Workforce Housing Developer Argues for Larger Number of Units

The Zoning Board of Adjustment heard a financial feasibility report from Russell Thibeault of Applied Economic Research, hired by the developers seeking to build a workforce housing project called Wallace Farms at 48 and 62 Perkins Road.

Project developer Thomas Monihan wants to put ten 24-unit buildings at the site and is requesting several variances. If approved, those variances would allow him to have 50 percent of the units as workforce housing, rather than the required 75 percent; have 24 units per building instead of the maximum 16 units per building; and phase in the project over three years instead of the required five.

The developer contends that if the conditions requested in the variances are not met, building the complex would not be financially feasible, as he would lose money.

Thibeault, the same consultant who went before the Town Council last week on the proposed Pettengill Road extension, said in his opinion it would not be fiscally feasible for the developer to build 15 buildings with 16 units per building, nor would it be feasible to have 75 percent workforce housing units or to phase in the project over five years instead of three.

Thibeault said it would cost more to build with 75 percent workforce housing than with 50 percent workforce housing, 75 percent workforce housing would generate less income than 50 percent, and phasing over five years would be more costly than three years.

He said 15 buildings with 16 units in each building with 75 percent workforce housing would cost $37.3 million, compared to 10 buildings with 24 units per building at 50 percent workforce housing, which would cost $33 million, a $4.3 million savings.

Thibeault said comparable two-bedroom units in the area are renting at an average of $1,300 per month without utilities, and new two-bedroom units in Amoskeag Millyard in Manchester, currently in construction, will have a monthly rent of $1,400. His conclusion was that new two-bedroom units in Londonderry could rent for $1,375 per month without utilities.

Quoting RSA 674:58-61, which is the New Hampshire statute on workforce housing, Thibeault said workforce housing rents with utilities could be found for $1,360 per month, or $1,100 per month without utilities, in western Rockingham County.

Thibeault said the rate of return had to be 6.50 percent and would require $2,424,500 for 75 percent workforce housing and $2,145,000 for 50 percent workforce housing. The estimated net income for the 75 percent would be $1,989,200, vs. $2,181,300 for 50 percent workforce housing. He said that would leave a deficit of $435,000 for 75 percent workforce housing, compared to a profit of $36,000 for the 50 percent scenario, after operating expenses.

He also noted that with 75 percent workforce housing, the rents would be lower and therefore the income would be lower, costing the owners income.

And the five-year phasing, Thibeault said, would put the developer at risk of rising interest rates and increase costs.

Board member Jay Hooley asked Thibeault how 75 percent workforce house vs. 50 percent would affect the cost of construction.

Thibeault responded that building 10 buildings with 24 units instead of 15 buildings with 16 units was the cost factor. He noted that he did not do the cost analysis but his experience was that building 10 buildings vs. 16 buildings is where the cost difference is.

Attorney Jay Leonard said the 75 percent vs. 50 percent was on the revenue side of the ledger and there would be loss in revenue at 75 percent compared to the 50 percent.

Hooley said he would like a breakdown of what the costs would be for 16, 20 and 24 units to see if there were a point where the profit would be made without having to go to a 24-unit building. Civil engineer Karl Dubay of the Dubay Group said a three-story building cannot have 20 units.

The board at its last meeting had requested that a third party, hired by the town at the applicant’s expense, do the cost analysis and again asked if that could be accomplished.

The board voted unanimously to continue the proceedings until March 7 and to have staff look into the legality of the request or whether an RFP (request for proposal) and bids were needed.

cent workforce housing units or to phase in the project over five years instead of three. Thibeault said it would cost more to build with 75 percent workforce hous- ing than with 50 percent workforce housing, 75 percent workforce housing would generate less income than 50 percent, and phasing over five years would be more costly than three years.

He said 15 buildings with 16 units in each building with 75 percent workforce housing would cost $37.3 million, com- pared to 10 buildings with 24unitsperbuildingat50 percent workforce housing, which would cost $33 million, a $4.3 million savings.

Thibeault said comparable two-bedroom units in the area are renting at an average of $1,300 per month without utilities, and new two-bedroom units in Amoskeag Mill- yard in Manchester, currently in construction, will have a monthly rent of $1,400. His conclusion was that new two-bed- room units in Londonderry could rent for $1,375 per month without utili- ties.

Quoting RSA 674:58-61, which is the New Hamp- shire statute on work- force housing, Thibeault said workforce housing rents with utilities could be found for $1,360 per month, or $1,100 per month without utilities, in western Rockingham County.

Thibeault said the rate of return had to be 6.50 percent and would require $2,424,500 for 75 percent workforce housing and $2,145,000 for 50 percent workforce housing. The estimated net income for the 75 percent would be $1,989,200, vs. $2,181,300 for 50 percent workforce housing. He said that would leave a deficit of $435,000 for 75 percent workforce hous- ing, compared to a profit of $36,000 for the 50 percent scenario, after operating expenses.

He also noted that with 75 percent workforce housing, the rents would be lower and therefore the income would be lower, costing the owners income. And the five-year phas- ing, Thibeault said, would put the developer at risk of rising interest rates and increase costs. Board member Jay Hooley asked Thibeault how 75 percent workforce house vs. 50 percent would affect the cost of construction.

Thibeault responded that building 10 buildings with24unitsinsteadof15 buildings with 16 units was the cost factor. He noted that he did not do the cost analysis but his experience was that building 10 buildings vs. 16 buildings is where the cost difference is. Attorney Jay Leonard said the 75 percent vs. 50 percent was on the rev- enue side of the ledger and there would be loss in revenue at 75 percent compared to the 50 percent.

Hooley said he would like a breakdown of what the costs would be for 16, 20 and 24 units to see if there were a point where the profit would be made without having to go to a 24-unit building. Civil engineer Karl Dubay of the Dubay Group said a three-story building can- not have 20 units.

The board at its last meeting had requested that a third party, hired by the town at the appli- cant’s expense, do the cost analysis and again asked if that could be accomplished. The board voted unan- imously to continue the proceedings until March 7 and to have staff look into the legality of the request or whether an RFP (request for proposal) and bids were needed.

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