The $15 million South Square affordable housing project proposed for the 100 block of South Queen Street would produce 62 one, two, and three bedroom apartments—roughly ringing in at $242,000 per unit. The steepness of this figure has been questioned by members of the public as well as our own Watchdog. But, according to PA Housing Finance Agency (PHFA) executive director Brian Hudson, not all publicly-financed affordable housing projects come at a price tag far exceeding private sector expectations.
“It’s not a rule of thumb that these projects are more expensive,” Hudson said, while acknowledging that a number of unique variables can easily cause expenses to surpass ordinary standards.
The PHFA is the administrator of low-income housing tax credits in Pennsylvania, from which the nonprofit Housing Development Corporation (HDC) is seeking $11.7 million to finance the South Square project. These credits are “sold” to financial investors as a means of funding project development.
Lancaster City economic development and neighborhood revitalization director Randy Patterson and HDC president Mike Carper have both attributed the high cost of South Square to historic preservation elements and legal expenses associated with the pursuit of tax-credit financing.
According to Hudson, environmental remediation, historic preservation, property acquisition, and various legal expenses can often increase the difficulty—and cost—of such tax credit-financed projects. “We see all kinds of them,” Hudson said, “We see ones that are difficult to do, but that doesn’t mean that the need doesn’t exist.”
The funding, allocated by PHFA, is highly competitive within the state. The credits are dispersed over a ten-year period, according to PHFA official Richard Allen, and each approved project is limited to a $1.2 million annual credit. This means that, with $28 million offered to Pennsylvania projects for 2010, only about 24 projects of South Square’s cost could be awarded funding.
85 applications have been submitted for projects throughout the state; 17 have been submitted from within Lancaster’s “region.”
Hudson said that, in this region, 4 to 6 projects will likely be awarded the credits. The agency judges projects on a region to region basis, comparatively assessing project feasibility, financial stability, demonstrated need, and potential community impact.
“Overall cost is always an issue,” Hudson explained, “We’re always looking at cost per unit and the total costs. If it’s historic, we have to take that into consideration. Then we look at what the implications would be from preserving this historic building. If we see unusually high costs, we look for why they are. Does it detract from the likelihood that it would be awarded credits? Not necessarily. But it does cause us to investigate why the costs are high….If it gets too astronomical, that’s going to be a problem with the project.”
The final awards, Hudson said, should be announced in June.
NewsLanc has to do a few articles about this tangled web . Who really makes out with this funding and is this funding reimbursed to the citizens when it is payed back or is it just free money for certain people?
I know for a fact that Newslanc’s dog has forgotten more about development than this so-called developers know. Don’t let them off the hook!!!!
The reason it cost so much is the graft and corruption built into the project. There are EXECUTIVE directors and their staff and expenses etc…. to support this nonsense.
Unfortunately this sort of welfare for non-profit management is nothing new. HDC executives make large salaries to use tax dollars to build over-priced, low-income housing and come off like heroes. The Umbrella Works at Mulberry and King streets was constructed for a fortune 20 years ago. We’d get much more for our tax dollars if we simply bought sixty two 3 bedroom homes in the suburbs and gave them to the poor.