Building Palm Springs affordable apartments will cost millions extra; city to loan $2.2M

The first affordable housing complex to be constructed in Palm Springs in a decade will cost millions more than planned because of increased construction costs.

On Monday, the Palm Springs City Council voted to provide about $2.2 million more in loans for the Monarch Apartment Homes, nearly doubling the total amount of loan funding it is providing for the project.

That leaves about $700,000 in funding still needed, with the council voting Monday to assist the project’s developer in securing it from other sources. City Manager Scott Stiles has indicated that if that effort fails, the city could provide the money itself.

A memo written by Stiles states that the new loan commitment from the city will allow the project to stay on track to be completed and fully occupied by the end of the year.

The city's director of community and economic development, Jay Virata, said the complex is 70% complete and the chance of it needing additional funding to be completed beyond that outlined Monday should be "very slim."

What are the Monarch Apartment Homes?

The Monarch Apartment Homes are a 60-unit housing complex being built on a previously vacant lot at the southeast intersection of Indian Canyon Drive and San Rafael Drive in North Palm Springs.

The project will consist of 28 one-bedroom units, 16 two-bedroom units and 16 three-bedroom units. It is being developed by Community Housing Opportunities Corp.

The rent will be capped at rates that must be affordable for those making 30% to 60% of the area median income. The area median income is $65,300 for a one-person household and $108,200 for a six-person household. One unit will be reserved for the manager of the complex.

How many people have applied to live there?

The city opened a waitlist in April, which closed in June. Virata said over 500 people applied during the window, including around 150 people who currently live in Palm Springs. City Attorney Jeffrey Ballinger said the city would likely face legal challenges if the property was restricted to people who already live in Palm Springs.

How much are building costs rising?

A staff report published by Stiles ahead of the meeting stated the cost of the project had risen to about $39.1 million, with the developer having secured about $36.1 million and asking the city to provide the remaining roughly $3 million.

A letter sent to the city from the developer stated that the cost of the project had increased by about $7 million.

However, Virata said during Monday's meeting that an additional $8.2 million had already been raised from other sources. Virata did not return messages from The Desert Sun on Tuesday asking for an explanation of the discrepancy.

And based on earlier accounts, costs have risen even more. When the project broke ground in April 2021, Joy Silver of Community Housing Opportunities Corp. estimated it would cost $29 million. (Private developers were expected to pick up $21 million of that through a state tax credit program.)

The latest $39.1 million cost would represent a 35% increase.

How does the cost compare to other affordable housing projects?

With the new commitments voted on Monday, the city will be providing about $82,000 in funding per unit. That figure reflects both loans provided for the project and the land the city donated, which is valued at about $850,000.

That puts the per-unit cost of the project roughly in between the two other affordable housing complexes currently being developed in Palm Springs with city funds: The city is paying about $60,000 per unit for the Vista Sunrise II special needs housing complex being built at the DAP Health campus and about $99,000 for the 71-unit Aloe Palm Canyon Project.

Stiles’ report noted that city contributions for recent affordable housing projects have ranged from about $41,000 per unit for a project in Palm Desert to $218,000 per unit for a project near San Jose.

What did the council say?

Councilmembers Jeffrey Bernstein, Lisa Middleton and Christy Holstege all spoke enthusiastically about the project prior to the unanimous vote, with Bernstein calling it a good example of an affordable housing project as well as a good deal for the city given that it's putting up just a small fraction of the cost.

Paul Albani-Burgio covers breaking news and the City of Palm Springs. Follow him on Twitter at @albaniburgiop and via email at paul.albani-burgio@desertsun.com.

This article originally appeared on Palm Springs Desert Sun: Palm Springs affordable housing complex to cost millions extra