By John Engel
The New Canaan Housing Authority (a non-profit corporation) is attempting to purchase Avalon New Canaan, 9.1 acres, 10 buildings, 104 units, currently with only 7 vacancies starting at $4,030 per month (for a 2-bedroom)
Why the Housing Authority?
The New Canaan Housing Authority (HANC) has statutory authority to issue bonds, acquiring and managing real estate for the benefit of the community. This is a good thing because town government is typically incapable of prioritizing land acquisition whether it be allocating sufficient resources or moving quickly enough on opportunities. Real estate won’t wait for the town’s ordinary budget cycle. During my 10 years on the Town Council we always agreed Land Acquisition was a priority and created a fund for it, but we never funded it meaningfully. The most we ever allocated to the Land Acquisition Fund was $50,000. It has been equally challenging to get money budgeted for affordable housing.
Where does the Housing Authority get its money?
Two ways. First, it borrows it. Second, thanks to the foresight of Lazslo Papp as Chairman of P&Z New Canaan now sets aside a portion of building permit revenue each year. The New Canaan Housing Authority periodically asks the Town Council to release those funds. Annually, it’s been about $400,000, not enough to build even one new unit of affordable housing. In the case of the Avalon purchase it has been reported that the Town of New Canaan pledged a $4 million line of credit to the Housing Authority and has told them to borrow the rest to purchase what I am estimating to be more than a $70 million asset.
Where did you get the idea of $70 million? And is this a good idea?
I am guessing based on the fact that Avalon Darien was sold for $120 million in July, 189 units, to AEW Capital Management after an auction drew more than a dozen bidders. That’s an average price of $635,000 per unit. Assuming that’s the market we can assume Avalon New Canaan will cost somewhere around $70 million. That’s probably understated because in Darien some units were affordable. Not so in New Canaan where the 8-30g provisions under which Avalon New Canaan was built have expired. The town assessment is $33 million, and market-rate sales typically come in at double the assessment, supporting my $70 million estimate. Is there precedent for greater town participation? The Town of New Canaan issued a $10 million line of credit for the library construction in 2021 at a quarter point interest rate. This is a POTENTIAL way to use the balance sheet of the town to back strategically important projects and to help the Housing Authority borrow for less in the market.
How does this project and bond compare with other major projects?
For perspective, the Town of New Canaan’s debt has decreased in the last few years from $147 million to $95 million. The largest current projects are the $6 million Playhouse and the $29 million Police Department. The $39 million Library required only $10 million from the Town. The contract to renovate New Canaan High School came in at $66.2 million in 2007 (two years after Darien High School was built for $73 million). Will this increase town debt? No. The housing authority balance sheet is separate from the Town balance sheet and Avalon is an income producing asset that will carry most of its debt load.
Will Avalon become Affordable Housing?
Not entirely for a couple of reasons. The main reason is that Avalon New Canaan will have to charge market rates for most of the units to pay down the debt. Using simple math, if the Housing Authority borrows $70 million at 5.5% over 30 years, then the debt service would be $400,000 per month. That mortgage is just about equal to 104 units averaging $4,000 (the price of a typical 2-bedroom). For every affordable unit there must be a profitable one for the project to be self-funding. Self-funding or not, this is a good idea for the Town and Housing Authority because the project is strategic, the only dense housing development of this scale except for The VUE, and it gives New Canaan options with respect to future moratoriums and 830-g. My back-of-the-napkin calculations hopefully show this is not the magic bullet that solves our Affordable Housing problems that some people imagine. But it likely gets us a little breathing room. For every affordable unit at Avalon there will have to be several market rate units for at least an extended number of years.
Note, Avalon New Canaan currently contributes $535,000 in annual property taxes, a number which is currently estimated to decrease by $135,000 because of the purchase, further complicating the math.
What other affordable housing do we have in New Canaan?
Millport Apartments. In 2010 and 2015 the Housing Authority of New Canaan built 73 new units in 4 buildings and 40 units in townhouses. Based on median state income of $86,400 eligible applicants must make $38,880 to $51,840. 1-bedroom rent is $847 to $1,171; 2 bedroom is $1,016 to $1,405 per month; 3-bedroom is $1,188 to $1,637. Once accepted the income is never re-verified. Once you’re in, you’re in. The waitlists are currently open for 1- bedroom units and accepting applicants. (To apply call 203-594-7782)
Canaan Parish. The Housing Authority, in partnership with New Canaan Neighbors, built 2 buildings with 100 new units a few years ago which are a mix of affordable and project-based section-8 voucher units. The rents are $1,450, $1,750 and $2,000 for 1, 2 and 3-bedroom affordable units. There is a table of minimum and maximum incomes on the website ranging from $49,714 to $103,700 for 6 people. Utilities aren’t included, and affordable rents are not subsidized. Priority is given to employees of the Town and Board of Education.
School House Apartments. This is Senior Housing, 40 units, studio and 1 bedroom built in 1993. Eligibility and rent is based on HUD income guidelines and residents must be 62 years old. This is managed by a board separate from the housing authority.
One thing I learned from the Millport project. 85% are 1-bedroom units, not the 2-bedroom or 3-bedroom units that are in such high demand. Why? Because the State penalizes the development of larger units by awarding those only 10% more in HUE points even though they consume proportionally more square footage.
The purchase of Avalon is a home run, strategically and fiscally, faster and cheaper than purchasing land, securing approvals and building new units. It does this without increasing density. Various committees tasked with finding town-owned land for such a project over the years have come up dry. But Avalon is only a small piece of a long-term solution. And, New Canaan cannot rely solely on our all-volunteer Housing Authority. I’d like to see our new Affordable Housing Committee be empowered in the coming months, asserting themselves in the annual budget process, identifying additional opportunities, charting a course for 8-30g reform that works, and asking for the resources so that we never find ourselves fighting in court over failed 8-30g proposals again.
John Engel is a former Chairman of the Town Council, former member of the Zoning Board of Appeals, and a current member of the Planning & Zoning Commission. Don’t be fooled, those positions don’t pay and John has to work for a living. You’ll find realtor John along with his wife Melissa Engel and mother Susan Engel at their Elm Street office, home of The Engel Team at Douglas Elliman.
