Millions of Americans flock to the nation’s sandy beaches and ski slopes for vacations each year. It’s not always a holiday, however, for the tourism sector, first responders, and other local workers in these destination towns.
The need for affordable workforce housing has reached crisis proportions in some of the country’s most-popular tropical and mountain getaway spots. Scarce and high-cost land, growth restrictions, and loss of housing to vacation-rental booking platforms are just a few of the barriers to creating housing for workers. And low wages combined with high housing costs leave renters without many options.
On the following pages, we look at developers in four popular travel destinations—the Florida Keys, Hawaii, Colorado’s ski resort towns, and Jackson Hole, Wyo.—to see how they’re delivering housing in these challenging markets.
Irma Exacerbates Housing Crisis in the Keys
Sometimes called the American Caribbean, the Florida Keys are a tropical paradise away from the mainland offering fishing, snorkeling, and scuba diving, among other recreational activities.
The tourism industry on the islands employs about 50% of the workforce, according to recent reports. But housing for these wage earners, already an issue, was exacerbated after Category 4 Hurricane Irma struck the Keys in September.
According to the “Approximate Damage Assessment Results” report of Monroe County (home to the Keys), Irma destroyed 1,179 homes throughout the Keys, and another 2,977 residences suffered major damage. Mobile homes, manufactured houses, and RVs were among the hardest-hit.
“Housing down in the Keys was already desperately short,” says Marty Flynn, operations adviser and strategist at Tri-Star Affordable Development, which constructs and operates affordable housing throughout the area. “Older housing with traditionally lower rents and affordable [units] got wiped out.”
Flynn cites a limited supply of land in the Keys, a strict growth ordinance, and environmental factors involving plants and animals as some of the difficulties facing new housing development.
Nonetheless, before and after Irma made landfall, his firm completed critical affordable housing that serves local workers.
Tri-Star’s Caya Place scattered-site development includes 42 units in two buildings located almost 20 miles apart. Residents started moving into the first building, in Marathon, less than two weeks before Hurricane Irma struck. The three-story structure includes 26 units and is adjacent to the company’s 73 Ocean development, which opened in 2016.
The second building, in Big Pine Key, comprises 16 units across two stories and was under construction when the hurricane hit, with its windows and doors having been installed two days before Irma came ashore.
“The buildings fared well. These are built to new building codes, with hurricane-impact glass and doors, metal roofs, and 40 tons of steel in the foundation,” says Flynn. “We lost all of the landscaping, but that was the extent of it.”
With a focus on cleaning up storm debris, restoring power, and getting people back on their feet, the Big Pine Key development took longer than expected to complete. Opened at the end of February 2018, the building was fully leased in just two days. Of the 16 households who moved in, eight had effectively been made homeless by the hurricane.
The $15.7 million development was financed with low-income housing tax credits (LIHTCs) and a State Apartment Incentive Loan from the Florida Housing Finance Corp. Hunt Capital Partners was the tax credit syndicator, with Citi Community Capital as the ultimate investor. First State Bank of the Florida Keys was the construction and permanent lender.
Thirty-seven of the one-, two-, and three-bedroom units at the two buildings are set aside for households earning 60% of the area median income (AMI), and five units are reserved for households at 25% of the AMI.
“Almost every single resident we have is working in one of the businesses here locally in Big Pine Key and Marathon,” says Flynn.
Annie Perez, the tenants and services coordinator for the buildings, says the development is a great community resource.
“All the tenants here are very happy with their apartments. Compared to the prices out there in the community, this is very affordable,” says Perez, who is a resident of 73 Ocean.
With the Keys a critical concern for the state, Tri-Star is working to find the right parcels of land and get approvals to do its next development.
“The need is so critical down here,” adds Flynn. “You could probably build 10 projects, and they would lease up on [certificate of occupancy] day.”
