By Julie Brown

Hopkins Village is an affordable workforce housing development set in a quiet patch of forest on the northwestern edge of Martis Valley. Modular duplex homes stand in a row on a two-block street. It is the first development of its kind in Eastern Placer County: 50 duplex units in total, each one built to be sold to full-time residents and families who work in the community, with deed restrictions designed to spur a secondary real estate market that’s affordable for the local workforce.

The first tell that something is amiss is the sign at the top of the street, advertising that homes are “coming summer 2022.” Yet, many of the duplex units remain under construction. On a morning in early May, bear boxes were still wrapped in cellophane. A half-opened garage door revealed stacks of lumber and unconnected appliances. Inside, wood floors were still unfinished and electric wires dangled from the ceiling.

The entire project has been delayed by rising costs, supply chain challenges, contract negotiations, and most recently, the biggest winter in 70 years. As a result, the developer says the project is costing more to build than it’s selling for. This spring, Hopkins Village was at the center of a complicated legal dispute over a three-party contract signed between the developer, the original property owner, and Placer County.

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From its inception, Hopkins Village has been an experiment in affordable workforce housing in Truckee and North Tahoe. But this project has always been beleaguered and difficult to execute. Trying to find ways to make the project’s finances pan out — for the developer, but also for the buyers — has been its Achilles’ heel. It’s a case study to help us understand why it’s so hard to build for-sale workforce housing in North Lake Tahoe and Truckee.

The first attempt failed after building just 10 of the 50 planned units. The timing, from 2007 to 2010, coincided with the Great Recession, when the value of market-rate homes sank so low they competed with deed-restricted affordable homes, and Placer County let the developer off the hook from finishing the project. That’s why, for the next decade, Hopkins Village languished, no more than empty lots on a street, until a local developer named Dan Fraiman started talking to the original property owners in 2018 about picking up where they left off. His idea was to build 40 new units with modular construction to keep costs down, and to update the affordability requirements so the project would fill some of the need for housing for the missing middle. Eventually, construction was taken up again and has been moving forward against all odds.

“For me, this project started with just wanting to make a difference,” Fraiman said.

The driving idea behind this venture has always been worthwhile, and it still is. Building for-purchase, deed-restricted workforce housing — in addition to affordable and workforce housing rentals — is a key part of the strategy the region is pursuing to stem the exodus of locals who are moving away because they can no longer sustain the cost of living in Tahoe.

“We need to give hope to our workforce that they can live here,” said Cindy Gustafson, Placer County District 5 Supervisor. “If we want people to relocate and stay here, they need to be able to think they can eventually purchase a home.”

New homeowners are beginning to move in as soon as construction finishes up on their units, one by one. To purchase one of the duplexes, buyers must work within the boundaries of the Tahoe Truckee Unified School District. Households can earn up to 180% of the area median income, which for Placer County comes to $183,960 for a family of four. The sales price is currently fixed at $615,000, about a 12% increase from the original price set in 2020. After five years the income restrictions and the price cap both go away, at which point homeowners are free to sell their property to any income level at the market rate. But the deed restriction remains: the new buyer must work locally. These homes are built for people who make a living in Truckee and Tahoe, and that will never change.

The new residents and people who have applied for Hopkins homes make the North Tahoe and Truckee communities hum. They manage the school lunch program, build websites, run admin for construction companies, landscape yards, helm business groups, and write the very environmental documents that guide development in this region. As of May 10, according to Placer County records, 21 households have either bought units or have contracts pending. Some of these folks are just moving in, others are ready and waiting for their homes to be finished. Approximately another 20 qualify but haven’t yet entered into a contract. But given the long delays and stumbling blocks of the project, during a time when interest rates are on the rise, 17 households that applied had to drop out of line.

How do we make this a win for our community? Basically, this thing would have been a home run for everybody if we didn’t have Covid and if building costs hadn’t skyrocketed.”

~ Dan Fraiman, hopkins village developer

While the project is “affordable,” the reality is that new homeowners are staring down outsized monthly housing payments that are an all-too-snug fit for their incomes, leaving little to no room for unplanned expenses. Most just barely qualified under the AMI limit. And while $615,000 is a good deal for Truckee (the median home price in March was $1.1 million, according to last month’s Market Watch), it’s still a stretch for people who make average local wages. One new homeowner, Jessica Penman, the CEO of the Truckee Chamber of Commerce, told me her housing payment eats up about 75% of her monthly spending. With an interest rate just shy of 7%, the mortgage payment, insurance, and the HOA fee add up to a number that Penman has to stretch to pay. Affordable housing, by definition, should cost a third of a person’s monthly expenses.

Ignacio Gomez and his wife moved into one of the first new units as soon as it was finished last December. They’ve worked in this community for 20 years and, like Penman, they qualified for the Martis Fund’s down payment assistance program, which is the only way they could make the math work. Still, they need to be frugal to make their monthly housing payments. They need new cars, but they’re pushing that purchase out as long as they can. Another expense: health insurance. Gomez’s wife is a two-time cancer survivor, so they pay a higher premium for better health insurance coverage. That’s one thing they can’t afford to give up.

“You know, it’s a relief,” Gomez said, about owning a home in Truckee. “We are okay paying the mortgage. And,” he pauses, “I wish it were easier.”

CROSSROADS: The experiment that is Hopkins Village — for-sale housing that is supposed to work for both buyer and seller — is proving exceedingly difficult. The developer and Placer County have been engaged in a lengthy and complicated legal dispute, which is ongoing. Photo by Ted Coakley III/Moonshine Ink

How Hopkins got here

Historical context is key to understanding this project and its challenges. When Placer County approved the nearby gated community of Martis Camp in 2003, the board of supervisors required the developer to also build employee/workforce housing as a condition of approval. Hopkins Village is that housing. Two decades later, hundreds of luxury homes have been built in Martis Camp. But the promise of affordable workforce housing is still pending.

