A 48-unit, $11.5 million apartment building planned for downtown Anchorage is back on track after rising construction and labor costs derailed plans last year. The project is a partnership between an Anchorage developer and the city.
Construction is set to begin on the Block 96 Flats complex in June, according to developer Shaun Debenham. His company, Debenham LLC, submitted his construction plan for city approval earlier this month.
“As soon as we can get it permitted, we’re out the door and going,” Debenham said.
The five-level building, with a heated garage on bottom and a rooftop patio, will be built in west downtown on an empty lot at K Street and West Eighth Avenue. It’s about a block from the Delaney Park Strip, in an area drawing increased attention for development.
Supporters say Block 96 could help revitalize downtown. It will be the first market-rate apartment complex in the area in decades, charging a rental price based on what the market will support, they say.
The studio and one-bedroom apartments will be an alternative for young professionals not ready for a big house payment, for example, but who also exceed income limits at the many affordable housing units built in recent years, supporters say.
The complex, planned for completion late next summer, will provide badly needed new housing in Anchorage, said Bill Popp, head of the Anchorage Economic Development Corp.
“There’s just a surge of people moving into apartments because there’s not a huge amount of housing construction,” he said. “And what is being built is very expensive. And then you have pent-up demand for apartments among younger adults who stayed at home with Mom and Dad during the pandemic, and now want to get out there on their own.”
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The project took root three years ago, when Debenham answered a call for development proposals issued by the Anchorage Community Development Authority. The city agency owns the land where the project will be built.
Construction was expected to begin last spring, but a dramatic rise in construction and labor costs during the pandemic delayed plans and put the project at risk of not happening, authority representatives said.
Early last year, the project was set to cost $6.2 million, but that figure has since risen to $11.5 million. And plans now call for the units to rent for $1,500 to $1,800 monthly, Debenham said. That’s about $350 more than was planned early last year.
To ensure the project still moves ahead, the authority board earlier this month modified the 50-year ground lease, said Mike Robbins, the authority’s executive director. It gives Debenham better terms for the first two decades compared to the previous arrangement.
The authority is also still investing $1.8 million into Block 96, the same as the previous ground lease. But it will now take the authority 37 years to recoup that investment from lease income, seven years longer than the previous ground lease, said Melinda Gant, an employee with the authority.
This project is expected to be the authority’s first public-private partnership to enter construction. Robbins said a goal was creating a valuable tax-generating property for the city.
Over its life, the apartments should produce more than $200 million in total revenue to the city, mostly as taxes to the city and rental income to the authority, according to an estimate provided by the authority based on details from Debenham.
It should create 60 jobs during construction and, after it’s built, the equivalent of two full-time property management positions and steady work for maintenance contractors, Debenham said.
Mayor Dave Bronson said the apartments can help Anchorage retain a skilled workforce. The city’s population and workforce have been dwindling for years.
“The Block 96 development is one piece in a larger framework of projects we are helping the private sectors advance throughout our great city,” Bronson said in a prepared statement.
Amenities will include vaulted ceilings for top-floor apartments, in-floor radiant heat, in-unit laundry, secure coded entry and a fitness center.
“These will be some of the nicest apartments in town,” Debenham said.
The city’s market-rate housing stock is aging, with much of it built in the 1970s and 1980s, he said.
Average Anchorage apartment rents rose slightly last year, to about $1,200, according to state figures. A large number of federally subsidized affordable housing units have been built in Anchorage in recent years, helping keep that average down, Debenham said.
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Debenham said he completed the last market-rate complex in 2016, Northwood in the Sand Lake area.
Building market-rate apartments in Anchorage is a challenge, industry observers said. The state’s isolation and limited workforce and available land have long contributed to high construction costs. Those problems have been magnified by inflation during the pandemic, they said.
A market-rate project must find a balance between keeping rental prices low enough to attract renters, but high enough to pay off project costs, they said.
Debenham said he’s created studios and one-bedroom units in order to keep rent down as much as possible. But the apartments will have open floor plans and an attractive common area with space to lounge, as well as private work stations, he said.
The Block 96 project is a live test case that’s shedding light on solutions to the challenge of building market-rate apartments in Anchorage, said Tyler Robinson, vice president of community development and real estate at Cook Inlet Housing Authority, a nonprofit that builds affordable housing projects.
“These types of projects are important because it shows what the public can do and what the private sector can do to get to a project that can go,” Robinson said. “To have a healthy housing market, you need housing at all levels of income, with different sizes, different locations and different choices.”
Block 96 will meet the goal of many Anchorage groups to build more housing downtown, said Amanda Moser, head of the Anchorage Downtown Partnership.
A few other housing developments have sprung up in downtown in recent years, such as Elizabeth Place, a 50-unit mix of affordable housing and market-rate units. It was built by Cook Inlet Housing Authority about a block from where Block 96 is set to rise.
The residents are helping change the character of downtown. Just north of the Block 96 project, Fire Island Rustic Bakeshop recently opened a market that includes a wine and spirits store and other shops. There’s also a new co-working office space nearby, Moser said.
Residents at Block 96 will be another small step to change downtown from a work destination that empties at 5 p.m. to something with a neighborhood feel, where locals walk to work and on the way home buy a baguette and wine or dine out, she said.
“The more we bring these different types of businesses together that support each other, the more we’ll see downtown grow,” Moser said.