Spruce Cape Homes, a $7.5 million affordable housing development, is now on the market. Thirty housing units are available in a multi-family rental housing project at 529 Carroll Way, the corner of Sharatin Road and Carroll Way.
The 30 units consist of 10 one-bedroom units, eight two-bedroom units and 12 three-bedroom units. Monthly rents start at $466 for one-bedroom units, $974 for two-bedroom units and $1,122 for three-bedroom units, according to a news release by North Star Management, LLC, which manages the property.
Some units are restricted to tenants making 60% or less of median household income. Other units are available to those at any income level. Ten units are fully equipped for tenants with physical disabilities.
The project was led by Trapline, LLC and V2, LLC, a partnership between Glenn Gellert and John McGrew, Anchorage-based housing developers. They also developed the Mill Bay Townhomes, which opened last September. They have developed 25 similar projects throughout the state. Anchorage-based SR Bales Construction Inc. performed the construction work.
“Kodiak is a vibrant economy with a lack of affordable housing,” Gellert said in the news release. “Everyone is entitled to high-quality housing that is priced to match income levels. Too many people are living in substandard conditions or struggling to pay for all of life’s necessities. Affordable housing is the key to stabilizing people’s lives and retaining quality workers. We hope that Spruce Cape Homes will be a well-accepted addition to the Kodiak housing market.”
McGrew, said the $7.5 million development only covers the first phase of construction. The second phase will provide 20 additional units, and will likely cost a similar amount, he said. In total, the Spruce Cape development will offer 50 units.
The first phase of construction began in late spring. Two buildings are complete. A third building is expected to be complete by the end of this month, and a fourth building will be complete by Thanksgiving.
Construction on the second phase is planned for spring. The adjacent lot will include two more buildings, composed of two and three-bedroom apartments.
According to McGrew, the decision to begin the Spruce Cape Homes development came at the heels of the success of the Mill Bay Townhomes development. He said all units were leased quickly once they were on the market, indicating the need for affordable housing in Kodiak is high.
“We were looking at doing another project. That lease-up confirmed the need for additional housing in Kodiak,” he said.
McGrew was appreciative of the support they received from the Kodiak government.
“The city was very supportive in terms of the responsiveness and giving us assistance. That was really refreshing, working with Ted (Hansen, Kodiak Building Official),” he said.
However, he acknowledged that working in Kodiak was harder than working in cities on the road system.
“There are logistics. It costs more, you have to ship everything in. You have to house employees,” he said, noting that the contractor made an effort to hire locally but still had to import workers from outside of Kodiak.
However, McGrew said that is the reason why the new housing will be so beneficial to the community, noting that the new housing will help maintain the workforce in Kodiak.
“When we talk to people in Kodiak, they say ‘My son had to move out because he couldn’t find adequate housing,’” he said. “If you can improve the housing, it helps the community economically.”
The Mill Bay and Spruce Cape properties are managed by Kristen Hinds, who explained that the rent rate for tenants will be determined on a sliding scale. depending on the tenants’ income. There are three below-market rates, for tenants making less than 30%, less than 50% or less than 60% of the median household income.
Both Mill Bay and Spruce Cape developments set aside units for tenants with physical and mental disabilities. In addition, they include units set aside for individuals experiencing homelessness. Management works with various nonprofit agencies in Kodiak, who refer individuals in need of housing.
Hinds said the existing Spruce Cape buildings are currently at 20% occupancy. She and her husband are among the new tenants. The Mill Bay homes currently have two vacancies. There will be two additional vacancies in November, according to Hinds. For both the Mill Bay and the Spruce Cape homes, she is accepting applications for both low-income and market-rate tennants.
“My hope is that it gives people a good place with plenty of space,” she said. “We’re looking to cater to everyone on the island, every family size, everyone who wants to have a home.”
The Spruce Cape homes, like the Mill Bay homes, are equipped with various energy-efficient fixtures meant to save tenants money. These include solar panels on the roofs of the buildings, energy-efficient water heaters, and energy-efficient kitchen appliances. All apartments come equipped with washers, dryers, dishwashers, microwaves and refrigerators.
“We don’t want people to have to worry — ‘How exorbitant is my electric bill going to be this month?’ We’ve done everything we can,” she said.
“It just doesn’t pencil”
McGrew said the funding and tax credits were critical for the success of the project.
“It’s hard to develop housing at the cost that it is today, that can support itself without some extra funding. It just doesn’t pencil,” he said. “You can’t build a $7 million project and rent out units for $800 a month. It just doesn’t work.”
McGrew and Gellert have developed more affordable housing in the state that any other for-profit, according to McGrew. Recent projects include a 24-unit development in Kachemak City, and a senior housing project in Fairbanks.
In some projects, they partner with nonprofits that provide financial support, but for the Kodiak developments, McGrew and Gellert are the general partners. Construction financing was provided by First National Bank Alaska. Permanent financing is being supplied by the Alaska Housing Finance Corp. and the Rasmuson Foundation.
The development team used Low Income Housing Tax Credits as a financing tool to pay for construction and bring down rental rates. These credits were brokered by WNC, a California based tax credit syndicator, that provides investment, asset management and development services focusing on affordable housing.
“WNC comes in and underwrites the project to make sure it’s developed correctly,” McGrew said. “They make sure it’s a good investment. They help broker the tax credits to investors. They are the eyes and ears of the investors as the investment is development. They make sure it’s developed properly.”
First written into the IRS code in 1986, affordable housing tax credits are the largest source of new affordable housing in the United States, according to the National Housing Law Project, a nonprofit. Often administered through statewide housing offices like Alaska Housing, tax credits are granted to developers, who then broker them to financial institutions. The banks and other lenders are then able to reduce their federal tax obligations dollar-for-dollar.
McGrew said housing developments are more challenging in remote parts of the state but that the Alaska Housing Finance Corp. encourages rural development. In order to build in Kodiak, McGrew and Gellert had to win a development bid from Alaska Housing.
“Every state has a certain amount of tax credits that they’re awarded to help meet the needs of affordable housing,” McGrew said, referring to the federal tax credits that supported the Spruce Cape and Mill Bay projects. “Alaska Housing has a competition every year where developers submit applications. They judge them by the need in the community.”
McGrew said he and Gellert take a hands-on approach to the project and management and will be traveling to Kodiak frequently in the coming years. They are committed to managing the project for the next 17 years, at which point the tax break ends and the investors usually exit the project. McGrew and Gellert, who live in Anchorage, hope to become the exclusive owners of the property.
“I love Kodiak. I think it’s one of the greatest places in Alaska,” McGrew said. “It’s one of the prettiest places in the world. I try to get there as often as I can.”
Once the second phase of the Spruce Cape development is complete, McGrew does not foresee additional projects in Kodiak in the near future.
“We’re excited about having those units there. I think it’s going to be a great project for us and a great project for Kodiak,” he said. “As developers, we’re going to probably stop for now and see how things go.”
Spruce Cape Homes is accepting rental applications. You can apply or make an appointment to see the homes by contacting Hinds at 907-942-2893 or email@example.com.
An open house is scheduled between 4 p.m. and 6 p.m. on Sunday, Oct. 13.