03 March 2010

City Incentives Spurring El Paso Apartments

El Paso Inc.

Incentives designed to stimulate the construction of apartments in El Paso are working, city officials say.

Almost 2,000 units have been put under contract since the incentives were approved by City Council less than a year ago, according to Kathy Dodson, the city’s director of economic development.

“I am thrilled about the results we are having,” she said. The program was created to provide off-post housing for the influx of soldiers coming to Fort Bliss.

One project taking advantage of the incentive program is The Bungalows, a 431-unit complex on the Eastside that’s being built by Bohannon Development.

Tom Bohannon, the company’s president, said units in the first phase will be ready to rent as early as next month. The rest should be finished by September 2011, he says.

But even with incentives, Bohannon says it’s still not the level of return on investment that would normally attract outside companies.

In the slow economy, builders are finding it hard to secure financing, while the cost of construction is high.

“You really need to want to build in El Paso, because it is very difficult to make the numbers work,” Bohannon said. “We have made some sacrifices in terms of the money we earn to do it.”

The incentive program rebates developers up to 100 percent of fees normally required by the city. It will expire when 4,000 units have been put under contract, unless City Council extends it, Dodson said.

Trouble brewing
In early 2009, the message was that this summer would be the breaking point when there would be more demand for off-post housing then there are places to live.

That spawned forums, studies and meetings between Fort Bliss leadership, the development community and city officials.

Many of the new soldiers are young, low in rank and not ready to be homeowners. They’d be looking for apartment in a market with a 94-percent occupancy rate for existing units, according to the El Paso Apartment Association.

And all that led to the city passing the incentives package.

Tom Fullerton, professor of economics and finance at the University of Texas at El Paso, cautions that there can be unintended consequences.

“Incentivising” the construction of that many units could put other apartment complexes out of business, he said, so the net gain might not be as high as expected.

Right now, Dodson said, they estimate that about 6,000 multi-family units need to be built to accommodate the incoming soldiers, but the number is only a rough estimate.

The stock of multi-family units in the city is projected to increase by about 200 this year, according to a report released in December by the University of Texas at El Paso’s Department of Economics and Finance. It also projects that multi-family starts will increase 32 percent.

The influx of troops to Fort Bliss is now 60-percent complete, according to Col. Edward Manning, garrison commander of Fort Bliss. The movement is projected to draw to a close sometime in 2012.

That timeline is important for builders, since it typically takes a year to work through the planning and financing stages of a new apartment complex, and two to three years to finish construction.

Bohannon says his company is approaching new projects conservatively, and not basing decisions solely on the hope of some future demand driven by growth at Fort Bliss.

“In today’s lending environment, that is really the approach to take,” he said.

What is clear is that soldiers have been able to find housing so far.

“Despite a high occupancy rate in the city, we don’t have people coming and saying they can’t find a place to live off-post,” said Col. Edward Manning, garrison commander of Fort Bliss.

To help soldiers who want to buy a home, Fort Bliss holds quarterly home buying seminars and classes.

“It makes better sense to help (soldiers) purchase homes because it is an investment,” said Yolanda Brown, director of the Fort Bliss housing office.

According to Desert View Homes’ marketing director Linda Cara, although they do see soldiers, there hasn’t been a major influx.

The company builds homes priced as low as $90,000 aimed at the first-time homebuyer.

“One of the neat things we are seeing,” Cara said, “is that they’re coming in and surprised that they can afford a home in El Paso.”

Incentives program

• Incentives available for new multi-family Texas apartments projects with at least 250 units

• Property tax increases resulting from new development will be used to rebate builders the city fees they pay

• One quarter of fees will be rebated for building 250-500 units, half of fees for 501-749 units, and all fees will be rebated for 750 or more units

• Developers must submit detailed site plan for approval by Development Services

No comments:

Post a Comment