Construction is getting started on 90 affordable-housing units in two northeast Napa projects.

The projects, located on 4 acres at 3700 and 3710 Valle Verde Drive, include the revamping and expanding of a shuttered assisted-housing site plus the building of apartments. Heritage House, which was built in 1988 and closed in 2004, is being converted into 66 apartments — 58 studio and eight one-bedroom units. On vacant adjoining land, the 24-unit Valle Verde Apartments project will have 12 with one bedroom, six with two bedrooms and six with three bedrooms.

All the units will be deemed “affordable,” which means rents will be restricted to tenants earning up to 60% of the annual area median income, and some of the Napa project units will be deemed “very low income” (30%–60% of AMI) and “extremely low income” (15%–30% of AMI).

The state’s determination on annual income limits for affordable housing changes at the beginning of each year and apply to units going into service afterward. For example, currently 60% of Napa County AMI is $52,980 a year for one occupant and $75,660 for four, according to the California Tax Credit Allocation Committee. The Heritage House and Valle Verde Apartments projects are planned for completion in summer 2023, with rental of the units by December 2023.

Under 2022 rent limits for 60% of Napa County AMI, that works out to $1,324–$1,967 a month for one to four occupants, respectively.

The project owner is Heritage House Partners LP, a partnership that includes Santa Rosa-based nonprofit developer and operator Burbank Housing as well as Allied Housing Inc., an affiliate of Fremont-based Abode Services, which has operated shelters in Napa since 2017. Napa’s Gasser Foundation donated the property to Burbank Housing.

“The start of construction demonstrates to those who came out nearly two years ago to voice their support for this project that there are solutions to the dual issues of homelessness and housing insecurity,” said Burbank Housing President and CEO Larry Florin in a statement about the June 24 groundbreaking ceremony. “With this continuing support, we’re certain that this groundbreaking will be the first of many. Congratulations to the elected officials, city and county staff, and housing activists who stood behind us throughout this process.”

That support was needed, as the projects faced opposition from some neighbors, largely related to the supportive-housing focus for 33 units in the Heritage House portion partly funded by a $7.9 million grant from California’s No Place Like Home program, according to Napa Valley Register reporting on the public hearings leading up to the City Council approval in early 2020. Opponents pointed to the program’s housing-first orientation, not allowing “sobriety, participation in services or treatment, history of incarceration, credit or history of eviction” to bar a tenant.

City housing officials countered that federal Section 8 vouchers to be used for those Heritage House units would allow more screening of applicants, the newspaper reported.

Napa Housing Coalition supported the approval of the projects.

“In a community such as Napa, with an enviable quality of life that all residents are worthy of, shouldn’t housing as human right be our guidepost for housing policy?” wrote co-chairs Joelle Gallagher and Teresa Zimny in a letter to Napa Valley Register in late 2019.

Chase is the main construction lender for the $54.2 million combined project. That works out to $603,000 for each of the 90 units, but that includes the rehabilitation of the existing Heritage House structure, according to Efren Carrillo, Burbank vice president of residential development.

“If you were to simply look at Valle Verde alone, we are certainly probably closer to $700,000 per unit,” Carrillo told the Business Journal in an email.

That’s in line with what it is costing per unit to build other Burbank projects in the North Bay, Carrillo told The Press Democrat in a June 29 story about escalating costs of constructing affordable housing.

The soaring price of building materials because of supply-chain and inflation in the past few years — on top of rapidly rising real estate values and labor costs — have pushed construction costs for the organization’s projects to $650,000–$750,000 per unit. That’s up from $500,000 per unit in 2019, according to the Bay Area Economic Institute.

Jeff Quackenbush covers wine, construction and real estate. Before coming to the Business Journal in 1999, he wrote for Bay City News Service in San Francisco. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

Update, July 7, 2022: Maximum rents allowed in 2022 in Napa County for incomes of 60% of the area median income were added as an example.