Fraiman, who is the CEO of a local construction company and serves on Truckee’s planning commission, told Moonshine Ink he initiated talks with the original developers, DMB Highlands, about reviving the affordable, for-sale housing project in 2018. Conversations took about two years to land a deal and a viable business model. DMB Highlands would give Fraiman the land, which already had the infrastructure built, and the Martis Fund would provide financial aid to help homeowners with the down payments. In exchange, Fraiman would build the remaining 40 units. Placer County would support the project with logistics: vetting applications, permitting, marketing, and hosting the website. At the starting line, the project penciled, giving Fraiman’s company a “very modest profit,” he said. In December 2020, DMB, Fraiman, and Placer County signed the contract.

“How do we make this a win for our community?” Fraiman asked. “Basically, this thing would have been a home run for everybody if we didn’t have Covid and if building costs hadn’t skyrocketed.”

The project is facing millions of dollars in losses, according to Fraiman, much of which stacked up when unavoidable global challenges stymied the construction industry from the outset of the pandemic: supply-chain delays, skyrocketing prices for materials, truck driver shortages, repairing damaged modular units, and other issues. He had trouble financing the project and eventually enlisted help from someone he knew personally who has a “high net worth.”  There was also the red tape of permitting. Fraiman said he paid the county $1.2 million in permitting fees and he also paid $17,000 in printing costs to deliver sets of plans, in color, for every unit. The county, however, flagged his project and said he poured foundations without permits in place.

The developer has been talking to Placer County staff for a year to renegotiate the terms of the contract to help him make up for the project’s losses. Those conversations escalated into a complicated legal dispute.

Fraiman told Moonshine Ink he asked the county to raise the ceiling on income limitations that applicants have to meet to qualify to purchase, from 180% to 245% of the area median income. In addition, he requested approval of a higher sale price for the units, increasing it from $550,000 to $615,000. And he sought permission to sell directly to employers at market rate, hoping that would help make up some of the cost.

Another alternative to make the project work: Fraiman has also approached the county about providing funding, in the range of $4 million to $5 million, to cover the project’s losses.

HOME SWEET HOME: Ignacio Gomez and his wife, who have worked in this community for 20 years, moved into one of the first new units at Hopkins Village last December. While it’s a stretch to make the mortgage, they are happy to have a home. Photo by Ted Coakley III/Moonshine Ink

According to Placer County staff, Fraiman started telling potential buyers in March that he would not enter into any more purchase contracts. On March 16, Fraiman told the county he was going to stop construction entirely.

The next day, March 17, Placer County’s legal team sent Fraiman a letter, demanding that he honor the original contract and finish building 40 workforce housing units.

“The county has been very determined to land on some sort of agreement and get the project completed with as many local workers buying the homes as possible,” said Emily Setzer, who manages Placer County’s workforce housing efforts in Tahoe.

In the seven-page letter, Placer County said Hopkins Village must remain an affordable housing project, and that the units cannot be sold at market rate without affordability restrictions. While the county is looking at removing or upward-adjusting income limits from some of their other deed-restricted workforce housing programs in Tahoe — a change happening region-wide reflecting an acknowledgment that housing in Tahoe is unaffordable for local workers at all income levels — Setzer said the 180% AMI restriction is still attached to Hopkins Village because of its roots and the original AMI range outlined in the Martis Camp condition of approval (which was 50% to 140% of AMI). The Martis Fund’s down payment assistance program — loans were recently increased to $100,000 and the program has been key for homeowners to afford the Hopkins duplexes — also limits incomes to 180% AMI.

STILL IN IT: Developer Dan Fraiman says he plans to get these homes finished and into the hands of the local workforce. Courtesy photo

In May, the Placer County Board of Supervisors approved a new contract with Fraiman and the Martis Fund, which allows the units to be sold at $615,000, with the 180% AMI requirement intact. The board is also letting Fraiman sell the units to employers at market rate.

Discussions about whether the county will help fund the project are ongoing.

The county has not seen the developer’s receipts or financial statements, and according to its analysis, Fraiman should have earned more than $1.1 million in profit under the original terms of the agreement. To consider giving Fraiman public funding, the county said they’d need to conduct a full forensic audit of the project.

Gustafson said Placer County’s challenge is to make sure that spending public dollars is justified, and the county needs access to receipts and the project’s accounting to make that call. Fraiman is due a reasonable profit that accounts for the risks and investments he’s made, she said.

“And so, what is that reasonable profit, right?” Gustafson said. “We know we need to invest public dollars to make these things happen.”

Two of the region’s experts and authorities in workforce housing, Mountain Housing Council and the Truckee Tahoe Workforce Housing Agency, both declined to comment on this story.

I met with Fraiman at Hopkins Village in May the day before the county board of supervisors approved the new contract, and he was in a good mood, all things considered. He said he’s focused on finishing the project and selling every one of the units to local workers, even though the cost of building them is higher than the price they’re being sold for. He’s been talking to regional employers about purchasing the units, too, but says the demand is not there. At this point, he’s not sure whether the project will succeed from a financial and logistical standpoint.

“Maybe ask me in a couple of years if I regret it, when all the chips fall,” he said. “Right now, they’re still up in the air.”

But there’s another goal for this project, and that one Fraiman is determined to see through: “People will have homes,” he said. “And that was really the goal that we did achieve.”

~ Julie Brown is a freelance journalist from Lake Tahoe’s West Shore. Her work has been published in the New York Times, the Washington Post, the San Francisco Chronicle, and SFGATE among others.

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