Housing Projects On City Agenda

Traverse City commissioners could vote tonight (Monday) to move forward with two city housing projects, including selling the city-owned Lot O – located next to The Omelette Shoppe at the corner of Cass and State streets – to HomeStretch for an affordable housing project and issuing a request-for-proposals (RFP) to find potential buyers or developers for three city properties to be used for multi-family housing.

Commissioner Ashlea Walter requested that staff put a purchase agreement with HomeStretch on tonight’s agenda for potential commission action. Staff have been in extensive talks with HomeStretch for the nonprofit organization to purchase Lot 0 and redevelop the parking lot into rental apartments (pictured, rendering). The move is part of a bigger city goal to consolidate parking into garages downtown and redevelop surface lots, particularly for infill projects with residential and/or commercial uses.

Walter wrote in a memo that while she understands some “minor changes” to the deal are still being discussed, she didn’t think there was anything that couldn’t be discussed publicly or would put the city in a “compromising position related to financial negotiation.” Walter said it would “behoove” the city to formally move the project forward, noting that HomeStretch needs the agreement “to secure financing, including potential grants.”

According to City Attorney Lauren Trible-Laucht, the city and HomeStretch have agreed on a $470,000 purchase price for the parking lot, with HomeStretch to pay $9,400 in earnest money when the agreement is signed. As a condition of the deal – and to meet the city’s goal of developing workforce housing – HomeStretch will commit to 80 percent of the building’s apartments having an aggregate average tenant income of 60 percent of the area median income (AMI). HomeStretch will commit to keeping those units at an “affordable rate in perpetuity,” according to Trible-Laucht, and will provide the city with an independent annual audit to confirm it’s meeting that requirement.

The deal also stipulates that the city will have first right of refusal on the property in the future. After the agreement is signed, the city will execute a quitclaim deed conveying the property to HomeStretch, according to Trible-Laucht. The deed will be held in escrow for up to two years to allow HomeStretch to acquire financing for the project. Once HomeStretch has secured at least 80 percent of the total development costs and can meet all the contingencies in the agreement, the deed will be released from escrow and delivered to HomeStretch. In the meantime, the city will maintain control of Lot O and continue to use it for parking until the deed is released.

While HomeStretch originally planned 64 units in the building, it has since changed the design to 60 units. According to Trible-Laucht, two planned floors of cooperative-style units – similar to dormitories, with small efficiency units and communal kitchen, lounge, laundry, and outdoor areas – were scrapped, with some of the building plans modified from the original proposal.

“Apparently, co-housing doesn’t meet the lending requirements for tax credit submissions and there are very few, if any, lenders that would finance the dormitory concept,” Trible-Laucht wrote in a memo to commissioners. “So, the plan is now for ‘single units’ with full bathroom suites and kitchenettes as opposed to units with shared bathrooms and no in-unit food preparation areas.”

City commissioners could also vote tonight to issue a request-for-proposals (RFP) for the redevelopment of three contiguous city-owned parcels at 715 and 723 Beitner Street and 535 Woodmere Avenue. Commissioners discussed issuing an RFP earlier this fall, but held off in a split vote after staff expressed concerns about the timing of looking for buyers now. City Manager Marty Colburn raised questions about the suitability of the properties for housing, the potential need to use the parcels in the future to expand the city’s department of public services, unknown environmental contaminants that might be present at the site, and the city’s current use of the properties for snow storage and construction staging. The properties also can’t officially be sold until October 2023 under a contract term put in place when the city purchased the parcels.

But with the city now having received an environmental assessment – though some key lab results are still pending, notably on the presence of arsenic and hazardous metals – Commissioner Tim Werner wants the board to direct Colburn to work with consultant Mission North on drafting and issuing an RFP for redeveloping the three properties. Werner suggested using a committee to review any submitted proposals – similar to the process that generated the HomeStretch offer for Lot O – and to be clear upfront with potential buyers on the sales price for the properties. Werner recommended setting the sales price between $1 and the appraised value of the parcels, “depending on the quality of the proposal.” A recent appraisal completed by Stelzer Appraisal Services valued the three properties combined at $830,000.

Werner recommended that the city review proposals based on certain criteria, prioritizing proposals that “maximize the number of residential units” and “minimize the carbon footprint with full building electrification and Traverse City Light & Power green rate (VGP).” He also said proposals should “create community through building design and a diversity of price points.” Werner suggested that proposals could include either “a single structure or multiple structures, as allowed by zoning code.”