Real Estate - Residential

Starway Redevelopment Proposal Highlights Affordable Housing Challenges

By Cece Nunn, posted Sep 8, 2021
A redevelopment proposal involving the Starway Flea Market property on Carolina Beach Road would provide affordable apartments. (File photo)
An exchange this week between city officials and developers proposing to build affordable housing on Carolina Beach Road in Wilmington revealed some of the challenges such proposals can face.

Bradley Development and Kelley Development Co., two workforce housing developers that have projects across North Carolina and South Carolina, want to build 278 apartments at 2346, 2430, 2370 and 2374 Carolina Beach Road and 2365 Washington St.

The project, which would include one-, two- and three-bedroom units, would mark the redevelopment of what's considered an underused area, currently home to Starway Flea Market.

The developers have submitted a preliminary application to the N.C. Housing Finance Agency for a 4% Low-Income Housing Tax Credit (LIHTC) award and a tax-free bond allocation. The 4% award is less competitive than the 9% LIHTC option, said Ted Heilbron of Kelley Development Co. 

“To be clear, our development will be a workforce apartment community targeting Wilmington residents earning 60% of the area median income,” Heilbron said to the Wilmington City Council at its Tuesday night meeting. “A meaningful housing gap exists here in Wilmington, particularly for workforce rental housing and our project hopes to play a small role in helping to close that gap.”

But for their final application, due by the end of the year, the developers would need a rezoning of the Carolina Beach Road and Washington Street properties to a multifamily designation.

On Tuesday, the Wilmington City Council voted 7-0 to continue the rezoning request until the council’s Sept. 21 meeting to give the city’s attorney and those involved in the rezoning application, including owner Ellan Hibbard, time to work out a contract. The agreement could give the city notice if the owner intends to sell the property in the event that the tax credit funding did not come through.

The aim of that notice would be to give city officials a chance to change the property back to its current zoning, community business (CB) and commercial services (CS), should the affordable housing developers have to discontinue their plans, officials said.

A major issue for council members was the fact that the developers are seeking a general rezoning, rather than a conditional rezoning. Without conditions, council members said, the project could be built without the affordable housing that's being proposed.

No one on the council, said Mayor Pro-Tem Margaret Haynes, is opposed to affordable housing.

“We just all want to make sure we get affordable housing and that we don’t get another one of these ... god-awful massive apartment buildings at market rate that a lot of people can’t afford,” she said Tuesday night.

While average rents (now at $1,325, according to RentCafe) have been increasing in recent years, even apartments with higher rents are still filling up as more people move to the region. Apartment development has continued in the Wilmington area because demand remains on the rise, with apartment communities often recording occupancy rates of 96% or more in recent years.

But studies have shown that over half of renters in New Hanover County are cost-burdened when it comes to housing, meaning they spend more than 30% of their income on housing costs, including utilities, insurance and taxes, a fact pointed out by Rachel LaCoe, the county’s senior long range planner.

LaCoe is coordinating the county’s Workforce Housing Gap Rental Assistance Program, announced Tuesday, which will provide subsidies to some renters who qualify for assistance.

For the Carolina Beach Road project in the city, the developers could have tried for a conditional district rezoning request, but that wasn’t feasible if they were to make their deadline, explained Cindee Wolf of Design Solutions, who is representing the developers in the request.

“Our concern was that this council generally does not hear conditional district petitions during November and December of a municipal election year,” Wolf said, referring to a requirement in the city’s code. “Waiting for an approval in January could have been problematic so we proceeded with general rezoning based upon all of the requirements that the Land Development Code institutes for any type of development.”

Heilbron pointed out that the 15-acre site where the apartments are proposed has multiple attributes that make it one of very few sites in Wilmington particularly suited for workforce housing, including its location in a Qualified Census Tract; a census tract where at least 50% of households have an income less than 60% of the Area Median Gross Income. 

“This is a really rare opportunity for Wilmington because these Qualified Census Tracts allow for an extra 30% tax credit to be given to a project,” he said.

The site is also a unique piece of real estate, he said, because it has access to large employment centers, downtown Wilmington, New Hanover Regional Medical Center and public transportation, among other necessities. The apartments also would be within walking distance of commercial services.

Wilmington City Councilman Kevin Spears said Tuesday night, “I’m glad that the mayor introduced this option or alternative [referring to the contract] for us to get this thing done because, during my tenure here, I've never seen this sort of project, and let me tip my hat to you all for bringing this forward where we’re seeing some true affordable housing.”
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