On September 4, the Albuquerque City Council unanimously approved tax abatements for major housing development projects in the city plagued by a shortage of housing. One of the projects is exclusively an affordable housing project. The tax abatements will be a “freeze” for seven years on developers’ tax payments at the level being paid before any development took place on the property.
With the tax abatements in place, the developers will be able to move forward and secure building permits and financing. According to a city staff report, the tax abatement will save developers hundreds of thousands of dollars of at least $744,332 in property taxes. The tax abatements are meant to incentivize the development projects.
PROJECTS OUTLINED
One of the projects is the 10-story Two-Park Central Tower near the corner of San Mateo and Central. For decades the building was commercial office space. It has been vacant for a number of years, and it will now be converted into housing. Developer Route 66 Multifamily plans to turn the vacant office building into 101 apartments. Some of the apartments will be market value, and some might become affordable housing.
Another housing development projects is the old Bank of the West Tower located at Central and San Mateo. It is a 17 story a high-rise office building completed in 1963 and when it was built it was the tallest building in the city. It is now the fifth tallest building in the state, and the tallest outside of Downtown Albuquerque. Developer Route 66 plans to turn the commercial building into apartments.
https://en.wikipedia.org/wiki/Bank_of_the_West_Tower_(Albuquerque)#References
The third and only project dedicated to affordable housing will be built at the corner of Central and Alcazar SE. The 70-unit Somos affordable housing complex is being developed by Sol Housing. The nonprofit plans to set aside 84% of the units for income-restricted affordable housing. The tax abatement on this project will save the developer an estimated $514,376. The city already owns the land that the Somos project is being built on and will transfer ownership to Sol Housing after the abatement period ends.
Felipe Rael, the executive director of Sol Housing, said this in a statement:
“With the construction of 70 apartment homes and commercial space to support local small businesses, SOMOS can achieve the vision of the international marketplace, providing much needed housing and economic benefits to the International District. … The city’s support furthers this vision as we work to stabilize housing for 70 senior households.”
Another housing development project will be undertaken by Titan Development. Titan Development is planning for a new long-term resident inn and food hall at the corner of Central and Cedar NE across from the Presbyterian Hospital complex. It is being proposed that the 126-unit residential development could be used by traveling nurses working across the street at Presbyterian Hospital. The tax abatement should save the developers an estimated $998,128 over seven years.
Sunlight Properties and Garfield Townhomes also received council approval for a tax abatement for a townhome project in the University Heights neighborhood. The developers plan to build 16 townhomes on a vacant lot on Garfield. The tax abatement should save the developer $151,209.
MAYOR TIM KELLER ISSUES STATEMENT
Mayor Tim Keller issued the following statement in response to the council’s tax abatement actions:
“We’re short up to 30,000 housing units in our city. There’s no question about it; we need to build more houses so everyone can find a place to live that they can actually afford … The city can’t build it all alone, but we can provide incentives to support developers who want to invest here and help us build the future of Albuquerque.”
KELLER’S HOUSING FORWARD PLAN
It was on October 18, 2022, Mayor Tim Keller announced his “Housing Forward ABQ Plan.” It is a “multifaceted initiative” where Mayor Keller set the goal of the City of Albuquerque being involved with adding 5,000 new housing units across the city by 2025 above and beyond what private industry normally creates each year. According to Keller, the city is in a major “housing crisis” and the city needs as many as 33,000 new housing units immediately.
To add 5,000 new housing units across the city by 2025, Keller proposed that the City of Albuquerque fund and be involved with the construction of new low-income housing. The strategy included a zoning code “rebalance” to increase population density in established neighborhoods. It included allowing “casitas” which under the zoning code are known as “accessory dwelling” units and duplex development on existing housing and other major changes relating to parking and height restrictions. It included “motel conversions” and conversion of existing commercial office space to housing. It also included enactment of ordinances to regulate the rental and apartment industry and promoting city sanctioned tent encampments for the unhoused.
MOTEL CONVERSIONS INTO HOUSING
“Motel conversions” is where the city acquires and renovates existing motels to develop low-income affordable housing options. Keller’s plan calls for hotel or motel conversions to house 1,000 people by 2025. City officials have said that the city’s estimated cost is $100,000 per unit to fix up or remodel existing motels for permanent housing.
Mayor Keller’s “Housing Forward ABQ” places great emphasis on “motel conversions”. A zoning change already enacted by the city council in early 2022 year eased the process for city-funded motel conversions by allowing microwaves or hot plates to serve as a substitute for the standard requirement that every kitchen have a cooking stove or oven. The existing layout of the motels makes it cost-prohibitive to renovate them into living units with full sized kitchens. An Integrated Development Ordinance amendment provides an exemption for affordable housing projects funded by the city, allowing kitchens to be small, without full-sized ovens and refrigerators. It will require city social services to regularly assist residents. The homeless or the near homeless would be offered the housing.
The Keller Administration proclaims that motel conversions are a critical strategy for addressing the city’s housing shortage. The city proclaims motels conversions are a simpler, lower-cost alternative to ground-up construction. It will require city social services to regularly assist residents. The homeless or the near homeless would be offered the housing likely on a first come first served basis and with rules and regulations they will have to agree to.
