SPRING LAKE - When Wells Fargo abandoned its branch on Third Avenue here at the beginning of 2022, it had no shortage of offers from developers eager to have property in the heart of the downtown shopping district.

The winning bidder, though, was Spring Lake itself, which bought the building a year later for $3.3 million and had a project of its own in mind: a restaurant on the ground floor and three apartments dedicated to affordable housing on top.

"We just don't have the properties where we can build (affordable housing)," said Bryan Dempsey, Spring Lake's administrator. "So when this came about, it was kind of like, you know what? That's the right thing to do. Let's do it."

Spring Lake is getting ready to embark on a redevelopment project that is winning praise from advocates who point to it as evidence that affluent towns can add affordable housing to their trendy downtowns.

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The development comes as New Jersey lawmakers debate a new strategy to add more than 200,000 units that the National Low Income Housing Coalition estimates are needed for low-income residents in the state.

Spring Lake officials say the renovation hasn't been easy. And it when it is complete, the new units will make just a small dent in the borough's affordable housing obligation. But experts say it is a roadmap for how wealthy towns can build low- and moderate-income housing.

'It can fit right into the fabric of the community'

"I think what what is really cool about Spring Lake is that it's … a very affluent area and they're going to include the affordable housing right downtown," said Randi Moore, chief executive officer of the Affordable Housing Alliance, a nonprofit organization based in Neptune. "It can fit right into the fabric of the community."

Staci Berger, president and chief executive officer of the Housing and Community Development Network of New Jersey, an association of affordable housing agencies, agreed. "On the face of it, it seems like an innovative way to utilize the underperforming asset that seems important to the community and to begin to address the shortage of affordable homes we have around the state," she said.

Spring Lake historically has been home to opulent hotels and summer cottages. Little has changed over the years. The median price of a home sold in Spring Lake last year was $3 million, more than four times higher than Monmouth County's median price, according to the Monmouth Ocean Regional Realtors, a trade group.

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Like all New Jersey towns, Spring Lake has an obligation under state law to provide its fair share of affordable housing units in which households making up to 80% of the area's median income would spend no more than a third of their monthly paychecks on housing expenses. In Spring Lake's case, its obligation is 148 units.

In Monmouth and Ocean counties, the median household income is $91,038 and $130,054 for a family of four. It means individuals making up to $72,830 and a family of four making up to $104,043 could be eligible for affordable housing programs.

Spring Lake's plan to meet its obligation, approved by a judge in 2018, called for developers to set aside up to 20% of units in multifamily homes for low- and moderate-income residents.

In reaching an agreement, Spring Lake was protected the town from builder's remedy lawsuits, which gave builders the chance to avoid the municipal approval process and build as many market-rate units as they wanted, as long as 20% of the units were affordable.

But affordable housing has been slow to come to Spring Lake, in part because the borough is virtually built to capacity.

Spring Lake's affordable housing projects instead are modest. The town won accolades in 2015 when it built a four-unit affordable housing complex on what was a vacant parcel of land on Warren Avenue, across the street from the transit station.

The borough, however, saw an opportunity in January 2022 when Wells Fargo moved out of a building that had been a landmark. Built in the early 1900s by First National Bank, the building is thought to be one of the oldest in town.

Borough officials feared a new developer would tear it down. So they agreed to buy it with the help of money from the town's Affordable Housing Trust Fund and satisfy what they saw as pressing needs: They could attract a restaurant to operate with a liquor license on the first floor, and they could build affordable housing units on the second floor.

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The idea received little pushback from residents or business owners. George D'Amico, president of the Greater Spring Lake Chamber of Commerce, said that part of town was always intended to have mixed-use buildings with retailers on the ground floor and apartments upstairs.

"I think it’s totally in character with what the forefathers had in mind," said D'Amico, an agent with D'Amico & McConnell Realtors.

'We all want to live here'

Town officials pressed ahead. "I think it's just an opportunity for a family of modest means to live in close proximity to a downtown, in close proximity to a very good school system, for all the same reasons why we all want to live here," Mayor Jennifer Naughton said. "So I think that's that's the biggest advantage. From a technical advantage, we can retire some of the unmet need that the borough has been carrying and carrying and carrying."

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New Jersey towns have been struggling for decades to meet their affordable housing obligations under rules that are set to expire in 2025. The New Jersey Assembly recently approved a bill that would abolish the Council on Affordable Housing, a state oversight agency known as COAH, and, supporters say, give municipalities more flexibility in how to meet their affordable housing obligations. The legislation is awaiting the Senate.

Even with more flexible rules, the Spring Lake project shows the creation of affordable housing can be arduous. The borough has run into plenty of obstacles to renovate the old building. Officials hired a contractor to gut the interior, leaving behind the bank vaults on the ground floor that are foundational to the building. And they need to decide what to do with a staircase that, as it stands, could lead from the apartments into the kitchen of the new restaurant.

Affordable housing developers say these are common, and expensive, hurdles builders face when trying to convert businesses into homes.

"With affordable housing, it's very hard to pencil out getting the numbers to work funding-wise," said Roger Johnson, senior vice president of real estate for Invest Newark, an agency that recently converted an old bank into an affordable artists' colony. "And so that's why you need the subsidies from the cities and states, federal dollars to kind of close those gaps. And even those processes are extremely cumbersome. So it's a challenge."

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Spring Lake's timetable remains hazy. Borough officials said they plan to go out to bid for a restaurant operator, before finishing designs for the apartments and hiring an agency to manage the affordable housing component. Eventually, the outside agency will conduct a lottery for the three units. You don't need to be a Spring Lake resident to apply.

"It really gives other towns like us that have limited properties the ability to look outside the box to see: Is there a mixed-use that you could do in your town, where the town could be the landlord and provide other things?" said Dempsey, the Spring Lake administrator, said. "In our case, we were able to do that."

Michael L. Diamond is a business reporter who has been writing about the New Jersey economy and health care industry for more than 20 years. He can be reached at mdiamond@gannettnj.com.

This article originally appeared on Asbury Park Press: Spring Lake affordable housing will come from converting old bank