Though the funds likely won’t be needed, officials say, the town is prepared to offer a $4 million loan to the New Canaan Housing Authority or ‘NCHA’ as that entity works to acquire a 9.1-acre apartment development located opposite Lakeview Cemetery.
Following recent votes by municipal funding bodies, the town is ready to offer the loan so that the Housing Authority can cover expenses related to its hopeful purchase of 106 Lakeview Ave. The property includes 10 residential buildings with dozens of units of various sizes, 11 garages and one large pool, tax records show.
The acquisition is expected to help New Canaan remain exempt from a widely discussed state affordable housing law. The town faces the challenge of creating new affordable units in order to continue doing so.
“Right now, it still remains that it’s likely that we will not need any funds from the town,” NCHA Chair Scott Hobbs told members of the Board of Finance during a special meeting held Sept. 16 at Town Hall and via videoconference.
Referring to the company that created the abutting Canaan Parish affordable housing development (and redeveloped it in partnership with the Housing Authority and town), Hobbs continued: “We’re still working a little bit with New Canaan [Neighborhoods] in order to try to boost our equity. A loan from the town does not help. The intention here is not to draw on this line of credit, but as I’ve been involved in this deal now long enough, I thought it was prudent that we go ahead and do as much work as we could ahead of time so that I’m not coming up three days before saying we need a million bucks tomorrow or this fails.”
Board of Finance Chair Todd Lavieri, Secretary Chris Le Bris and members Maria Weingarten, Bob Hamill, Victor Alvarez and Tom Schulte voted in favor of the special appropriation. Member Nick Mitrakis was in attendance but did not vote because he wasn’t seated at the very start of the agenda item. Members Michael Chen, Colm Dobbyn, Jan Schaefer and James Yao were absent.
The Town Council unanimously approved the same appropriation during its regular meeting on Sept. 18. The legislative body met in executive session prior to voting and didn’t discuss the matter during the public meeting.
On Tuesday, the Board of Selectmen reviewed a “Cooperation and Payment in Lieu of Taxes (or ‘PILOT’)” agreement for the property that’s contingent on a successful purchase-and-sale.
First Selectman Dionna Carlson noted that the agreement already had been approved by the town’s tax abatement authority.
“The amount that was authorized was a 7% payment in lieu of taxes, so they would pay 7% of effective gross income,” Carlson said. “Currently the Avalon contributes about $535,000 to the town’s tax base, that will reduce — based on, obviously, this is based on a pro forma, we have no idea what it’s going to be, but based on the pro forma — probably about a $135,000 haircut to the taxes we receive from that entity.”
She added: “This is a requirement by Fannie Mae to be a senior debt lender. They need a PILOT to be able to come in at the senior debt level. And this won’t happen unless the deal closes.”
Carlson described the prospective acquisition as “affordable housing without adding debt” for the town.
Selectman Amy Murphy Carroll said, “This is our best option to move forward in addressing our housing challenges.”
Selectman Steve Karl said, “Based on the potential cost of acquiring property and building something, it’s just a home run all around.”
The potential acquisition of the Avalon property comes as New Canaan rolls out an affordable housing strategy that is tied largely to obtaining successive exemptions from the state’s affordable housing law.
The Town Council last May passed an ordinance that allowed for the formation of an Affordable Housing Committee, calling for the appointed body to identify properties that could support affordable housing developments in order to help New Canaan chain together four-year blocks of relief—each block known as a “moratorium”—from the state law known by its statute number, 8-30g.
Under it, in towns where less than 10% of all housing stock qualifies as affordable (New Canaan is at less than 4%), developers who propose projects where a certain percentage of units are set aside to rent at affordable rates may appeal to the state after a local P&Z Commission denies their applications. New Canaan’s last moratorium lapsed in July 2021, under a prior administration. After it did, the town received three 8-30g applications, at Weed and Elm Streets (120 units), Main Street (20 units) and Hill Street (93 units). P&Z denied all of them. The applicant’s appeals currently are before a state Superior Court judge in Hartford. (The town earned a new moratorium this summer, though neither that, nor the acquisition of Avalon, is expected to affect the pending 8-30g appeals.)
During their special meeting, finance board members asked whether the loan would be set up as a multi-draw (no, the NCHA will just ask for what they need to close the purchase), what rate the town will use (a tax-exempt rate plus 1% or 100 basis points on top of it), how the interest payments would be calculated (interest-only for 10 years, balloon payment at the end) and whether the town’s loan could exceed $4 million (no).
Hobbs said that the NCHA currently is dealing with “a little bit of a hiccup.”
“And I’m only saying ‘a little bit’ because we’ve had a lot of big hiccups, but they are doing a little bit of pushing under our equity value,” he continued. “And in order to try to go ahead and boost our equity, we are working with New Canaan [Neighborhoods]—and New Canaan [Neighborhoods] was the group that actually founded Canaan Parish, and we had partnered with Canaan Parish in order to create the new Canaan Parish… Canaan Parish had gone ahead and derived some equity beforehand from the project. And then through the project and our developer fees, they’ve actually accumulated more equity. And we’ve been asking and trying to work with New Canaan [Neighborhoods] to go ahead and give us a grant that would be usable toward this project and that would be returnable if not used within a, say, three-year type period. And so we’re in negotiations trying to do that. Should that fail, then again, we may have to try to scramble and do some other things or we may have to try to find another way to try to boost our equity somewhat by several million dollars. Hopefully that won’t fail.”
Asked what the concern is, Hobbs said, “I believe it’s a concern under Fannie [Mae] that although we have done successful projects as the Housing Authority and New Canaan has shown great promise, ultimately, we haven’t done 10,000 units or 100,000 units. And so we’re still relatively new to this and they have some concerns over the fact that we’re a new entity, and what happens if things go wrong/ It ignores a little bit of the fact that—and again, I pray to God I never have to eat these words—but we are in New Canaan, there’s an extremely limited supply of housing, and we’re in a top school district, so the odds of things going horribly wrong, I believe to be very minuscule. And our performance shows that to be the case. So that’s where I think it’s just this nervousness about how you consider this deal to be one like what you’d be doing in Tampa or Scottsdale or in Nashville versus New Canaan, Connecticut. And again, the fact that we’re relatively new to this business. And again, don’t have 10,000 units behind us or something.”
Asked about the pushback from New Canaan Neighborhoods, Hobbs said, “I think it’s making sure that they act in a fiduciary sound way to protect their charitable funds. And that, I think, is the biggest challenge for them.”
How many units versus the legal requirement will this achieve?
That’s a great question, Irene, and I’m sure that Scott Hobbs and others close to the acquisition have a very good idea. I would imagine some are also wondering how this large parcel might be redeveloped with greater density in the future. I would follow the meetings of the Affordable Housing Committee to hear its members discuss the prospective acquisition (you could attend in person or via Zoom and ask them that very question). Remember that New Canaan this summer earned a four-year exemption from affordable housing appeals, so there’s time to map out future moratoriums.