Rising Construction Costs Imperil Town's Affordable Housing Project

Rising construction costs and delays are threatening the viability of the town’s proposed 64-unit affordable workforce housing development known as Ticcoma Green off Fairgrounds Road.

The town’s chosen developer for the $40 million project, HallKeen Management, told the Select Board on Wednesday that it is short $6.5 million on its latest construction budget for the mixed-income rental housing community. HallKeen is seeking a zero percent loan from the town for that amount which wouldn’t come due for 40 years.

The Select Board considered the $6.5 million gap financing request from HallKeen Wednesday night, and also reviewed a series of changes to the project - including eliminating all basements from the four buildings that make up the 64 units - intended to bring down construction costs.

“We’re at a crossroads,” said Tucker Holland, the town’s municipal housing director. “It’s not because of anything HallKeen has done or the town has done. We’re at this juncture because of a nuisance lawsuit and appeal which has delayed housing for year-round community members - 64 households to be exact - for a period of five years.”

Holland was referring to a lawsuit filed by a group of neighboring property owners who appealed the local approval of the affordable housing development in Land Court and then to a state appeals court. Those legal challenges were ultimately defeated when the appeals court rejected the lawsuits in January 2020, just before the start of the pandemic.

“The developer has been able to secure tax credits and subsidies,” Holland said. “But because of the long delta and significant increase in construction costs over the last few years, even these robust subsidies are not enough to cover all of what is required. It’s not an easy conversation, and it’s unfortunate we’re at this point. However, let’s see if we can’t move something forward.”

Members of the Select Board, however, had questions about the proposed loan, and were critical of the decision to remove basements from the four buildings.

“I don’t see that as a loan, it’s more like a grant,” said Matt Fee. “I think we have to be clear about that. It’s not a loan. If it is, it’s not the kind of loan I’d like to give...The town has put up $2.5 million for the road and now we’re being asked to put up $6.5 million. This is an opportunity. If we’re going to go forward we should be co-general partners and benefit more than getting it back in 40 years.”

Select Board member Dawn Hill Holdgate said she would like to see some form of interest - perhaps the same rate the town pays when it borrows money - placed on the loan if it is granted to HallKeen.

The current plan for the Ticcoma Green project - which would be located west of the town's public safety facility lot on Fairgrounds Road - includes four buildings, 64 units and 114 bedrooms. The property is owned by the town, and the Select Board issued a request for proposals to develop the land for workforce housing back in 2017. HallKeen emerged from that process as the town's chosen developer.

The 64 apartments would be divided into 12 three-bedroom units, 26 two-bedroom units, 14 one-bedroom units, and 12 studios. Fifty-two of the units would be restricted to individuals and households making up to 120 percent of the area median income. The final 12 units would be rented at market rates. The development would have a total of 81 parking spaces.

Mark Hess, the chief operating officer of HallKeen, was also in attendance Wednesday night. He referred to the increases in the construction budget for the project as “COVID escalation” and indicated that the gap financing loan from the town would allow his firm to start construction before the end of 2022 with its general contractor, Dellbrook Construction.

“Now that we’ve cleared the permitting lawsuit hurdle, we’re trying to move the project forward and get it under construction before the end of the year if we can,” Hess said. “With the difficulties of COVID escalation, we went to the DHCD (the state Department of Housing and Community Development) for tax credits and gap financing. But we got notice from the contractor they couldn't hold their price, or anything close to it.”

Responding to Fee’s comments, Hess said that HallKeen would be interested in having the town play a more active role in the project along with its $6.5 million loan - should that request be approved - but those discussions would need to happen soon.

“We do need to fish or cut bait at some point,” Hess said. “If we are going to have those conversations we need to accelerate that dialogue.”

Nantucket Affordable Housing Trust vice chair and Select Board candidate Brooke Mohr said there is an urgency for the project to get underway considering the delays and the island’s deepening affordable housing crisis.

“It will never cost us less and people have been waiting a long time,” Mohr said. “There's desperation in the community about housing. As a member of the Affordable Housing Trust and a housing advocate, I encourage the board to find common ground and work together with HallKeen. Sixty-four families have been waiting for these apartments for a very long time.”

The Select Board will discuss the gap financing request and other aspects of the project next week in executive session.

“The project won’t happen without town financial support,” Holland told the Current after Wednesday night's meeting. “We need to determine under what conditions we could see making it possible.”