A small town in southern Sussex County is creating affordable housing in a program that may show others how to unlock public funding sources to help ease a crisis that has priced many workers out of local housing markets.
The town of Laurel, a community of around 4,300 people near the Maryland line, hopes to break ground this fall on The Promenade, a development of 14 buildings containing 28 homes that will be priced significantly below market rates and are expected to attract teachers, police officers, hotel workers and others who can’t afford to buy market-rate housing.
The project, costing around $4 million, plans to build three-bedroom, two-bathroom homes of around 1,300 square feet on an empty two-acre site near the center of town. The units are due to be priced at $280,000 to $290,000, well below the town’s current $330,900 median listing price, according to realtor.com.
The low-price tags on the new homes are being made possible in part by various sources of federal, state and county funding that have been obtained by the Laurel Redevelopment Corporation (LRC), a nonprofit that since the 1990s has acquired land, repurposed blighted residential and commercial properties, and worked to revitalize the town. Much of the public money is in the form of loans rather than grants and is being supplemented by LRC’s own funds.
Now, LRC is taking its first leadership role in building affordable housing in a bid to revive the downtown economy that has lost supermarkets, coffee shops, hardware stores and other retailers to a strip mall along nearby Route 13. In downtown Laurel, the only commercial establishments that remain are two banks.
LRC officials also want to cut the town’s share of rental homes – which currently make up almost half of the total – in their bid to encourage ownership and rebuild a vibrant, walkable community where young people would like to live but often can’t afford to buy property.
“We’ve got a lot of housing in Laurel; some of it good, some not so good,” said Brian Shannon, executive director of LRC, at a meeting with Delaware Public Media at the corporation’s headquarters. “What we’re attempting to do is create housing where people own their homes, they can afford the home, and they will be invested in that home, not just a rental property. Laurel has a great deal of rental property, more than some towns, and we’re trying not to add to that.”
Laurel’s affordability problem mirrors that through the county and the state. Last November, the Delaware State Housing Authority issued a Housing Needs Assessment which found that 20 percent of homeowners pay more than 30 percent of their gross income in housing costs, exceeding the state standard for affordability. For renters, the affordability problem is even worse: half pay more than the 30 percent level, meeting the federal definition of “severely cost-burdened.”
The high cost of housing prevents low-income owners from improving their homes, while low-income renters risk eviction or credit refusals, the report said. Low-wage businesses such as health care and tourism have trouble finding workers who are often priced out of local markets.
“Across the state, there’s a huge affordability gap. It’s definitely pronounced in Sussex County given the attractiveness of this area for retirees."Conor Nally, VP of development for Nally Ventures.
Delaware needs to add 24,400 housing units – both rentals and ownership units – by 2030, rising to some 30,000 when seasonal units are included, the report said. The demand is highest in Sussex County where 13,392 new units of both kinds will be needed by the end of the decade. Within the county total, officials estimated that more than 6,400 units – far more than in New Castle or Kent Counties -- will be needed for households making at least Area Median Income, which for a family of two was $60,100 in 2021.
“Across the state, there’s a huge affordability gap,” said Conor Nally, vice president of development for Nally Ventures, a developer and construction manager that works as a consultant to LRC. “It’s definitely pronounced in Sussex County given the attractiveness of this area for retirees. Most of the development homes are on the eastern side of the county, usually geared toward retirees who can often afford to pay a little bit more or don’t have to wait to get loans. The workforce on the eastern side can’t afford homes there so move to the west side, and price out locals.”
If demand for the new homes exceeds supply, as expected, there won’t be a bidding war as there would be on market-rate homes, but they will be sold to qualified buyers on the basis of first-come, first-served, LRC officials said. They hope construction will be finished in spring 2025.
In Laurel, the planned addition of 28 units won’t come close to solving the town’s affordability problem but it’s a start that has the potential to breathe new life into a struggling local economy, officials said.
“It’s 28 more than we have now,” said Ed Lewendowski, a coastal communities development specialist at Delaware Sea Grant, and a board member of the LRC. “It’s a start toward addressing this problem, using a public-private partner model that we hope can be replicated by others.”
Much of Sussex County’s real estate is beyond the reach of its workers, and the Laurel program is a step toward addressing that problem, Lewendowski said.
“We’re at a crisis situation across the county,” he said. “The average home price is approaching a half-million dollars. If you are a teacher, law-enforcement officer; medical professional, nurse, try and come up with that kind of money to purchase a home, especially with the higher interest rates today.”
Laurel’s town manager, Jamie Smith, said properties are beyond the reach of many local buyers but prices are staying high because of external demand. “It’s blowing my mind the prices that some of these houses are selling for given their age and where they are and the amount of work that needs to be done to them. They are still selling but the buyers aren’t local residents,” she said.
Funding sources include the state’s Downtown Development District program, which helps 12 communities revitalize their town centers. That program, which has included Laurel since 2016, contributed $660,000, or about 20 percent of the construction cost.
Another $100,000 is coming from the Sussex County Housing Trust Fund, which helps provide housing for low-income families. The county funding, announced on June 4, is less than the maximum $500,000 LRC applied for, which would have enabled it to sell 10 of the 28 homes at a price that’s affordable to families making 65 percent of Area Median Income. Now, the lower pricing will be available on only two of the homes.
“If we had gotten more, it obviously would have helped but this is what we’re dealt and we will move forward and make those two homes available at that level,” Shannon said. He said there’s nothing to stop other towns adopting the LRC model, but he was unaware of any that has done so.
Shannon hopes the arrival of 28 families in the new units will do wonders for Laurel’s economy.
“When you bring that many people back to your community, they need things,” he said. “They might want a coffee shop, or an ice cream shop or a bookstore. It’s an opportunity for an entrepreneur to bring that service to town. It will create a need, and we have to be able to fulfill that need.”
About half of the funding, $2 million, is coming from the Federal Home Loan Bank of Pittsburgh, which distributes federal housing funds in its region.
The key to raising funds from state and federal sources has been the LRC’s partnership with Nally Ventures, which can seek public money on behalf of LRC because the redevelopment corporation is a nonprofit. If LRC was a private developer, those sources of money would not be available to it.
The relationship between LRC and Nally is what distinguishes Laurel’s efforts to build affordable housing, and may become a template for other communities, officials said.
“I’m thinking of it as a model because it is an underserved area,” said Rick Ferrell, a consultant to the Delaware State Housing Authority. He said the state currently has no mechanism to create workforce housing or affordable housing, and Laurel’s approach may provide that template.
“At a local level, it is that mechanism. It’s an acknowledgment of a developer seeing a need and meeting a need with inventory, and in that respect, I think it would be looked at statewide by others,” he said.
For Bill McGowan, an LRC board member and community development specialist at the University of Delaware, Laurel, and other communities have a shot at reviving their struggling economies by knowing how to access public funds.
“LRC has a rich history since the 90s of commercial economic development,” he said. "This is a new venture; this notion of building residential and getting into the game is new to us. There are funds out there; there are lenders out there. You just need the chutzpah to go get it. You need somebody to be able to look for it, find it, and nail it.”
