Three years ago, Joe Kmetz started looking for an apartment in downtown Kansas City. His budget: $600 a month.
Kmetz, then 24, was working as a valet at the Kansas City Marriott Downtown. He wanted to pay off student loans and medical debt while starting a career in engineering.
He couldn't believe his luck when he found a one-bedroom in the Crossroads Arts District for $395 a month. At 480 square feet, the rental was tiny — but it was close to work, and it came with a parking spot and an impressive view of the Kauffman Center for the Performing Arts.
There was one catch. The 48-unit brick building, Nottingham Apartments, was reserved for residents who made less than $31,600 a year. Kmetz fit the bill.
His apartment is one of roughly 2,100 income-restricted units downtown, according to the Downtown Council. That means 23 percent of the city core's 9,000 rental apartments are guaranteed to be affordable for people with lower incomes.
But that's about to change.
More than 5,000 market-rate apartments are under construction or planned for the city center, which the council defines as the area bordered by the Missouri River, 31st Street, the state line and the 18th & Vine Jazz District.
Very few of those will be income-restricted, a fact that could eventually drop the city's percentage of low-income downtown housing to about 15 percent. That's not good news for residents like Kmetz, who used his cheap rental as a stepping stone to a better future.
Kmetz's story runs counter to the one Missouri Gov. Eric Greitens painted when he explained why the Missouri Housing Development Commission voted in November not to allocate $140 million to the Missouri Low Income Housing Tax Credit Program. The funding provides developers incentive to build affordable housing.
The program was "failing," Greitens' statement read. “No. More. Giveaways."
For Kmetz and other low-income renters, the program is not a failure. It has helped them build a career, buy a home or pursue a dream. In Kmetz's case, he now earns too much as an engineer to stay at Nottingham and will move with his fiancee to a house in Roeland Park.
Low-income housing is necessary not only because it provides housing for people earning working-class wages, but it also allows people to take risks, says Michael Frisch, director of the urban planning and design program at the University of Missouri-Kansas City.
"An entrepreneur might risk just working on his or her business," Frisch adds. "Our society benefits from that."
A funding gap
In recent years, Missouri tax credits helped finance several local affordable housing projects, including the Rose Hill Townhomes at 713 Troost Ave., Curls Manor at 3900 E. 52nd St. and the Faxon School Apartments at 1324 E. 37th St. Those three projects were each awarded state tax credits worth more than $6.5 million.
Matt Meier, vice president of real estate development for the Wisconsin-based Alexander Company, says that without tax credits, investors have little financial incentive to fund low-income housing projects, especially in city centers, where land and construction costs are high.
In 2011, Meier oversaw the renovation of the Courthouse Lofts. The 79-year-old courthouse building at 811 Grand Blvd. features 176 income-restricted units, a heated underground garage, a fitness center and a rooftop deck. Meier says the development, which committed to remain affordable for 30 years, would not have been financially workable without state tax credits.
Meier says Kansas City isn't the only market that needs more affordable housing. In many cities, rents are rising faster than wages, which is contributing to a nationwide shortage.
"A lot of people are calling it a crisis," he says.
Kansas City officials are aware of the problem. But without a deeper study, it's unclear how the loss of the state tax credits will affect future numbers of income-restricted units, says Stuart Bullington, deputy director of the city's Department of Neighborhoods & Housing Services.
A recent city report that stirred consternation stated that credits for 1,140 of downtown's affordable units would expire over the next five years. But that's not entirely accurate.
Bullington says the projection was based on the assumption that most of the units would expire 15 years after being built. But many, like the Courthouse Lofts, committed to 30-year terms. And there's no way of predicting what the owner of a building will do once a commitment ends.
The Missouri Housing commission has agreed to inform the city whenever an income-restricted apartment building requests to switch to market rate. So far, only one building has made that request.
Jewell Lofts is a 15-unit building at 920 Broadway with $582-a-month studios and $831-a-month two-bedroom apartments. It's owned by a partnership that owns a dozen other low-income buildings in the downtown area.
General partner Dale Schulte says he put Jewell Lofts up for sale because complying with the regulations — like confirming his tenants' incomes annually — simply became too much work for a building with only 15 units. He has other buildings with around 50 units each.
Schulte says it will take around three years for Jewell Lofts to transition from income-restricted to market-rate apartments. Once the transition is complete, the building's rent will not be regulated — but Schulte says that doesn't necessarily mean he'll raise it if he still owns it.
"My projects will continue to be affordable, period," he says.
A project derailed
The elimination of the state tax credits has already derailed the construction of at least one low-income housing building downtown.
Last summer, Prairie Fire Development Group drew up plans to tear down the former Kansas City Public Schools headquarters at 1211 McGee St. and construct a 400-unit mixed-income apartment building. The plans included lofts reserved for teachers and possibly a second grocery store for downtown.
Prairie Fire partnered with a New Jersey company, The Michaels Organization, and submitted a proposal to the school district.
"When the governor cut the funding (in November), it pretty much killed that project," says Prairie Fire Development Group owner Kelley Hrabe.
