On September 8, Elk Grove City Council unanimously approved a $ 6 million loan for a $ 104 million affordable housing project on Bruceville Road between Big Horn and Laguna boulevards. The project is known as Lyla.
As a 294-unit family apartment complex, The Lyla will become the city’s largest affordable housing project. The second largest affordable housing project in Elk Grove is Seasons Apartments at Laguna Ridge, a 222-unit senior housing project on Bruceville and Bilby Roads.
Vice-mayor Stéphanie Nguyen was absent from the meeting and the council’s 4-0 vote.
City council member Pat Hume expressed his support for this project.
“This project was just hard to ignore, because of the numbers they put forward and the location,” he said. “It really is the main infill in the Town of Elk Grove when it comes to affordable housing, adjacent to services and public transportation and all the things that tick the box.”
The loan will come from the City’s Affordable Housing Fund, which is generated by new development at market rate for residential and non-residential developments.
Since the city’s incorporation in 2000, the city has funded approximately 1,800 affordable housing units.
The Lyla project includes studios, which are unique to other affordable housing in Elk Grove.
About 58 of the units will be available at the median income level, which has never been included in any other affordable housing project in the city.
Sarah Bontrager, the city’s housing and utilities manager, explained the type of people who would qualify for these mid-income level units.
“These units would be available to families who have relatively few options for affordable housing in the city, but who still might not be able to afford market-priced apartments,” she said. .
She also mentioned that the city believes there will be adequate demand for all sizes of units within Lyla.
Lyla’s facilities will include a swimming pool, children’s play area, parking area and a minimum of 15 hours per week of on-site social services, including after-school programs. The project is also close to public transport.
The project, which will be built on six plots and protected from commercial uses by trees, will be located near Laguna Community Park, Wackford Community Center, Target Mall and Laguna Creek High School.
Project developer Pacific West plans to primarily develop the project through tax credits and tax-exempt bonds. The developer is also seeking $ 6.5 million in deferred developer fees.
Bontrager called The Lyla a “pretty expensive” project.
“Per unit, (The Lyla) comes to about $ 353,000 per unit,” she said.
However, Bontrager noted that the city’s grant request was “relatively low,” at $ 20,619, or about 6% of the cost per unit.
Bontrager mentioned that the Lyla has several strengths, including the developer’s experience.
“The (developer) has over 100 projects, including three in Elk Grove – Avery Gardens, Bow Street (Apartments) and The Gardens at Quail Run,” she said. “They have two projects on hold (in Elk Grove).”
Due to its size, The Lyla will have three managers on site.
Bontrager noted that the project has various weaknesses, including that the development costs far exceed city standards. She also said that the project services budget may need to be increased in the future to provide high quality services to this project.
Bontrager mentioned that because the project’s replacement reserve deposit cannot sustain the project for a 55-year period, the city expects the project to eventually need to be recapitalized in order to make improvements. major.
“Typically this happens between year 15 and year 20,” she said.
Bontrager added that many of the project’s weaknesses are not uncommon for such deals.
“It’s common for rent projections to be lower than operating expense projections, and there are ways for developers to compensate for this, such as lower than expected vacancy rates,” she said.
“This project, for example, predicted a vacancy rate of 5%, but what we’re seeing in our affordable housing at this point is a vacancy rate of 0%.
Right now, the city is confident that the unit sizes at their income levels associated with the Lyla will all have adequate demands, Bontrager noted.
She also noted that if the project showed significant profit, the developer would not need city funds to build The Lyla.
“We recognize that most affordable housing will need some funding from the city to come to fruition,” she said. “And in return for this loan, the developer agrees to make the units affordable for 55 years.”
The promoter has further committed to help solve the city’s homelessness problem by placing homeless households at the top of the project’s waiting list, for the units in which they qualify.
Mayor Bobbie Singh-Allen summed up the Lyla project as “something that will meet many needs in our community, with our shortage of affordable housing.”