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WilmingtonBiz Magazine

No Way Home?

By Jenny Callison, posted Mar 24, 2021
Steve Spain, (from left) executive director of Cape Fear Habitat for Humanity, homeowner Tonya Lawton, and Lauren McKenzie, who will replace Spain as ED when he retires in April, are shown in a Habitat neighborhood in NHC. (Photos by Aris Harding)
Mushrooming apartment developments. A steady stream of new residents fueling the Cape Fear real estate market. Record-setting luxury home sales. A healthy demand for housing is a positive indicator of the area’s economy, right? But there’s a flip side, say local housing advocates: Increasing numbers of existing residents can’t find housing they can afford.
 
“Land is in very short supply in New Hanover County and Wilmington, and that has a huge impact on (housing) affordability,” said Steve Spain, executive director of Cape Fear Habitat for Humanity. “Scarcity and price go together, and that has been a challenge for Habitat.”
 
As an example of the impact that a hot housing market can have on low- to moderate-income residents, Spain points to two homes in Habitat’s new development off Gordon Road in Wilmington. A recently completed home appraised at almost 16% more than an identical home completed last July.
 
It’s not just demand driving higher prices: The rapidly rising cost of building materials is also a contributor, Spain added.
 
The lack of workforce housing issue goes beyond Habitat’s ability to develop homes for which its partner-buyers can afford the mortgage.
 
“Housing affordability is a community issue,” said Rachel LaCoe, New Hanover County’s workforce planner. “Having housing that is affordable near jobs is valuable for both workers and employers. It attracts a diverse workforce, provides financial security, improves mental health and developmental outcomes and boosts academic achievement.”
 
Acknowledging the problem, the city and county established the New Hanover County/ City of Wilmington Workforce Housing Advisory Committee, which is finishing up a housing study with recommendations to the city and county on how they can address the issue and prepare for the growth this area will inevitably see.


 
Committee chairman David Spetrino, president of PBC Design + Build, said that in addition to limited land and rising home costs, two other factors work against development of more affordable housing units in New Hanover County. One is the stigma that the concept of workforce housing carries.
 
“As much as we need affordable housing, there are neighbors who will come out against that,” Spetrino said. “The people who need affordable housing are teachers, public safety workers, first responders, health care workers. We have had to be very specific (in our description). These are not free or subsidized houses. They are discounted houses, and they are the same as surrounding houses.”
 
A second factor blocking development of more affordable units is the city of Wilmington’s height and density limits, Spetrino said. He points to downtown Wilmington’s Sawmill Point and Flats on Front apartment complexes, where density approaches 600 units on 9 acres. Compare that, he continues, to the norm for suburbanstyle apartment projects, where density is limited to 17 units per acre.
 
“No one can answer why that is,” Spetrino said. “Seventeen is a random, arbitrary number. Density is all wacky in the city and the county.”
 
Density limits most single-family housing in the county to between three and seven units per acre – another obstacle to making cost-effective use of limited land.
 
The city of Wilmington is looking at how it might spur affordable housing. One approach is to allow residential development in predominantly commercial areas. Another is to ease density and height restrictions. The advisory committee has recommended that the city and county develop new land development codes to provide some flexibility on density and height for multifamily developments. It also proposes that developers be incentivized to include affordable units in their projects.
 
“If you build affordable housing, we’ll give you a break on density,” is the gist of the committee’s proposal, according to Spetrino, who added that builders would be required to make 10% of the units in any development available at affordable rates. Those units would be indistinguishable from surrounding units and would be scattered throughout the project.
 
Spetrino’s company has requested such a break, explaining to local officials in a memo last June that it would like to set aside about 10% of its new apartment homes for workforce housing.
 
In his memo, Spetrino notes that a report published by the Cape Fear Realtors shows that almost half of all Wilmington workers make less than $40,000 per year.
 
“We want to set aside housing for people making 60% to 80% of the Area Median Income (AMI),” he wrote. “This is about $31,000-$41,0000 for a singleperson household or $35,000 to $47,000 for a two-person household.
 
