All-Affordable Redevelopment of the Werner Site at Howard and Paulina Hits a Roadblock
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In the Fall 2022 Newsletter, this newsletter reported on plans for an all-affordable new housing development at the northeast corner of Howard and Paulina Streets that would bring 110 units of housing to the Howard Street corridor. Like many such proposals, these plans required public assistance to make the project feasible since rents cannot exceed 60% of area median income (AMI) while construction and other development and financing costs are the same (or higher) than comparable market-rate developments.
A key source of funding that makes such developments feasible is low-income housing tax credit (LIHTC) equity. For this particular project, the developer needed to procure 9% tax credits which are highly prized and competitively awarded.
The Illinois Housing Development Authority (IHDA) recently announced the results of the 2023 application process for the awarding of IHDA’s allocation of 9% tax credits. The Werner site appears on this list as having submitted a complete application, but was not one of the 18 approved projects.
Shelly Tucciarelli, Executive Director of Visionary Ventures and one of the members of Housing For All, LLC, the developer of the Werner site, reports that the final budget for the Werner site redevelopment required gap funding to make it financially feasible. Even with the 9% tax credit equity, there was still a deficit between sources and uses. Soaring construction costs and rising interest rates have pushed total costs up to such an extent that traditional sources of debt and equity are no longer sufficient to cover all the costs of acquisition, construction and lease-up.
According to Ms. Tucciarelli, the City’s Department of Housing (DOH) and IHDA had agreed in principal to find the gap dollars needed to make sources and uses match. The problem was that DOH was unable to verify their portion of these funds before the application deadline. Ms. Tucciarelli says that she will reapply this year for the 2024 LIHTC awards and hopes to have sufficient time to get commitments from both DOH and IHDA for all of the funds required to get this property built.
For now, plans for an all-affordable redevelopment of the Werner site will have to wait at least another year before they will have the opportunity to try to procure the necessary funding to begin construction. Even then, they will have to reapply and compete with other proposals for the 9% tax credit allocation.
