Gateway at Exeter: Developer reduces workforce housing units, increases rent

EXETER — The Gateway at Exeter is set to bring 224 apartment units to town upon completion. However, the development will include fewer workforce housing units with higher rent prices than originally planned.

The town's Zoning Board of Adjustment approved a variance request July 18 from developer Tom Monahan to slash the number of planned workforce housing units for the project off Epping Road from 56 to 45 with rents not exceeding 80% of the area median income (AMI) instead of 60%.

Attorney Morgan Hollis, representing the Gateway at Exeter, said the request came down to cost and making the project work financially.

“Unfortunately, times have changed since 2019 (when the project was originally approved),” he said. “The biggest change is of course the cost of construction, which has nearly doubled … in addition, interest rates have gone from near zero to 6% range.”

The cost of construction, he said, went up from $39 million in 2019 to $57 million now, a 46% increase. That number does not include the soft cost — which is around 15% of the total — and the cost of financing.

ZBA members said they were “disappointed” with the request but agreed 45 workforce housing units were better than none.

“Unfortunately, I think it’s the right thing to do, (which is) to agree to it,” said ZBA member Laura Davies. “This much housing will make a difference in Exeter. We don’t have enough rental housing, period.”

“Forty-five units of workforce housing — even at 80% of AMI — is better than none,” said ZBA Chair Robert Prior.

Board members questioned if there is any flexibility to make the units more affordable.

“It is disappointing to see it become less units and less affordable, and I know you’re going to the minimum number of units,” said Davies. “Is there any play in there to make it more generous to the community?”

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Based on the latest New Hampshire Housing Finance Authority data, the cost for a one-bedroom apartment is $1,775 and $2,130 for a two-bedroom apartment at 80% AMI. At the initial 60% AMI, the cost would’ve been $1,386 and $1,663, respectively.

“Those rental rates could not generate sufficient money for the project,” Hollis said of the latter.

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The Gateway at Exeter will be a mixed-used development on Epping Road across from a Mobil gas station. The development plan includes two buildings — one will have 75 units and the other 149 units — and a 50,000-square-foot commercial building, all on 17-acres of land.

The complex is planned to include one- and two-bedroom units.

Monahan, who is behind the approximately $80 million project, said the Gateway at Exeter would not have been built without funds from InvestNH, a housing incentive program that capitalizes on federal American Rescue Plan Act money to expand and accelerate housing construction across the state.

The project received a $3 million grant. One of the requirements was that the development have at least 20% of the units reserved for workforce housing, which the project still qualifies for.

“(The state) looks at this as their most important development because it’s the Seacoast area," said Monahan.

As part of the program’s incentive, the town will receive $450,000 — $10,000 per affordable housing unit — which has no spending restrictions. Monahan said it’s a win-win situation.

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Monahan said affordable workforce housing is a passion of his, but rising costs have made it more difficult for developers. He noted that a Dover developer's plan to construct 64 affordable housing units is also charging rents at the same rate as his project.

“That’s the only way we (developers) can do it,” he said. “I look at this development as a family legacy development…It’s not going to make money (in the short term), I could buy a food truck and make more money. I won’t see the profit for many years, but it will be manageable at 20% (affordable housing units).”

As part of the approval, the 45 units of workforce housing will be offered for at least 30 years. Monahan hopes to start construction as soon as possible.

This article originally appeared on Portsmouth Herald: Gateway at Exeter developer reduces workforce housing units planned