After dodging a snag, one of Jackson’s largest private-sector housing developments in years is back on track.
The Sagebrush Apartments, a 90-unit complex planned on Broadway near the Dollar Tree, stalled when developers were unable to secure insurance they say they need to finance the project. But town officials agreed to resolve the problem by loosening restrictions on the units, deciding the influx of housing is worth the risk.
“If this project gets built it is mostly going to serve the workforce,” Mayor Pete Muldoon said. “I believe that. So I think that really minimizes the downside for us.”
When applying for insurance through a Department of Housing and Urban Development program to incentivize multifamily housing, developer Joe Rice and his partners encountered an obstacle: the workforce deed restrictions placed on about a third of the units.
As it stands the deed restrictions — used to earmark housing for local workers — still apply to those units in the event of foreclosure. That limits the number of people wh0o could rent the units, an unattractive arrangement to lenders who want to ensure their loans are repaid.
“To protect their interests,” said Christine Walker, a consultant on the project, “HUD has a set of rigid criteria that a developer has to meet.”
One of those criteria is that deed restrictions must terminate upon foreclosure. The developers argue that foreclosure is unlikely to begin with, given the hefty sum the Sagebrush team has already put toward the project.
Stefan Fodor, an attorney representing the Sagebrush team, said the estimated cost of the development is $32 million. Loans account for $24 million, and the rest came straight from the investors’ wallets.
“We have 8 million reasons why we don’t want to walk away from this,” Fodor said.
Nevertheless, things happen. And in the “unlikely event” of foreclosure, deed restrictions will terminate, leaving apartments available to out-of-towners.
The town would have first priority to purchase the project, preserving the deed restrictions. But it’s unclear if officials would want to assume whatever portion of the $24 million debt remains at that point.
Leonard Lucas, senior director at Love Funding, the HUD-qualified lender supplying the loan for the Sagebrush project, said the terms of the loan would allow the town to drop it at any time with no liability.
Fodor argued that even if the town chose not to take ownership, “inherent safeguards” would ensure the units remain de facto workforce housing: They’re small, they’re not condos, and they can’t be used as short-term rentals, reducing their appeal to second-home owners.
Elected officials were hesitant Monday, with Councilor Jonathan Schechter bluntly asking the project’s representatives, “Are we getting screwed here?” But after weighing the risk against the need for housing they were won over by the prospect of 90 more heads in beds.
“I don’t want to kill the project today,” Councilor Hailey Morton Levinson said. “I think we still need more market rentals for the workforce.”
Not everyone was persuaded. Councilor Jim Stanford, the lone “no” vote, opposed the move, saying the council has already done too much “to bend the rules” for the Sagebrush Apartments.
In 2017 the council approved an amendment to the town’s land development regulations exempting the project from affordable housing requirements that mandate a certain percentage of the floor area be deed restricted for low-income renters.
Stanford voted in favor of the amendment, though said at the time that he was “skeptical” of it. But this, he said Monday, was a “step too far.”
“We’ve made so many concessions already, and it would seem that we’ve been ripped off if we did not get those assurances,” he said, referring to the deed restrictions.
The council also resolved another minor dilemma for the project. The property includes two small patches of 100-year floodplain and part of Flat Creek, a floodway. To satisfy HUD’s terms, the town had to take ownership of the floodway, but the Sagebrush team has agreed to compensate the town for any legal liability associated with it.
Rice said he hopes to begin construction in July. He estimated the project would take 14 to 16 months to complete.
Correction: This article has been revised to reflect that the Sagebrush Apartments project is not the largest housing development in 20 years.