City approves incentives to turn historic downtown Wichita building into apartments

A five-story historic office building would be transformed into downtown apartments under a proposal Colorado developers are seeking Low Income Housing Tax Credits to support.

The Wichita City Council approved an incentive package to support the project Tuesday.

212 N. Market, a 75,000-square-foot building constructed in 1925, would be converted into 51 one-bedroom units and 23 two-bedroom units under Denver developer Sam Edelson’s proposal.

To make that proposal more appealing to the Kansas Housing Resources Corporation, Edelson asked the Wichita City Council to approve local incentives, including $21 million in industrial revenue bonds and a 10-year 100% tax abatement.

The issuance of IRBs eliminates the sales tax on construction costs, an exemption that the state awards points for during the highly competitive tax credit application process.

“We’re finding that Wichita projects without some kind of incentive are not getting full credit for the tax credit program, and therefore the Wichita projects are not scoring high enough [to be selected]” City Manager Robert Layton said during Friday’s agenda review meeting.

City incentives will be applied only if the 212 N. Market project is selected to receive 9% Low Income Housing Tax Credits, a U.S. Housing and Urban Development Department-funded initiative that provides up to a 70% subsidy for developments that rent to a specified number of low-income tenants. With state matching dollars in effect, the 9% LIHTC credits will cover up to 85% of development costs, city staff said Tuesday. The deadline for that application is May 10.

“Per their application, we are seeking all of the deepest levels of affordability [in rent rates] for their criteria and scoring,” Edelson said.

He said 16% of units would be rented affordably to tenants below 30% of the area median income level, 30% would be rented at below 40% median income, and the rest would be offered at below 60% median income. Wichita’s median income is just over $69,000 a year.

Edelson said it’s too soon to know exactly what rent rates would be at 212 N. Market. Many of the downtown apartment complexes that have opened in recent years are on the higher end of the rent spectrum.

Edelson hasn’t developed in Wichita before, but he said he has “about 20 active projects” in Denver and a number of others in Kansas City and Iowa, many of which are adaptive reuse projects that rely on LIHTC to turn historic buildings into apartments.

“In a resource and time-constrained world, everybody would love to offer infinite amounts of housing at affordable rates, but sadly, the way the world works, just the fundamental cost to build housing is in excess — certainly in excess of these levels of affordability,” Edelson said. “So the only way to make housing affordable, not just in Wichita but throughout the country, is through these programs.”

Vice Mayor Maggie Ballard said developers told her they plan to set up a local management company several blocks away from the property.

“That’s really good news because . . . we have heard in the past, sometimes out-of-state developers that aren’t here to drive by every day don’t take as good of care of our property. I’m really excited to hear about that,” Ballard said. “Just excited for someone to actually tackle the affordability piece that so many members in our community are really struggling to find in housing.”

The local incentive package was approved unanimously by the council.

In a bid to boost all seven Wichita projects being considered for tax credits, the council also voted to approve a waiver of building and water/sewer connection fees for this year’s LIHTC applicants. Only six projects across the state will ultimately be chosen to receive 9% LIHTC credits.

“We’d like to have you approve this [incentive] for this funding cycle, and then we’re going to bring a recommendation for a permanent policy to you later,” Layton said. The extra city incentive will only be applied for Wichita projects that are selected by the Kansas Housing Resources Corporation.

212 N. Market, which sits at the northeast corner of First and Market, is currently owned by Ontario-based Trident 1 Investments LLC. Edelson said the building sale will go through only if his LIHTC proposal is picked because the project isn’t viable without it.

Trident did not respond to a request for comment Friday and Edelson said he wasn’t comfortable sharing information about what tenants currently occupy the building. The city agenda report states that 212 N. Market is “experiencing very low occupancy.”

If the project wins state approval, Edelson said construction will likely start before the end of 2024 and take 12 to 14 months to complete.

The approximate value of the proposed sales tax exemption is $540,254, according to the agenda report. During the 10-year property tax abatement, developers would be required to pay $21,112.72 annually — equal to the current property tax generated — before the value of the renovated apartments would be added to the tax rolls.