Affordable housing development in Warehouse Arts District requests $2M in local support

photo by: Rendering by H2B Architects

Penn Street Lofts

A mixed-use affordable housing development planned for the Warehouse Arts District is requesting close to $2 million in economic incentives and other local financial assistance.

Plans for the Penn Street Lofts project call for the construction of a four-story, mixed-use development on three currently vacant lots at 800 Pennsylvania St. About 75% of the building will be used for affordable apartments that would remain affordable for 30 years, after which time they could be rented at market value.

Developer Tony Krsnich is requesting a property tax rebate, sales tax exemption, affordable housing grant and a rebate on building permit fees for the affordable units. The city’s affordable housing shortage has been a key concern the past few years, and Krsnich recently told the Journal-World that he saw the project as meeting multiple city goals.

“The reason that the city has supported the project in the past and others like it is it’s perfectly aligned with their mission: affordable housing, job creation, urban infill,” Krsnich said. “It’s something for everybody, right?”

The City Commission has already approved some land development code changes to accommodate the project, and though the city’s Affordable Housing Advisory Board did not award the project funding as part of its last award cycle, the board expressed support for the project and invited it to reapply. The project will cost about $11.8 million to construct, according to application materials. In addition to the affordable housing units, plans call for about 4,500 square feet of commercial and retail space and seven market-rate live/work rental units on the first floor. The upper floors will consist of 47 affordable apartments, comprising studio, one-bedroom, two-bedroom and three-bedroom units.

Krsnich is requesting a 15-year, 95% Neighborhood Revitalization Area property tax rebate; Industrial Revenue Bonds sales tax exemption on construction materials; and a rebate of building permit fees for the affordable units. The city estimates the economic incentives have an approximately $1.4 million value, according to a city staff report regarding the request. In addition, Krsnich has requested a $550,000 grant from the city’s affordable housing funds, putting the total amount of local assistance requested at $1.95 million.

City staff state in the report that eligibility requirements have been met for the property tax rebate and the sales tax exemption portion of the request. The cost benefit for the city would be 1.30, meaning that for every $1 in public incentives, $1.30 of benefit value would be returned. The city’s policy is that the cost benefit be at least 1.25. Including the affordable housing grant and the rebate of city permit fees, the ratio decreases to 0.95; however, the city states some intangible benefits to the community are not captured in quantitative analysis.

“The Penn Street Lofts projects will meet one of the City’s foremost goals of increasing affordable housing stock in the community,” the report states. “In addition, the development of vacant parcels into productive use will enhance the local economy, producing adequate returns on the investment of public dollars in the short term and substantial returns in the long term.”

Krsnich, who is the developer behind other projects in the Warehouse Arts District, has received federal and state support for the project. The project has been awarded $7.9 million in Federal Low-Income Housing Tax Credits and $448,000 from the National Housing Trust Fund.

To address the city’s affordable housing shortage, the city’s goal has been to create permanent affordable housing that is scattered throughout the community. The city staff report states that the 30-year affordability period is reasonable because units will require significant rehabilitation by that point in time. It goes on to state that the 30-year affordability period is also the threshold for the U.S. Department of Housing and Urban Development’s investments.

The Public Incentives Review Committee will now consider the economic incentives request. Once PIRC reviews the request, its recommendation will be sent to the City Commission, which will make the ultimate decision regarding the city’s portion of the incentives package. Douglas County and the Lawrence school district will also consider the property tax rebate. The city’s Affordable Housing Advisory Board will consider the affordable housing grant request in the context of the board’s other requests, and the board’s recommendation will then go to the City Commission for consideration.

PIRC will consider the economic incentives request at its meeting Thursday, and AHAB will consider the grant request on Feb. 10. The City Commission will have a public hearing to consider both requests on Feb. 18.


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