NewbergAffordableHousing_1_250Affordable Housing – To Rehab or Build Again? That is the Question.

When it comes to affordable housing, where are our limited resources best applied, to preserving existing affordable housing or to developing new units? Two distinct affordable housing projects in the Twin Cities serve as good examples of the inherent value of the former.

In Roseville, Minnesota, a first ring suburb of the Twin Cities, the renovation of an aging apartment complex is setting the standard for green development. Aeon, a Minneapolis-based non-profit, is renovating 120 one-bedroom apartment units in five buildings. Near downtown Minneapolis, locally-based Sherman Associates is proposing to renovate 1,313 units at Riverside Plaza, an instantly recognizable project with a storied history.

Originally built in 1965, Sienna Green is typical of the era – two-story walk-up buildings with additional garden level apartments. The project is also in a good location near shopping, employment and along a transit line. NewbergAffordableHousing_2_250

When Aeon purchased the complex in 2006, it was 40% vacant and sorely in need of renovation, as some tenants had to shuffle furniture around when it rained so as to avoid getting wet. Gina Ciganik, Vice President of Housing Development at Aeon, explains that they considered tearing the buildings down and starting fresh, but decided that since the bones of the building were sound that renovation was not only more cost effective but also greener. “You have to weigh that and we did,” says Ciganik. “Besides, it is much greener to reuse the existing buildings.”

With green development in mind, Aeon decided to make the project a sustainable model for revitalizing aging housing stock, and formed a partnership with the Center for Sustainable Building Research at the University of Minnesota and the Center for Energy & the Environment, a Twin Cities non-profit, to assess pre- and post-construction energy and materials efficiency.

Sienna Green’s has many of the usual green features, including low-VOC paints and carpeting, high-efficiency appliances, updated HVAC, and rain gardens. As well, Aeon is building a sidewalk to create a walking connection through the neighborhood. These will save tenants from day one, making Sienna Green’s affordable rents even more so.

NewbergAffordableHousing_3_250For all of Sienna Green’s environmental friendliness, the bottom line was a major consideration. Sienna Green was financed using more than a dozen sources, Low-Income Housing Tax Credits being a primary one. The total development cost for the project is approximately $145,000 per unit, versus around $200,000 per unit if they had chosen to tear the buildings down and build 120 new construction units. That cost difference totals over $6 million, a major consideration for affordable housing policy advocates, lenders, and developers alike.

Ciganik notes the seemingly endless supply of 1960s and 70s apartment complexes across the Twin Cities metro area that could be renovated in a similar fashion. It amounts to tens of thousands of units. Multiply that across the major metro areas in the United States, and given the inherent green argument for renovation versus new construction, and there is a compelling argument for more projects like Sienna Green.

Riverside Plaza, originally built in 1973 as one of a precious few projects built using the federal “New Town In Town” program. Cedar Riverside (as it was originally named and still widely referred to as) is notable for its Ralph Rapson-designed high-rise buildings with colored panels, its good urban location (although isolated by freeways), its original use as market rate apartments and current use as largely affordable apartments, a large proportion of which are rented by recent Somali immigrants.

NewbergAffordableHousing_5_250Sherman Associates is proposing, at a cost of $100 million to renovate the complex to provide more efficient HVAC systems, elevators and in-unit improvements. The proposed renovation cost would be paid for by a variety of sources, including low-income housing tax credits and historic tax credits. The suggestion that a 37-year old property is eligible for historic tax credits has raised some eyebrows. However, the cost of renovation is just $76,000 per unit, a large sum, but considerably less than $200,000 or more (likely substantially more for high-rises in the core city) it would cost to redevelop Riverside Plaza with new units.

Sienna Green and Riverside Plaza, in strikingly different ways, both demonstrate the inherent value of preserving well-located affordable housing units as being critical to the overall housing supply in the Twin Cities.