On February 11, 2023 it was reported that the City of Albuquerque executed a purchase agreement for the purchase of the Sure Stay Hotel located at 10330 Hotel NE for $5.7 million to convert the 104-room hotel into 100 efficiency units. The $5.7 million purchase price for the 104-unit complex translates into $53,807.69 per unit ($5.7 Million ÷ 104 = $53,807.69 per unit). The renovations and remodeling of the Sure Stay Motel have already been completed.
The city has also acquired the old San Mateo Inn near I-40. For decades, the old motel was formerly the La Quinta The city purchased the building for nearly $5 million earlier this year, with plans to convert it into the city’s first Youth Homeless Facility. Renovations and remodeling are now underway by the city. A recent report found a significant group of 15- to 25-year-olds experiencing homelessness never utilize the city’s existing resources.
COMMERCIAL OFFICE SPACE CONVERSIONS
According to Keller’ plan, the city wanted to convert commercial office space into to residential use. The Keller administration proposed $5 million to offset developer costs with the aim of transitioning 10 commercial properties and creating 1,000 new housing units.
The Keller Administration early on announced that the conversion office space plan is a heavy lift for the city and the city has yet to acquire a single commercial office building to be converted into residential use.
CITY COUNCIL GETS UPDATE ON HOUSING GOALS
On September 19 the Albuquerque City Council was given an update on Keller’s Housing ABQ Forward Plan and the city’s efforts to bring 5,000 housing units to Albuquerque by 2025 with city support. City Councilors had repeatedly asked for an update from the City to no avail. The update report was on the city’s housing projects from the last 5 years as well as plans to increase unit production before 2025. The Keller Administration again cited a 30,000-unit shortage of housing and a need for 15,500 affordable housing units. The topic of the unhoused was also brought up by city councilors.
Joseph Montoya, the city’s new Deputy Director of Housing, made an in-depth presentation that laid out what the city has been doing and how they plan to address the affordable housing shortage. Montoya said the goal was 30,000 units of new housing over the next 5 years. Out of that number, at least 5,000 units of affordable housing are needed. The 5,000 units of affordable housing by the city has from the get-go been the goal of the “Housing Forward ABQ Plan.”
STATISTICS PRESENTED
Over the past 5 years, the city has supported the construction of 2,224 housing units, 1,021 of which are subsidized for low to moderate income tenants. On average, the city has been producing between 200 and 250 affordable units per year, for about 450 units total. The city now has a goal of producing 1,000 affordable housing units per year. To reach that goal, the current housing output will have to at least quadruple.
Joseph Montoya, the city’s Deputy Director of Housing, reported the following statistics to the city council:
- Nearly half of renters are rent-burdened.
- Rents have increased 20% since 2021.
- The median house price is $360,000.
- The city’s current waiting list for help with housing is about 800 people long.
- The city needs to produce 1,500 new units a year to keep up however only 200-250 units are being produced.
Montoya said this:
“[These are] the worst stats I’ve seen to date.”
In addition to the initiatives already in place, Montoya outlined additional strategies the city would like to use. Those strategies include:
- Expediting planning approvals for affordable housing developments,
- Opening request for proposals, known as RFPs, to “for-profit” as well as nonprofit developers,
- Creating a loan fund for homeowners building affordable accessory dwelling units.
- Align the city’s RFP process with the Metropolitan Redevelopment Agency and to create funding packages for developers.
Montoya is asking for a $20 million per year budget to focus on housing initiatives in the city.
NEW MEXICO MORTGAGE FINANCE AUTHORITY REPORT ON HOUSING NEEDS
On July 24, the New Mexico Mortgage Finance Authority (NMFA) officials reported on the findings of the state’s most recent housing needs assessment. It outlined how $84.6 million in state funding will be allocated to address those needs. The New Mexico Housing Needs Assessment is a comprehensive annual report produced by New Mexico Mortgage Finance Authority. It comprises an array of housing indicators describing affordable housing needs in the state.
MAJOR FINDINGS OF REPORT
Following is an edited version the major findings of the 2024 MFA Housing Needs Report deleting graphs and figures:
NEW MEXICO’S DEMOGRAPHIC AND ECONOMIC PROFILE
“There are 2,112,463 people residing in New Mexico and 812,852 households in the state. New Mexico’s population grew 1.3% over the last five years, a rate which lags its neighboring states: Utah (9.7%), Nevada (7.5%), Texas (6.6%), Colorado (6.2%), and Arizona (5.3%).
New Mexico’s working population, defined as persons 16 years and older, is primarily employed in education and healthcare, at a rate of 25.7%. This rate is consistent with national trends.
The poverty rate in New Mexico’s poverty is 18.3%, higher than the national rate of 12.5%.
New Mexico’s median household income is $58,722, which is lower than the national median household income of $75,149.
The percentage of the population living with a disability in New Mexico totals 34.4%, which is higher than the national rate of 26.4%.
The rate of households with seniors, which are defined as households with one or more people 65 years of age or older, in New Mexico is 33.8%. Nationwide, the rate of households with seniors is 11.5%.
