Albuquerque Housing Credit Project Funded in Part from Carbon Offset Dollars

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Tax Credit Advisor, February 2009: Romero Rose LLC had always intended for the new Silver Gardens Apartments in downtown Albuquerque, NM to be a model of environmental responsibility.

After all, the local affordable housing developer is an affiliate of the New York-based Jonathan Rose Companies, which has made a nationwide name for itself with more than 1,000 units of green housing under development that meet or exceed the U.S. Green Building Council’s LEED green building standards.

But Romero Rose saw an opportunity to do even more. With help from a new initiative by Columbia, MD-based Enterprise Community Partners, Romero Rose plans to upgrade its energy efficiency features when it break ground on the 66-unit low-income housing tax credit (LIHTC) development in early February 2009.

First Project of Type

The new Silver Gardens Apartments will be the first development in the nation to participate in the new Enterprise Green Communities Offset Fund, said Dana Bourland, who manages the fund and serves as a senior director of Enterprise’s initiative.

The fund will pay Romero Rose about a nominal amount of $6,600, called a voluntary carbon offset, for promising to include upgraded energy efficiency equipment in Silver Gardens Apartments that will prevent about 330 tons of carbon dioxide from being released into the environment.

“We didn’t know about the carbon offset fund, but it’s a nice thing they chose us to be first transaction,” said Homer Robinson, project manager for Romero Rose, who works on the Silver Gardens Apartments development.

“We wanted to put in a wind turbine, but as a result of the carbon offset, we are looking at a solar-wind hybrid turbine,” Robinson explained. The upgraded equipment, which is manufactured in New Mexico, can generate and capture wind energy at night as well as solar energy during the day, he said.

“Without the offset, it would have been out of our price range,” he said.

Robinson said the Silver Gardens Apartment is being developed in partnership with the Supportive Housing Coalition of New Mexico, Inc. In addition to the housing units, the property will also include a parking garage for tenants.

Two-Phase Project

Silver Gardens Apartments will be a transit-oriented development built on the site of an old Greyhound bus station in a blighted area of downtown Albuquerque, Robinson said. The goal, he added, is to create a 24-hour, mixed-used, mixed-income community in an area that is just acres of empty dirt.

The first phase of the project, which qualifies for the carbon offsets, will include approximately 10 market-rate apartments and 56 LIHTC units. The development is across the street from the Alvarado Transportation Center, a city hub for bus and train transportation. Construction is expected to last 12 months.

The second phase of the project will contain an additional 55 units, including 46 LIHTC units, and will be completed a year later, Robinson said. Other planned additions include for-sale town homes and a green home/office space development.

While all the units will have the same green efficiency features, the affordable housing rents will be structured according to tenant income. Monthly rents for the affordable units will range from $278 to $739. Higher rents will be charged to market-rate tenants.

In the first phase, approximately nine units will be reserved for tenants with incomes at or below 30% of the area median income (AMI); 26 units, at or below 50% of AMI; and 21 units, at or below 60% of AMI. For an individual, 30% of the AMI is $12,200; 50% of AMI is $20,300; and 60% of AMI is $24,360. For a family of four, 30% of AMI is $17,400; 50%, $29,000; and 60%, $34,800.

Robinson said Silver Gardens Apartments will help the city in addressing an affordable housing shortage of roughly 6,000 units.

Funding Sources

The bulk of the financing for Silver Gardens Apartments, about $9 million, comes from housing tax credit equity, which Romero Rose locked in before the equity market fell apart, Robinson noted.

A $2.87 million construction loan for the project has been provided by Los Alamos National Bank, which has a special program for green builders with LEED certification. The 24-month loan is at 5.75% interest, with many of the fees waived. Other interim financing sources are a $1 million city Urban Development Action Grant (UDAG) loan and a $1.25 million infrastructure loan (3% interest) from the New Mexico Mortgage Finance Authority. The land for the project was donated by the city.

In addition to the tax credit equity, permanent funding sources for the project include a federal FHA risk-share permanent mortgage of $1.5 million at 7%; $1.9 million grant from the city’s Workforce Housing Trust Fund; Home Depot Foundation Grant of $100,000; Enterprise Community Partners green design grant of $50,000; UDAG grant of $75,000; and the Enterprise carbon offset sales funds of about $6,600.

Robinson noted that Enterprise Community Investment syndicated the housing credits. He said the projected total development cost is currently estimated at $12.6 million.

Robinson predicted that Silver Gardens Apartments will achieve LEED Silver or Gold certification and also meet the Enterprise Green Communities criteria – these are two different green building ratings systems. The project will include water-efficient landscaping and irrigation, featuring rainwater collection and storage tanks; water-efficient indoor plumbing; an energy-efficient building envelope and mechanical systems; and Energy Star windows and appliances.

Bourland said the Silver Gardens Apartments development proves that green building technology doesn’t result in inferior housing developments. In fact, she said, residents actually get the best of both worlds – affordable rents and more healthy living spaces in local neighborhoods.

Carbon Offset Program

Under Enterprise’s voluntary carbon offset program, Enterprise Community Partners collects charitable contributions from corporations and individuals that host events or operate businesses that produce carbon dioxide. These organizations might want to make a commitment to combat global warming so they participate in the voluntary carbon offset program, Bourland said.

These charitable contributions, which are tax-deductible, are awarded to affordable housing developers who agree to take extra steps – such as buying more energy-efficient equipment or materials – to reduce the carbon footprint of their developments.

The funding requires the developer to measurably reduce carbon emissions below what they had planned to achieve during the normal course of construction, Bourland explained. Enterprise pays developers $20 per metric ton of reduced emissions.

Enterprise considers a development’s indoor air quality, energy efficiency, water conservation, and other program criteria. Bourland said carbon offsets can only be used once during the 10-year purchase period, and can’t be traded.

So far, Enterprise has had limited contributions and hasn’t opened up the fund to general inquiries by developers. Bourland said the Silver Gardens Apartments development attracted Enterprise because the developer is committed to energy efficiency and the housing is located near a transportation hub.

– Stephen K. Cooper