Mark Barrett

ASH

ASHEVILLE – City government is considering paying the developer of apartments and retail space planned for the River Arts District more than $760,000 in return for limits on residential rents in the project.

City Council has set an Aug. 26 public hearing on the proposed incentive grant for RAD Lofts, to be located on the former Dave Steel property at the "five points" intersection where Roberts Street, Depot Street, Lyman Street and Clingman Avenue meet.

The development will contain 209 apartments, 48,500 square feet of commercial space, including a community grocery store and a two-story underground parking deck at a development cost estimated at about $52 million. Developer Harry Pilos said he hopes to begin construction by November.

RAD Lofts promises to significantly increase activity in the neighborhood, bringing what Pilos said would be about 350 residents to what is now an empty lot. It has also prompted worries that it will contribute to gentrification.

Rent limits on most of the apartments planned in RAD Lofts would be well over rents Pilos said in October 2013 that he planned to charge.

Pilos said then that one-bedroom units would go for $995 a month and two-bedroom units would be $1,350 monthly.

The terms of the incentive agreement City Council will consider call for rents for 204 of the units to meet what the city calls its "workforce" housing cost limits. They are designed to be affordable to households making 20 percent more than area median income. Median income is the point at which half of households make more, half less.

The workforce limits are $1,267 for one-bedroom apartments and $1,418 for two-bedroom units. The agreement would allow 3 percent annual rent increases for the 10-year life of the deal.

The other five units would meet the city's tougher affordability standard, meaning a family making 80 percent of area median income could pay the rent on them.

That would limit rents for those units to $819 for one-bedroom apartments and $914 for two-bedroom units, also with annual increases allowed.

Pilos said the proposal is a good deal for the city because he is giving up the ability to impose large rent increases in the future and the agreement would reduce cash flow from the project, thus making it less valuable if he decided to sell it.

"We're not asking for something for nothing," he said.

The RAD will benefit in several ways from construction of the project, Pilos said.

"There's a parking crisis down in the River Arts District right now," which the 364 parking spaces planned for the development will ameliorate, he said. "We're cleaning up the neighborhood. We're going to bring housing to the neighborhood."

Pilos has already negotiated an agreement with Norfolk Southern whereby locomotives will not sound their horns at a nearby rail crossing, thereby making the area more attractive for other residential developments as well, Pilos said.

His plans also include cleaning up environmental contamination on the site, and Pilos says the project will receive Energy Star certification, granted by the federal government to buildings that meet tougher energy efficiency standards.

The city is considering the agreement under a policy to grant incentives to major residential developments that meet specific city goals. It was adopted several years ago in conjunction with a request from developers of Montford Commons, which was planned to be a large residential project just north of Hill Street.

The development never got off the ground, and Jeff Staudinger, assistant director of the city's community and economic development department, said the policy has yet to result in any incentives actually being paid.

The policy is designed to reward projects that have more affordable rents, are designed to be energy efficient, have a mix of residential and commercial uses and are close to bus routes.

The $765,362 the city would give Pilos' company is based in part on the amount of property taxes the city expects to collect once RAD Lofts is completed. That's estimated to be $184,000 a year, meaning the amount of taxes paid would exceed the city's obligation in five years.

Staudinger said that for now, "There's very little housing available" in the RAD.

Units in RAD Lofts would be "relatively affordable" when compared with apartments downtown, and the project "will probably lead to more (housing) being developed" in the RAD, he said.

Pilos said worries about gentrification in the area do not seem relevant to his project.

"It's just going to make it more of a neighborhood than the kind of post-industrial checkerboard that it is right now," he said. "We're not displacing anyone. We're taking a big hole in the ground and doing an environmental cleanup."

Want to go?

City Council meets at 5 p.m. Aug. 26 on the second floor of City Hall.