New London — In the heart of downtown, developer Yehuda Amar is creating eight luxury apartments at the former Royal Hotel at 53-55 Bank St., eliminating 20 small, outdated and affordable units.

The real estate company Benjamin Parker is advertising micro-loft apartments, “hip new residences,” at 38 Green St., now the home to 20 art studios. The spaces had ranged in price from $275 to $475 per month. New prices are not yet available, though typically micro lofts are smaller versions of luxury apartments.

The city is welcoming a relatively new phenomenon — an influx of developers either converting portions of historic buildings into upscale and market rate apartments or building them from the ground up.

There are hundreds of new residences in the planning stages or already built and city officials are calling it transformational.

While there are some murmurs about gentrification, city officials and developers alike say the housing boom is simply meeting an unfulfilled need and will benefit the city and its businesses.

That is the hope, anyway.

Developers typically cite Electric Boat and its crop of engineers and draftsman working near the city as reason enough to build.

Pennsylvania-based A.R. Building Co. built a 104-unit apartment complex on Mansfield Road, is constructing a 98-unit complex at Bank and Howard streets and pitched an idea to build more than 100 units at Fort Trumbull, along with a companion apartment building near Mansfield Road.

Jason Kambitsis, A.R. Building's director of land development, said along with Electric Boat, future jobs created by the offshore wind and the ancillary services “give us confidence in the area.” Other developers look to another major city employer, Lawrence + Memorial Hospital, for the potential of new city residents moving in.

Kambitsis said A.R. looked at what existed for housing stock when it tested the market.

“For many years, new housing was not being built in and around New London. That is a need we are trying to meet. People need housing options and, by developing new units, we can fulfill what has been a hole in the market,” he said.

While a typical apartment in New London can fetch between $750 and $950 a month in rent, the newer units start at about $1,200 and up for a one-bedroom and exceed $2,000 a month in many cases for larger units. The median gross rent in New London is $950 per month, U.S. Census data shows.

“New London is a city that has great bones. Being from Pittsburgh, Pa., we have an understanding of a place in resurgence. We live it every day in Pittsburgh. These older cities that are walkable and compact give a feeling of home to us and frankly are attractive to people looking for a quality of life you cannot get in a bigger, more congested city,” Kambitsis said.

Flush of new stock, rehabilitations

Felix Reyes, the director of the city’s Office of Development and Planning, said there are more than one thousand new residential units on the boards right now. Most are market rate but, opposed to the older stock in the city, have things like new fixtures, appliances and amenities that can attract someone with disposable income — millennials and retirees alike.

Mayor Michael Passero, seeking a second term in the upcoming election, said the housing activity reflects what he hopes will be a shift in the demographics of the city, especially downtown, and create a balance with the lower-income population that has dominated the area for years.

“You can’t live downtown unless you are below a certain income,” Passero said.

That fact has not helped to keep the restaurants and retailers with a steady source of year-round income, he said. A greater density with a higher income level will. The U.S. Census shows the median household income, between 2013 and 2017 in New London, was $37,331.

Tony Silvestri, who spearheaded the Harbour Towers condominium complex on Bank Street, “was a bit ahead of the curve, but the first to realize there’s nowhere to live in downtown if you have money,” Passero said.

And while the condominium market may not be what it was, developers are seizing on an opportunity. Even the city is getting in on the game by assisting Eastern Connecticut Housing Opportunities Inc., or ECHO, to rehabilitate and resell two-family homes in and around the downtown. The rental units in those homes will be reserved for lower-income residents.

Connie Howard, a real estate agent with US Properties who focuses mostly on commercial properties, said the recent surge in interest by developers is “good for everyone.”

Portions of the mixed-use older buildings that have sat without rehabilitation for years are being updated and apartments are being created. She said she thinks the residences will provide a boost to businesses.

“As more people live downtown, they want to be able to walk and eat,” she said.

Both Passero and Reyes said there is little to fear in the new upswing in market-rate apartments displacing the large population of low-income residents.

Seeking a balance

While there is always a need for affordable housing, Passero said much already exists and is being built.

“We’re very sensitive to that. We don’t want to push out moderately priced housing but to a certain extent we’re less at risk here because we have so many housing units that are affordably priced. We have a solid base that is not going anywhere,” he said.

Passero points to the new affordable units being constructed at the former St. Mary School, the 64 units of affordable housing contemplated by ECHO on Bayonet Street, along with existing low-income units at the Mohican Apartments on State Street, Winthrop Square Apartments on Federal Street and Williams Park Apartments on Hempstead Street.

Passero called the established apartment complexes “a significant contributor to the idea that downtown doesn’t become one social class.”

“We have to balance the income in downtown to support our businesses. The spending traffic is not here yet,” he said. “We’re adding a piece of the inventory that we don’t have. This is the first time we’ve had housing in downtown New London above median income. We’re not creating this market. The market is there and we’re trying to take advantage of it.”

In addition to people living near work or a transportation hub where they can get to work, Reyes said others who want to sell their homes now have a better options to rent.

The leaders of two local nonprofits focused on creating affordable homes also back the idea that the new housing is not taking away the affordable-housing options.

Marilyn Graham, executive director of the nonprofit HOPE Inc., said her organization is focused on rehabilitating older homes to create good quality but affordable homes.

“We tend to pick up the dumpy, cheap places either in foreclosure or ones that aren’t worth much to the average developer,” Graham said. “We put more into a project than we get out.”

Like ECHO, HOPE’s projects are bolstered by low-income tax credits through the Connecticut Housing Finance Authority.

Peter Battles, executive director of ECHO, said it’s no surprise that most of the residential construction proposals by developers is for new construction.

“Frankly, without some kind of government subsidy ... it’s simply not financially feasible for a profit-motivated developer to construct something anything other than market-rate housing,” he said.

“I don’t see a negative impact,” Battles said. “These are newly-constructed units. It’s not affecting the current supply. But does it serve people who are in need of affordable housing? Of course it doesn’t.”

ECHO is working to rehabilitate and sell more than 22 one- and two-family homes as part of its Home New London program, among other projects.

“For the city as a whole, it’s a wonderful thing. To bring in more residents ... it helps in regard to one of the things you always hear about — more tax revenues,” he said.

ECHO’s project to build 64 affordable units on Bayonet Street will include a mix of market-rate apartments.

“In all cases these days, all of these affordable developments are mixed-income developments. There are market-rate units in the mix,” Battles said.

He said it's well-proven that “it’s not good for anybody” to build a complex strictly for lower-income residents.

g.smith@theday.com