Hawaii Lives up to Reputation for High Costs
EAH Housing recently completed the third and final phase of Villages of Moa‘e Ku on Oahu, Hawaii’s most-populous and -visited island. The 52 units bring the total development to 192 apartments.
The one- to three-bedroom units are home to teachers, tourist-industry workers, and others earning 30% to 60% of the AMI. All three phases were leased up in less than two months.
Without affordable housing, it’s just about impossible for a low-income family to make ends meet in Hawaii, one of the nation’s most-expensive housing markets. The state has the highest “housing wage” in the country, reports the National Low Income Housing Coalition (NLIHC) in its most-recent Out of Reach study. That means a worker in Hawaii must earn $35.20 per hour to afford a modest two-bedroom apartment without spending more than 30% of his or her income on housing costs.
In other words, a minimum-wage worker would have to work 152 hours out of a 168-hour week to afford a two-bedroom rental home at fair-market rent or 116 hours to afford a one-bedroom rental home, according to the NLIHC.
It’s also a big challenge to develop affordable housing in Hawaii. To develop Villages of Moa‘e Ku, for example, the nonprofit developer purchased about 24 acres in Ewa Villages from the city and county of Honolulu as part of a master-planned effort to turn a former sugarcane field into a community with a mix of housing types, including affordable homes. EAH Housing subdivided the property and broke it out into three phases, according to Marian Gushiken, EAH’s director of real estate development in Hawaii.
Each phase of the Villages of Moa‘e Ku was financed with tax-exempt bonds, 4% LIHTCs, and Rental Housing Revolving Fund financing from the state. Each also used Community Development Block Grant (CDBG) and HOME funds from the city and county.
“I think the challenge in many communities, including Hawaii, is that the land cost is very difficult to overcome,” says Gushiken, noting that Villages of Moa‘e Ku would likely not have been accomplished without the city’s assistance in providing financing.
Rather than develop the property as one large project, the team had to split it into several phases to secure the needed financing.
A limited amount of subsidy is available in Hawaii, particularly the Rental Housing Revolving Fund, which provides gap low-interest loans or grants to developers building affordable housing.
The $22.9 million third phase was financed with approximately $9.3 million in LIHTC equity from Alliant Capital.
The development also uses $3.7 million in permanent financing from Citibank; $5.6 million from the state Rental Housing Revolving Fund; and $2.9 million in HOME funds and $1.4 million in CDBG funds from the city and county of Honolulu.
EAH Housing began its housing work on Oahu, home to Honolulu, Diamond Head, and Waikiki Beach. The company now works on three islands and has developed and manages affordable housing communities on Oahu, Maui, and Kauai. After the firm had worked on several notable redevelopment projects, the Villages of Moa‘e Ku launched EAH’s new-construction pipeline.
EAH Housing and its affiliate Hui Kauhale are building Ola Ka ‘Ilima Artspace Lofts in Honolulu, an 84-unit development including one- to three-bedroom units that will be ready in summer 2019. A joint venture with Minneapolis-based Artspace, the Lofts will provide a preference for artists and will house the PA’I Foundation, a nonprofit entity promoting native Hawaiian arts and culture.
EAH is also working with the Bronx Pro Group, based in New York City, to develop Nohona Hale in Honolulu, which will feature 111 micro units, the first ever in Hawaii, and is scheduled to be occupied in 2020. —Donna Kimura
Colorado Ski Towns Battle Uphill Climb
For Oregon, Wis.–based developer Gorman & Co., partnering with communities and employers to provide workforce housing opportunities is in its DNA.
The firm started to work with waterparks in its home state a couple of decades ago to create needed housing in those communities. It has also partnered with regional medical centers, universities, and other companies to assist with their workforce housing needs. “Our strategy is to go to communities and ask what their needs are,” says Gorman & Co. chairman of the board Gary Gorman.
Lessons from these past developments have been brought to two famed ski resort communities in Colorado. “There’s a huge need for affordable housing in the town of Vail,” says Gorman.
