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New Hanover County's new American Rescue funding plan remains vague on $3.5 million in affordable housing spending

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New Hanover County
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NHC
The county's initial plan was to extend water and sewer along Sidbury Road to the future location of a DR Horton development, at a cost of around $4 million.

New Hanover County has tweaked its budget for $45 million in federal Covid recovery funding from the American Recuse Plan -- which includes millions to support affordable housing. As with the initial approach, the new plan approved by county commissioners this week offers few specifics.

The county’s initial budget for American Rescue Plan (ARP) funding, announced in late March, was necessarily tentative -- since the federal government hadn’t yet released final guidelines on spending.

Still, the county knew it wanted to spend about $4 million to spur new affordable housing -- and planned to do that by footing the bill for water and sewer infrastructure for a DR Horton development known as 'Sidbury Farms,' located on Sidbury Road in the northern part of the county. These are costs known as 'capacity fees,' that developers traditionally pay upfront, and then recoup over time as subsequent projects 'down the line' connect to the new infrastructure.

Related: NHC says Rescue Act funding could increase affordable housing, but details aren't worked out yet

However, because DR Horton had already agreed to pay the Cape Fear Public Utility Authority (CFPUA) the capacity fees for this infrastructure, when the official Treasury Department guidance was handed down, it rendered this ARP project a no-go, according to county manager Chris Coudriet.

“If a water and or sewer extension already had an identified source of funding, particularly private funding, ARP dollars would not be eligible," Coudriet confirmed.

In the new plan, $3.5 million is now being held for a future project, as of yet unidentified, but it's still earmarked for water and sewer, and will probably still be used in the same area.

“It may be still an extension of what comes from the Horton project further along Sidbury. Because that is the best development opportunity as viewed by the planning office," Coudriet said.

About $500,000 in funding will go toward helping delinquent CFPUA customers catch up on their bills. At the beginning of the year, the authority had about 6,000 overdue accounts, totalling about $3 million in unpaid bills and fees. Due to the limitations of state statute, authorities like CFPUA can't simply decrease or forgive water and sewer bills for customers; to help, the county helped CFPUA set up an independent non-profit for bill assistance.

Related: CFPUA likely to scrap flow-restrictor pilot, take new approach to delinquent bills

When it comes to affordable housing, the underlying philosophy for the ARP spending is that, by reducing the infrastructure costs (in this case, the capacity fees) for developers, more affordable units will be built.

This raises two questions. First, how much more affordable will the units be?

While the Sidbury Farms project is no longer being considered, it does serve as an example of how using infrastructure investment to drive down housing costs could work.

According to a CFPUA spokesperson, "for this project, the Capacity Fee was estimated to be about $1,600 of the total cost of each three-bedroom home that ultimately will connect to the utility extension. That is only an estimate, though. The actual Capacity Fee for this project will not be set until project costs are calculated after completion."

With over 600 homes (and over 100 townhouses) planned for the project, those savings could certainly be aggregated to drive down the cost of select units.

But, then there is the second question: what’s to keep developers from simply using the savings to pad their bottom line?

The county has not drafted any specific language about that yet — but, when a specific water and sewer project is identified, it will have to go before county commissioners, with what Coudriet calls ‘policy parameters.’ Those could, in theory, dictate how many affordable units would be created — and how affordable they would be.

There's time to work out those details, but the clock is ticking. Under federal guidelines, the county has about two and a half years — until December 31, 2024 — to spend ARP funds.

For now, it’s unclear how much affordable housing bang the county will get for its infrastructure buck.