Lewes council struggles with affordable housing

Developer Preston Schell originally planned to build affordable rental apartments on land along Savannah Road in Lewes until neighbors from the Henlopen Gardens community objected. Schell has shifted focus and decided to move ahead with an ownership model multifamily home community.

That has mayor and city council concerned. In June, city officials agreed to rezone the property with the understanding that the property would be developed and made available as workforce housing for teachers, hospital staff, police officers. 

By offering units for sale, council worries they will soon become unaffordable.

“The reason we said we wanted workforce housing is that workforce housing is desirable,” said Councilwoman Bonnie Osler.  “That’s why I thought we were willing to have more density on that piece of land.”

While the developer could target certain income levels for the initial occupants, Osler said, there is no way to ensure subsequent buyers are the people they are targeting. 

“The concern is it’s purchased by a teacher, then it sells to someone who wants to turn it into an AirBnB or flips it into a crash pad for six Washington lawyers,” Osler said.

To address workforce housing, Schell proposed a new housing type – a big house – with 10 units per building in the R-5, mixed residential, zone. The big house concept is used in Paynter’s Mill off Cave Neck Road. Existing code permits seven units per structure for townhouses and eight units per building for multifamily.  At a public hearing in October, council was reluctant to agree, saying eight units per building was more palatable. 

Tom West, the city’s planning and development coordinator, offered a solution to the eight-unit versus 10-unit problem. He recommended the limit be set at eight, but a developer could build 10 units per building if they provide a financial evaluation that outlines all development costs for both eight and 10 units per structure, identify the proposed unit rent or cost and compare the resulting cost to the current area median income levels for households in Sussex County. 

In response, Schell said he would not submit a plan if council moved forward with that idea.

“You cannot ask a for-profit developer to do all these extra things, and we’ll give you two extra units per building,” Schell said. “I can tell you now there’s no way I’ll do that. I’ll go right down to eight units, and I won’t have any restrictions.”

He said opening his books to the city would be a nightmare because every penny would be scrutinized, especially if a cost increased. 

“That is a recipe for disaster, and there’s no way I’d ever do it,” he said. 

Schell said his idea for 10-unit buildings would naturally keep the resale price lower.

“There is something called affordability by design,” he said. “That’s what I’m trying to do here. If you allow me to do more units and do affordability by design, I can offer it less expensively, and due to the density, the nature of the units and the size of the units, they will likely continue to be relatively affordable.”

Schell said he’s built similar communities in the area that continue to be affordable, like Creekwood on Route 1 or the North Village at the Villages of Five Points.  He said the cost difference between an eight-unit and 10-unit building in today’s market is nearly $21,000 per unit. 

By building a 10-unit building, he keeps the sale price down, he said. 

Schell said he’s worried the final process for building affordable housing will be too complicated. “If this gets too crazy, I will offer the land at cost to a nonprofit that builds affordable housing, and that nonprofit can build this, but I’m not going to do it,” he said.

Council deferred action on the maximum unit debate and will hold a workshop to further discuss the issue with Schell, Delaware Housing Authority officials and the public.

City Manager Ann Marie Townshend said there is a lot of interest in Lewes’ approach to affordable workforce housing.

“The state is watching,” she said. 

“They are very interested in this because they want this to be a success because of the challenges we all face regionally.”