According to Gorman, the town acknowledged it had a problem related to workforce housing. Vail owned an apartment complex that had deteriorated and had sent out several RFPs in the past, but developers couldn’t get to the finish line.
Gorman and a local partner decided to give it a go. “The difficulty was we had to essentially educate Vail’s leaders about what could be done affordably and what couldn’t, and that they had to bring resources to the table,” says Gorman. The town provided a ground lease and has a minor ownership stake.
Three years ago, the development team got to the finish line with the completion of a rehab of the existing building and new construction at the $27.4 million Lion’s Ridge, which created 114 workforce housing units with no income caps for the community.
That development spurred a partnership between Gorman and mountain resort company Vail Resorts to bring workforce housing to the ski town of Keystone in nearby Summit County. Like Vail, land availability and high home prices are major issues in Keystone.
Kimball Crangle, Gorman’s Colorado market president, says vacation-rental platforms like Airbnb and VRBO also have had a significant impact on the housing stock. “We’ve seen a whole supply of housing disappear nearly overnight in the market. This particular area has lost nearly 1,500 units,” she says.
Gorman will break ground early this summer on the Village at Wintergreen, a 196-unit community in Keystone. It will include a 40-unit 9% LIHTC project that has already received an award; 36 units of seasonal housing that Vail Resorts will be master-leasing for the winter and summer seasons; and 120 units of workforce housing for year-round Summit County residents.
Vail Resorts is a key partner on the development, providing a ground lease on the land in addition to master-leasing the seasonal housing. The county is providing soft funding and a local property tax exemption for the tax credit component.
“If we had to buy that land, we couldn’t make the numbers work,” says Crangle.
Village at Wintergreen, with an estimated development cost of $54.4 million for the affordable and workforce housing, will be delivered in phases and is expected to be on line within about 20 months.
Jackson Serves Full Gamut with Public-Private Efforts
Offering skiing in winter or exploration of Grand Teton National Park in summer, Jackson, Wyo., has become a vacation destination year-round and an ideal place to purchase second homes.
With its tourism- and service-based economy—often providing low wages—the area presents a challenge to local workers, who often struggle to find affordable housing.
According to the Jackson Hole Community Housing Trust, a 2014 housing needs assessment estimated that 1,200 affordable units were needed to meet the demand for workforce housing in Teton County.
“We have similar conditions to other mountain and resort communities,” says Carrie Kruse, director of project development at the Trust. “We have a very high percentage of public-land ownership, which limits the development potential. We have strong demand for ownership of second homes. Those coupled together drive up real estate prices beyond what the local workforce can afford.”
The Housing Trust, founded in 1992, is dedicated to creating a vibrant Jackson Hole community through housing. The nonprofit has developed or acquired over 120 for-sale and deed-restricted homes and will complete its first rental property this summer. Redmond Street Rentals will feature 28 one- and two-bedroom units on 1.3 acres in East Jackson.
“The rental market is not necessarily unaffordable, but it’s very unstable. Lots of people live without leases or on month-to-month leases,” says Kruse. “What we’re really looking to offer is a new housing type for our workforce. These will be rental units that will be stable for the long term.”
The nonprofit had looked at using LIHTCs to finance the $13 million development, but it opted to use conventional financing since the cost to build in Teton County can exceed the Wyoming Community Development Authority’s cost caps.
Kruse says the development is a great demonstration of a public–private partnership that has the support of both the town and the county. The town of Jackson purchased the land for $1.65 million and is providing another $2.1 million in financing, along with $1.95 million from the Jackson/Teton County Housing Authority. Additional financing includes $3.4 million through local donors and $3.9 million in long-term debt through Jackson-based Rocky Mountain Bank.
At press time, the Housing Trust was in the process of offering reservation agreements for the units, with move-ins expected in early August. With a goal of retaining working and middle-class households, Redmond Street Rentals will serve, on average, those at 80% to 90% of the AMI.