National developer NRP Group plans to build a $57 million apartment complex on the booming Broadway corridor, but it won’t pay one cent in property taxes through a new city initiative to promote affordable housing.
Some housing advocates question whether San Antonio’s working class can stomach the complex’s rents of around $1,124 a month — $166 above the local average — and whether taxpayers are getting their money’s worth.
“Taxpayers should not be footing the bill for market-rate units,” said Rod Radle, the former executive director of affordable housing nonprofit San Antonio Alternative Housing Corp.
The San Antonio Housing Trust Public Facility Corp., a nonprofit created by the city and overseen by five City Council members, is working with developers to build seven apartment complexes with a total of 2,077 units through the program. One complex has been built, two are under construction, and five others have been proposed, including the one Cleveland-based NRP wants to construct on Broadway.
Many of the apartment complexes would charge rents well above local averages, according to an analysis of contracts, term sheets and prospective rent tables obtained through an open records request.
The deals are public-private partnerships in which the housing trust retains a small ownership stake in the project. It buys the land from the developers and leases it back to them for about the cost of some two-bedroom apartments for up to 75 years. As a nonprofit, the housing trust doesn’t pay property taxes, so the properties could be off the tax rolls until nearly the end of the century.
In return, developers are required to rent half the units to those making no more than 80 percent of San Antonio’s median household income, or roughly $49,000 a year. Every deal is unique — some developers are required to limit rents to a certain percentage of the low-income tenants’ incomes while others aren’t.
Each complex will deprive the city of an estimated $15 million, on average, in property taxes in the long term, said Jim Plummer, an attorney for the housing trust.
They would also likely deprive local school districts of tens of millions in tax revenue over several decades. The 1221 Broadway Lofts, a market-rate complex two blocks from where NRP wants to build on Broadway, paid $345,687 to the San Antonio Independent School District last year, and it’s worth less than half of what NRP’s project would cost, according to the Bexar Appraisal District.
Supporters of the deals say the complexes bring quality housing and a mixture of incomes to downtrodden neighborhoods and will encourage others to build nearby. In other words, the deals act both as a way to create affordable housing and as an economic development tool. The Cevallos Lofts apartments built in Southtown in 2012 under a similar arrangement have been a catalyst for development, Plummer said.
NRP’s Broadway complex would be in the midst of north downtown’s thriving apartment market, but it would create relatively affordable apartments in an area with sky-high rents, said District 3 City Councilwoman Rebecca Viagran, president of the city nonprofit’s board.
The deal structure “allows us to look at economic development opportunities but also housing opportunities — quality housing product — in areas that have been long overlooked and underserved,” she said. “We haven’t seen quality ‘A’ product in a very long time in the council districts that are represented.”
The apartments are high quality, so it’s unfair to compare their rents to the local average, Plummer said. But many of the rents for low-income tenants would still be above the local average for upscale apartments, records show.
At the Broadway complex, the average rent for low-income tenants will be $1.84 a square foot. That’s well above the local average of $1.14 a square foot, or $1.30 for similar high-quality “class A” complexes, according to analytics firm Austin Investor Interests. But it’s slightly less than the $1.88-a-foot average for the downtown submarket, where class A units rent for $1.94.
NRP is also partnering with the housing trust to build the Baldwin at the St. Paul Square complex near the Alamodome, where rents will range from $1.47 to $1.81 a square foot. The median rent in that area is $1 a square foot, but it’s close to the border with the pricier downtown submarket.
“It’s always a positive thing to add new, high-quality apartments to any community, especially when it is done with affordability as a major component,” NRP said in a statement. “We applaud our partners in the city of San Antonio for their economic development strategy. It presents the opportunity to add new residents in neighborhoods by providing affordable housing at a variety of price point options.”
Some of the apartments created under the deals will cost less than the local median rent, including about a fifth of those in the Upton at Longhorn Quarry complex that NRP built last year near Morgan’s Wonderland. There, rents cost $1.03 to $1.42 a square foot, records show.
Affordable-housing advocate Radle said the deals would increase the burden on local social services and school districts without contributing property tax revenue.
“There needs to be a more critical look at what we consider affordable housing, as opposed to how can we generate more deals that don’t necessarily generate the housing we need for the majority of the working poor in San Antonio,” he said.
When NRP Group completes the Baldwin at St. Paul Square complex, it will be able to charge whatever it wants, as long as half the renters are making less than 80 percent of the local median income.