Many New Mexico senior households are low or moderate income with 41.8% earning less than $40,000 annually. The national rate is 37.7%.
The Homeownership rate in New Mexico is 70.9%, which is higher than the national rate of 64.8%.
43.2% of New Mexican households earn less than $50,000 annually. This rate for the country is 33.8%. Renters in New Mexico, like the rest of the nation, are more likely to be low-income compared to homeowners.
The state’s median household income increased from $48,059 to $58,722, or 22.2%. from 2018 to 2022.
The median home price increased by a whopping 50% from $200,000 to $306,000.”
EDITORS NOTE: Home price increases surpass wage growth, which results in difficulty achieving homeownership.
HOMEOWNERSHIP MARKET AND DEMOGRAPHICS
“In New Mexico, the median sale price of a home in 2023 was $323,230 which increased 5.6% from the prior year. As home price increases outpace wage growth, the ability to achieve homeownership becomes more difficult.
Inequities in homeownership persist with respect to race:
- White households comprise 37.8% of homeowners but 35.6% of the population.
- Hispanic households account for 35.2% of homeowners but 49.8% of the population.
- The relative rates for Native American households is 5.2% of homeowners and 8.5% of the population.
- Black or African American, Asian and households of two or more races are underrepresented among homeowners.”
RENTAL MARKET DISPARITY
“In New Mexico, the median monthly gross rent in 2022 was $966, which increased 7.7% from the previous year and 16.7% from 2018.
The state’s renter median income increased from $34,837 to $37,408 or 7.4% from 2021 to 2022, which lagged behind rent price increases.”
DECLINE IN HOUSING PERMITS
“Single-family detached homes comprise the majority of New Mexico’s housing stock, followed by a high percentage of mobile or manufactured homes. The number of building permits for residential construction issued in 2023 decreased by 2.2% from the prior year. Despite this dip in the pace of construction, the decades-long trend of depressed building has abated in recent years, with a 71.7% increase from 2019 to 2023.”
DECLINE IN AFFORDABLE HOUSING
“Cost-burden among renters (43.9%) is higher than homeowners (28.4%), largely due to lower income levels among renters. A decreasing supply of affordable housing options, for both renters and homeowners, coupled with increasing demand as the state’s population grows, threatens to worsen cost burden rates.”
PRESERVATION AND REDEVELOPMENT NEEDS
“43.2% of houses in New Mexico were built prior to 1980, which indicates a high need to preserve the stock of existing homes.
15.3% of homes are mobile or manufactured housing units. Mobile homes built before 1976 do not meet HUD’s Manufactured Home Construction and Safety Standards, which are federal standards for the design and construction of manufactured homes to assure quality, durability, safety, and affordability. Thus, HUD only allows for the replacement of these units rather than rehabilitation.
3.3% of households are overcrowded.
1.0% of households do not have sufficient plumbing facilities and 1.0% lack complete kitchen facilities.”
FUNDING APPROVED
At its May and June meetings, the New Mexico Mortgage Finance Authority Board of Directors approved a $50 million allocation, along with the $34.6 million in state fiscal year 2025 severance tax bond funding. The breakdown includes:
- $26.6 million to create more housing.
- $20 million for down payment assistance.
- $10 million to preserve existing affordable housing.
- $1 million to create stable housing environments.
- $27 million in reserve to use based on particular demands.
MFA Executive Director Hernandez said this about the allocations:
“Whether it’s building homeownership and wealth, creating more housing, preserving existing affordable housing or creating stable housing environments, our efforts and programs directly align with the key findings in the housing needs assessment report. … I appreciate our board of directors, the governor and legislators for their support and funding for these much-needed programs in our state.”
The full housing needs assessment is available here.
The links to quoted and relied upon news sources are here:
https://www.koat.com/article/monday-breaks-record-for-hottest-day-ever-on-earth/61688417
https://citydesk.org/2024/homelessness-has-increased-by-50-affordable-housing-is-scarce/
COMMENTARY AND ANALYSIS
It is clear that the City of Albuquerque and the state of New Mexico are suffering from a significant shortage of affordable housing. The housing shortage is related to economics, the development community’s inability to keep up with supply and demand and the public’s inability to purchase housing or qualify for housing mortgage loans. The shortage of rental properties has resulted in dramatic increases in rents.
The blunt reality is that it is not at all realistic for the City nor the State to try and attempt to solve the housing crisis on their own with nothing but government financing, construction and ownership. Government’s responsibility is to provide essential services, such as police protection, fire protection and utilities and not to directly compete with the housing industry. It’s the market forces that must be relied upon to get the job done when it comes to affordable housing.
The approach that the City and the State has taken in the form of tax deferrals, subsidies and low interest loans to the private sector as incentives to construct housing are the reasonable and responsible approach to help solve the current housing crisis in the city and the state. City and State government can further help the private sector to build more affordable housing by eliminating policies and zoning restrictions that unnecessarily drive-up housing costs so long as there is a preservation and respect for adjoining property owners’ rights and remedies. One area of reform to help the housing industry would be to address and reduce the states gross receipts tax on construction materials in order to bring down construction costs.
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