Hrabe says future developments will rely on financial incentives from the city and the federal government to keep rents low downtown.
Ten years ago, downtown apartments rented for around $1 per square foot. Now the average price is at least 50 percent higher, and some residents pay up to $2 per square foot for luxury lofts.
As rents rise, so does the demand for cheap apartments.
Hrabe says there's a waiting list for CP Lofts, a mixed-income building his company completed last year at 401 Charlotte St. in Columbus Park. Half of the 108 apartments are income-restricted.
Old Town Lofts, which manages 526 income-restricted units downtown, gets more requests than there are available units. But not everyone who inquires fits the definition of "low income."
In Jackson County, an individual is considered to have a "low income" if he or she makes less than $44,800 per year, or $51,200 for a two-person family, according to the U.S. Department of Housing and Urban Development. Income-restricted apartments often set their limits by calculating a percentage of those maximums.
Old Town Lofts' limits top out at around 70 percent of the Jackson County maximums, so individual tenants can't make more than $31,740, and two people living together can't make more than $36,240.
Hrabe describes the drop in state funding, coupled with rising construction costs and interest rates, as a "triple threat" to future low-income housing developments.
He adds that if the city doesn't make affordable housing a priority, rents will continue to rise, more of downtown's low- and moderate-income residents will be priced out, and the area's socioeconomic diversity will suffer. He's seen it happen in places like San Francisco; Austin, Texas; and Estes Park, Colo.
That concerns City Councilman Quinton Lucas.
"For a city to survive, you need all sorts of folks living there," Lucas says. "(Downtown) Kansas City can't just be five luxury apartment towers and some apartment buildings for lawyers like me."
The city is taking steps to develop more low-income housing in the urban core.
Last month, Cordish Companies agreed to convert the Midland office building into 100 apartments for low- and moderate-income residents. In exchange, the city promised to build a $17.5 million underground parking garage for Cordish, the developer of luxury residential high-rises One Light, Two Light and Three Light.
And in January, the City Council passed an ordinance to waive sales taxes on construction materials for apartment projects that agree to make at least 15 percent of their units affordable for low-income residents.
Lucas says that was a small step in the right direction. He'd like the city to consider including affordable units in every multifamily housing project moving forward.
"Frankly," he adds, "I think there's more we can do."
He says that without the state tax credits, it will be up to the city to develop more quality affordable housing, and not just downtown.
The city is currently working with Illinois-based Brinshore Development to create around 360 units of mixed-income housing in the Paseo Gateway neighborhood, located about a mile from downtown in the Historic Northeast. Around 63 units are complete, and 117 are under construction.
Pendleton Flats, a rehabbed building next to a park and Independence Avenue, already has a waiting list for its 30 units. Two-bedroom apartments cost $550 a month for low-income tenants and come with contemporary finishes, private balconies and secure parking.
The Paseo Gateway project, which drew criticism from affluent neighbors, utilized state tax credits and is financed in part by a $30 million grant from HUD.
Todd Lieberman, executive vice president at Brinshore Development, says the Historic Northeast was appealing from a development standpoint.
"It's an old established neighborhood with good transportation to downtown," he says, adding that "the area is unique because it's a melting pot of all different cultures."
Meet the residents
Income-restricted apartments attract people from all kinds of backgrounds, says Coleman Crenshaw, a former leasing agent for the Courthouse Lofts.
"You get a lot of artists, a lot of people starting over or who just moved to town and don't have their job situation squared away yet," Crenshaw says. "Young people, retired people, service industry folks who work in restaurants."
Crenshaw, who is in his 30s, has lived in income-restricted apartments for around six years. He first moved to an apartment managed by Old Town Lofts after losing his job as a nanny.
"Since my job was gone and I was temping, I had really low income," he says. "I needed a place to stay, and I'd always wanted to live downtown."
Now he works as an artist and actor. He loves the jobs, but they don't pay much. Still, he can afford around $850 a month for his two-bedroom at the Courthouse Lofts.
Rebeca Garcia, 23, is living in the River Market's income-restricted Cold Storage Lofts while she saves money to finish college. Garcia knows she wants to be an elementary school teacher but is still deciding between kindergarten and third grade.
She works as a registrar secretary and volleyball coach at Guadalupe Centers Middle School and loves life in the River Market, where she rides the streetcar to the gym and runs through Berkley Park with her adopted mutt, Cleo. Her one-bedroom loft costs $733 a month, which is at the top of her budget.
"It's so expensive here," she says, adding that if the rent gets any higher, "I probably would have to move up north or get a roommate."
Hai Chen, 35, recently downsized from a house in Olathe to a two-bedroom income-restricted apartment in the Central Business District.
Chen made the move around the same time that he left his career in aerospace engineering to work for a tech start-up and help the local launch of the nonprofit House of Genius.
"This has been a nice cultural and professional reset," Chen says, adding that if he didn't have access to a low-income apartment, he might not have risked switching careers.
"I would've moved to the suburbs and stayed there," he says.