In other words, it’s possible the rent charged to low-income tenants could still strain their budgets.
Some complexes being created under the deals have rent restrictions; others don’t. At the proposed complex on Broadway, rents for low-income tenants would be limited to 35 percent of their income. The same goes for a complex that NRP is building on Foster Road on the Northeast Side and another it has proposed at the East Side’s Red Berry Mansion.
Federal housing regulations define affordable housing as that costing up to 30 percent of a tenant’s income, according to the U.S. Department of Housing and Urban Development.
“We’re frankly learning as we go along,” Plummer said. “The earlier deals did not have some of the provisions that you’ll see in the later deals. You’ll see now that we have rent restrictions, now we have them for an extended period of time.”
The deals have caught the attention of the COPS/Metro Alliance, a local community organization. Its leaders see potential in the deals, but would prefer stricter rent controls and to lower the income limit to 60 percent of local median income, said Walker Moore, an organizer with the group.
“I think this is a really creative way to provide affordable housing,” he said, pointing out that the federal government recently cut back on housing programs. “But the question is, who’s benefiting and who’s paying?”
Walter Moreau, the executive director of Austin affordable housing nonprofit Foundation Communities, said the rental price targets in the program “barely” qualify as affordable. But he said that could change over time if San Antonio’s rents rise as swiftly as they have in Austin.
A decade ago, the median rent in Austin was roughly the same as rent charged to those making 80 percent of the median, he said. But that changed as rents skyrocketed. Today, the city’s median rent is a few hundred dollars higher than rents charged to those in the 80 percent category.
“If you look ahead to the future … that 80 percent rent looks better and better,” Moreau said.
Some organizations define housing as affordable if it sets aside units at lower pricesfor renters making 60 percent of the median income; that is the definition used by Austin Investor Interests, the analytics firm. Developers getting federal tax credits must meet that standard.
The Department of Housing and Urban Development defines “lower income” families as those making no more than 80 percent of the local median income per year and “very low” income families at 50 percent of the median income.
Viagran said the city nonprofit’s board is looking at pushing the median income requirement down to 60 percent for future deals, such as one to build 350 apartments at the abandoned Friedrich Building on the East Side with local firm Provident Realty Advisors.
The nonprofit will soon make a presentation to the Housing Policy Task Force, which Mayor Ron Nirenberg created last summer to recommend changes to the city’s affordable housing policies. City Council is expected to hear the task force’s recommendations in May and vote on them this summer or fall.
“I think we have an opportunity to review everything that we’re doing,” Viagran said.
Under the current arrangement, the housing trust typically charges a $250,000 “structuring fee” and leases the land to the developer for $25,000 a year for 75 years, according to the contracts obtained through the open records request. The rent is less than what residents will pay for sometwo-bedroom units at NRP’s Baldwin at St. Paul Square complex.
The housing trust owns a small share of the complexes — either 10 percent or 15 percent, according to the records. It is expected to make back more than the city loses from the property tax exemption over the long term, Plummer said. The nonprofit uses that revenue for services, such as a $1.25 million roof repair program.
The public-private partnership was pioneered in San Antonio, but municipalities all over Texas are starting to use it or are considering it after being approached by NRP and other developers. When the municipalities create their own nonprofits for the deals, they often hire Plummer because of his experience, he said in a previous interview.
NRP, one of the most active multifamily builders in San Antonio, is responsible for five of the seven complexes being built under the deals. It also developed two complexes in similar deals with the Brooks Development Authority, the nonprofit redeveloping the former Brooks AFB, and one with Alamo Colleges near San Antonio College. Plummer worked on the Alamo Colleges project and one of the Brooks ones but wasn’t representing NRP.
Plummer, a partner at the local office of global law firm Norton Rose Fulbright, does all the city nonprofit’s legal work, he said. When he works on these deals, developers sign a letter saying he doesn’t represent them and that they will have their own legal representation, he said.
His salary for the deals is paid not by the city nonprofit but by the projects themselves — in other words, it ultimately comes from the developers and other investors. He declined to say what his fees are.
The arrangement doesn’t represent a conflict of interest, he said.
“If you ask the developers, they’ll tell you I represent my client (the city nonprofit) exclusively,” he said.
NRP has paid Plummer for legal work on a few matters, such as an apartment complex it plans to build at Hemisfair, but never for a city nonprofit deal, he told the Express-News for a previous article.
“Jim has done a very good job with the” program, Viagran said when asked about a potential conflict of interest.