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Workforce housing option

TOWN OF HILTON HEAD PURSUES PUBLIC-PRIVATE PARTNERSHIP

BY TONY KUKULICH

Faced with a shortage of affordable housing and unsuccessful attempts to encourage private development to meet that need, the Town of Hilton Head Island is pursuing a public-private partnership strategy to develop workforce housing on 13 acres of north-island property owned by the Town.

“We have a lot of front-line workers, hospitality and retail staff and others who want to live where they work,” Mayor John McCann said in a press release. “They have invested in our community, and we must invest in them by creating opportunities for affordable workforce housing.”

In February Town Manager Marc Orlando received permission from the town council to explore the public-private development option. The site selected for the project was identified as the North End Post Office Tract for its proximity to the post office on William Hilton Parkway. Soon after, surveying work and site cleaning began on the tract between Gumtree and Wild Horse roads.

A fact sheet produced by the Town illustrates the challenge facing potential home buyers and renters on the island.

The median home price on Hilton Head Island is $420,000. Assuming a buyer had the $84,000 required for a 20% down payment, a 30-year mortgage payment would run about $1,700 a month. The median monthly rent on the island is $1,500. The salary of a first-year teacher is about $35,500. Allowing an allocation of 30% for housing, that teacher could afford $888 a month for housing, far short of what is required to meet both the mortgage and rent payments.

For workers with less income, the delta between what’s affordable and actual costs gets even larger.

The annual income necessary to afford the average rent on Hilton Head is approximately $60,000 a year, which is nearly three times the average salary of a food services worker and more than double the amount a retail worker makes in a year. It’s also more than the starting salary of a registered nurse and a firefighter/paramedic with Hilton Head Island Fire and Rescue. 

Suitable location

According to council member Glenn Stanford, the Town started looking for opportunities to ease the housing shortage several years ago when a consultant was hired to study the issue. A solution suggested by that study was to offer bonus density, which allows developers to build more housing units than a parcel of land is zoned for if those units provide workforce housing.

“We adopted those recommendations as town ordinances, and nothing has happened,” Stanford. “Since then I’ve heard from people with expertise in the matter that bonus density just doesn’t work. The problem here is that the dirt is too expensive to meet the economic formula that a workforce housing developer needs.”

With no private developer stepping in to fill the housing gap, the Town, which is the largest landowner on the island, searched its inventory of properties for a parcel suitable for development. That process revealed that development on most of the town-owned land was prohibited, largely by the terms of the bond referendums that were used to purchase the properties. Those restrictions were put in place to preserve trees and green space on the island, an idea that Stanford called “very worthy.”

Despite the challenge of locating unrestricted land, a parcel adjacent to the post office on the north end of the island was identified as town-owned and free of development restriction. With a suitable location identified, the town started its search for a development partner in early April when it produced a request for qualifications (RFQ). Interested developers have until May 20 to respond to the RFQ.

“This first phase is really qualifying what we believe are good partners that have experience developing fixed-income, sustainable, value-added communities,” said assistant town manager Shawn Colin.

The town will evaluate the RFQ submissions to determine the pool of applicants who will be asked to submit a development proposal, and those proposals will be reviewed by town staff and the town council before a final selection is made.

The timing of the process will be dependent on the number of RFQ responses received, as each response requires time to properly evaluate. Colin said there has been high interest among developers for the project and provided a rough estimate of 60 to 90 days after the closure of the RFQ process before proposals might be due.

The town has $1 million in funding allocated from its $5.5 million American Rescue Plan Act distribution to contribute to the project in some form, though exactly how that money will be used hasn’t yet been determined.

“It could be interior roads,” Colin said. “It could be a public park element. Roads, water, sewer, storm water and broadband are the focus areas.” 

Needs of the community

Workforce housing is a broad term that can apply equally to low-income development projects and to those earning up to 150% of the county’s area median income. Until project proposals are submitted, it remains to be seen which part of that continuum will be targeted.

Sandy Gillis, executive director of the Deep Well Project — an organization with a 50-year history of providing assistance and promoting self-sufficiency to those in need on Hilton Head Island — expressed support for the initiative but remains concerned that those on the lowest tier of the economic ladder will be excluded.

“I feel like we have a little bit of momentum now that we’re at least talking about the need for workforce housing,” Gillis said. “You’re not going to hear them talking about the guys who work on the golf courses or the ladies who clean the condos. They’re going to talk about the teachers, and they’re going to talk about cops, and they’re going to talk about those kinds of people, which is still a step in the right direction. But there’s still a whole other tier of housing that right now is in the shadows.”

Colin addressed that concern by asserting the town’s commitment to addressing the needs of the entire community.

“We want to provide housing that meets the entire range of workforce needs that we have here,” he said. “We want to make sure we’re looking at mixed income opportunities to serve workforce needs across a bigger spectrum.”