is fine by itself. But the statute runs both ways. A landlord cannot charge a tenant who pays their rent from their salary more than a Section 8 tenant for the same apartment. Absent huge subsidies, a developer cannot build a development where all the tenants pay rents that qualify for Section 8.
This issue does not affect hotels, nor developments that were grandfathered by the IZ ordinance such as the office building conversion on the Green. But it would affect any housing built in conjunction with redevelopment of State Street.
My wife reminds me that I am periodically mistaken. I hope this is true in this case. But the mere uncertainty as to whether developers can charge any tenants market rents may well cast a pall over downtown developments.