The Housing Authority of the City of Milwaukee, through its development arm Travaux Inc., plans to construct a 32-story mixed-income tower to fill a niche it claims is not being met in the Milwaukee area.
This spring, officials unveiled the housing authority’s (HACM) plans for Convent Hill South, which would go up at the corner of Knapp and Milwaukee streets. The roughly $150 million tower would have as many as 350 affordable and market-rate residential units, 40,000 square feet of office space, 13 townhouses along Milwaukee and Knapp streets and amenities typically found in upscale high-rises, such as a swimming pool and fitness center.
Scott Simon, vice president of development with Travaux, said Convent Hill South is a unique project for the area. However, it would not be different from high-rises built elsewhere in the U.S., in communities that contain inclusionary zoning requirements. Such requirements ensure a portion of units are set aside for low-income families.
“By definition we are filling a niche that a lot of other communities are having filled with mixed-income developments on all sides,” he said.
Milwaukee is not able to enact such requirements due to state law, said Simon. Elected leaders in 2017 considered an inclusionary housing proposal for certain properties that receive assistance from the city, but the city attorney’s office said such a move would be illegal.
Amy Hall, a HACM spokeswoman, added that the revenue generated from the market-rate and commercial tenants will help finance necessary capital improvements on Housing Authority properties. Financing those improvements has become more difficult in recent years due to shrinking contributions from the federal level, she said.
“What this allows us to do is provide a funding stream that allows us to maintain our portfolio and generate the money that goes back into HACM,” Hall said.
In addition, there’s a shortage of both affordable units and housing overall, according to Travaux.
Simon said there is a shortage of affordable units across the nation. In Milwaukee specifically, the shortage is made apparent by the waiting lists for various HACM properties, he added.
“We’re hoping to provide as many new units over the next number of years that we can to accommodate the demand,” he said.
As for market rate, Simon said it appears vacancy rates are falling below 5% in the market. And according to market research, 5% appears to be the equilibrium in the market, he said.
“That tells us there is greater demand than there is supply at the moment,” Simon said.
As of mid-October, schematic design on the project was at 90% completion, he said. The project team had also completed outside market research and was still determining the appropriate unit mix. Further, the team will also have to determine what percent of the area’s median income renters would need to be earning in order to qualify for the affordable units.
Simon said he expects the unit mix and affordability levels will be finalized within the next six months.
Also to be finalized are development design and construction documents. Simon said each of these steps will take at least three months, and that’s after an additional month needed to complete schematic design.
From there, Travaux will piece together the project financing.
“There’s many options we’re looking at right now, the first and primary being the Opportunity Zone funds that are available,” said Simon, alluding to the fact that the site falls within a federal and state designated Opportunity Zone. This program was created in 2017 by federal lawmakers to encourage investment in projects located in distressed areas.
Simon said he expects Opportunity Zone funds to make up somewhere between 15% and 20% for an equity contribution on the project.
Other financing options include various HUD programs, offerings from Fannie Mae and Freddie Mac, and more conventional options, such as mezzanine and equity debt.
Travaux also plans to bring on a construction manager as well as a property manager. Hall said in late October that HACM expected to issue a request for proposals seeking a construction manager within the next couple weeks. A separate RFP for property management would be issued further into the future.