Cape Fear Collective is approaching the workforce housing problem from a different angle: securing outside investments to purchase and rehab existing residences, and then renting or selling the units to recoup the capital. That new capital will enable the organization to purchase and improve additional housing stock.
 
The nonprofit, which aims to bring people together in a structured way to achieve social change and eliminate inequities, received a $2.5 million investment at 2% interest from Live Oak Bank. The money has allowed CFC to purchase 21 houses, 19 of which were occupied but all of which were substandard.
 
“We recycle that capital,” CEO Patrick Brien said. “The investor gets the interest; the community gets housing. We’re essentially buying and selling properties with a tiny margin. Our overhead is philanthropically funded.”
 
Live Oak Bank President Huntley Garriott said banks’ involvement with financing affordable housing isn’t new, but Live Oak’s approach may be.
 
“It’s an investment,” he said of the $2.5 million. “(CFC) will manage that investment for us; we’ll get that money back over time.
 
“What we did was look at different models and see if we could invest at a lower cost of capital,” he added. “Ours is an investment model, not a grant model. That’s the part we’re really excited about: bringing more private capital in to help affordable housing. We’re trying to set up a model that can be used for others.”
 
Garriott explained that CFC will work with outside managers to oversee the 21 units now and will later liaise with whoever eventually buys those properties.
 
“Some tenants may end up entering into purchase agreements; some may continue renting,” he said.
 
Brien and other CFC staffers want to spread their model. They are in discussions with the Kate B. Reynolds Charitable Trust, a Winston-Salem-based foundation that has funded affordable housing investments in the past. The group will also meet with affordable housing advocates in Charlotte to encourage similar bank-nonprofit partnerships there.
 
Brien said that partnerships are key to his organization’s success.
 
“Right now we have a really good partnership with WARM (Wilmington Area Rebuilding Ministry) in our rehab work, although we’ll have to go to the market to get contractors for some of the work. We’re trying to leverage every nonprofit partnership we have, such as with Cape Fear Community Land Trust.”
 
Some partners may be for-profit entities. Brenda Carlton Dixon, a Realtor and owner of Dixon Realty, was inspired to create Get That Deed, a program that helps convert renters to homeowners by preparing them to qualify for a mortgage loan. Her program celebrated its 82nd newhomeowner client in early February.
 
“I tell our working families, retired or disabled people, that in 18 months or less they can become a homeowner,” Dixon said. “It starts with building their belief level. Most have rented for as long as 50 years.”
 
Dixon consults with individuals or families as to their desires as well as their financial situation. If necessary, she helps them repair their credit or build their savings, and she provides information about programs aimed at first-time homebuyers and takes them through the process.
 
“My goal is to be a source of information and encouragement and hand-holding,” she said. “These are people who have been renting for these number of years and sometimes have applied for much smaller purchases and got turned down. They don’t think home ownership is within reach.”
 
Dixon has been so successful, she says, that now she has a problem.
 
“I have about 17 families who have pre-approvals, but no affordable homes are available. The majority of these people make less than $16 an hour, and they have other financial obligations. Their approvals are for $215,000 and under, so finding something in that price point is difficult. And often, multiple people are making offers on any house in that price range, so there’s a bidding war. (My clients) can’t compete.”
 
Dixon has begun marketing her pre-approved clients to housing investors.


 
“I say, ‘Give these families a chance to look at your property; give us first right of refusal. They will pay full market price, and your property will never have to hit the open market.’ We’re looking forward to finding more of those investors that are willing to work with us.”
 
North Carolina’s inheritance laws have aggravated the affordable housing situation, said Habitat’s Spain.
 
Spain said CFC and other housing advocates are trying to get the state law changed so that, even absent a will or a probate, an heir can establish title over time by keeping up the property. When the house is eventually sold, those proceeds stay in the family, and the community gains an affordable residence.
 
“Right now, prices for houses under $250,000 are just going crazy,” he said. “And there are 1,200 properties in this community that have no clean title so the heirs can’t sell them. They sit there, get code violations and eventually will be condemned, knocked down and the lot gets auctioned off. Those families’ entire wealth is gone."
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