Incline developer's hopes? Limit losses

At Incline Village, where homes commonly sell for well over $1 million, developing affordable or moderate-income housing is not for the faint hearted.

"The building costs are not the issue," says Kevin Lane, a partner of Falcon Capital, which is developing moderate-income homes there.

"It's the land costs and entitlements."

Lane's goal in fact isn't to make money on the project but rather to lose as little as possible.

Falcon Capital is developing 20 units in five four-plexes, one of the largest amounts of affordable or moderate-income housing to be brought on line at once at Incline.

The project is in conjunction with Incline Creek Estates, a development of 68 luxury homes on 13.5 acres.

Falcon bought the land for Incline Creek Estates, which had included a trailer park on the old Sierra Nevada College campus, and got the entitlements for the luxury-home project.

Among the conditions for approval by Washoe County was to develop the 20 affordable or moderate-income housing units.

Falcon then sold the Incline Creek Estates project to Scott Properties Development Co., and as part of the deal agreed to retain the affordable portion of the project.

The Incline Creek Estates can't be built out until the affordable units are completed.

Falcon will build three four-plexes offsite on Incline Way and two four-plexes on Northwoods.

Sky-high land prices and complex environmental regulations make building affordable housing at Lake Tahoe especially challenging.

The "coverage" regulations, which denote the percentage of property that can be covered by manmade structures, are the same for affordable housing as they are for marketpriced projects.And there is no reduction or waiver of water-quality mitigation fees for affordable housing.

Those fees are calculated according to the amount of coverage proposed.

Developers must get approval from two agencies the county and the Tahoe Regional Planning Agency, the land-use authority for property in the Lake Tahoe basin.

Meanwhile, demand for affordable housing is growing across the country, particularly in resort communities such as Lake Tahoe.Of the 40,000 homes at the lake,most are owned by part-time seasonal residents from the Bay Area with fewer of the local workers able to afford to own homes, noted John Singlaub, executive director of the Tahoe Regional Planning Agency.

More people must commute to their jobs in Tahoe because of the high housing costs.

The agency has been studying affordable housing solutions in other areas such as Mammoth,Napa and Santa Rosa and built incentives into its regional plan and ordinances.

Normally a developer must buy on the open market the development rights

to build beyond more than one house on a parcel.

But developers of affordable housing can apply for free "bonus units" on their parcels.

They can apply for bonus units for moderate-income housing if the local city or county has a housing plan and a mechanism to monitor the property according to its deed restrictions.

As part of an update of the regional landuse plan for Tahoe, the agency will look at ways to create additional incentives for affordable housing.

But balancing the demand for affordable housing with the need to protect the lake is no easy task.

"It's a challenge with all projects, affordable or market-rate," says Peter Eichar, senior planner for the agency.

Whether the housing developed by Falcon Capital will be affordable or moderate-income is still in question.

Lane wants to make the units moderate-income.

But it's unclear whether Falcon will be able to get the free "bonus units"because Washoe County has not yet adopted a plan for monitoring moderateincome housing.

Affordable housing can be rented or sold only to people who make no more than 80 percent of the median income.

In Washoe County, the median income for a family of four is $64,715, so a family of four could make no more than $51,772 to qualify.

To qualify for moderate-income housing, a family can make no more than 120 percent of the median income $77,658 for a family of four.

Rent for affordable or moderate-income housing, including essential electricity and heat,must not exceed 30 percent of income.

Falcon has applied to subdivide so it can sell the units.

Lane says sale prices would be limited to no more than 2.5 times the median income if the units were classified as affordable (about $162,000 for a family of four) and no more than 3.5 times the median income if the units were classified as moderate income (about $226,500 for a family of four).

The county would have ultimate approval over the sale prices.

Lane expects permits for the project to be finalized this month.

Construction is scheduled to begin in May and completed in 12 months.

Incline Creek Estates, meanwhile,will be built in six phases,with the first phase of 10 homes completed in the spring of 2006 and all 68 scheduled for completion in the summer of 2008.

The 2,500 square-foot homes will start at $1 million.