Delaware Housing Project Gets Stimulated
By: JON PRIOR
September 8, 2009 11:06 AM CST
Seven months after President Obama signed the Recovery Act in February with the promise of a transparent injection of nearly $800bn into the economy, we’re finally finding some clarity.
And the first celebration of local stimulus success comes not from California, where IOU’s are becoming currency, and not from Arizona, where the foreclosure pile continues to grow, or from Detroit, where unemployment plagues every street corner.
The news comes from Hollybrook Farms, a 124-unit affordable apartment community in Laurel, Delaware.
Last week, Delaware Governor Jack Markell and US Senator Tom Carper gathered with dozens of others to celebrate the rescued apartment project.
Hollybrook Farms received a combination of public and private funding last year to renovate the aging community, but in May 2009, renovations were only 58% complete when the investor defaulted on contractual obligations and forged a $4.8m funding gap.
The Delaware State Housing Authority worked with the community to request $4.3m of the federal stimulus funds, which was approved last month.
“This is stimulus funding doing exactly what it was intended to do — help the economy, create and sustain jobs and support the completion of ‘shovel-ready’ projects. The stimulus funding is being put to good use here in Delaware,” said Senator Carper.
But in seven months, literal concrete examples have been hard to find with the exception of last week, when HousingWire reported on the Treasury’s disclosure of state-by-state receipt of stimulus funding.
Is the spending of the stimulus package more of a slow trickle instead of an injection, or is good news just hard to come by?
Write to Jon Prior.
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September 9th, 2009 3:46 pm by David Layfield
I am the developer of Hollybrook Farms in Laurel, DE. You lamented that it’s been 7 months since the Stimulus Package was passed and little news has emerged on those expenditures.
I would agree that we haven’t heard a lot of stories like the Hollybrook story. However, Federal money, no matter if it’s a regular budget appropriation or an emergency package, takes considerable time to put on the street. The checks and balances required to ensure that money is not appropriated improperly or not just plain stolen take considerable time to implement.
In the case of the Tax Credit Exchange Program, an entire regulation, allocation plan and funding process had to be created from scratch.
Couple this with the fact that the funds were intended for construction projects, the large majority of which only existed on paper when ARRA became law, which typically take months or years to secure approvals for.
Contrary to what Congress or the public might think, us developers don’t sit around with “shovel-ready” projects that just need funding.
It costs tens or hundreds of thousands of dollars to do the predevelopment work necessary to have architectural and engineering work done and receive the necessary approvals.In the case of Hollybrook, we had a different scenario. We were nearly half complete with the project when ARRA was signed into law. No architectural work, permits or other time consuming predevelopment work had to be completed. Our project truly was shovel-ready and is certainly one of the first to put real dollars on the street.
Rest assured the development community is chomping at the bit to get to work. I have another renovation project not far from Hollybrook that we have been notified we are receiving ARRA money to complete.
However, the State of Delaware will not be able to get around to underwriting it until October. I could have been doing all the preliminary development work on that project for months now putting architects, engineers and others to work, but the red tape attached to the funding has made it a slow process.My recommendation is to be patient. At least in the Low Income Housing Tax Credit business, you will see a wave of deals closing starting in October and reaching an apex sometime around February.
Unfortunately long timetables are the norm in any real estate development that requires Federal or state financing.
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