Milford Housing Development Corporation has pulled its commitment to the Dutchman’s Harvest workforce housing community currently under construction in Lewes.

MDHC had been selling 42 of the 140 units at direct cost to qualified buyers. Developer Preston Schell of Lewes Attainable Housing confirmed to Lewes Mayor and City Council Dec. 2 that MDHC is out of the project.

“For various reasons, they are not going to be able to perform on purchasing those 42 units,” Schell said. “It’s for sale. Discounted housing, particularly when you share the equity appreciation value or share it slowly with the homebuyer, is far more difficult than [renting].”

David Moore, president and CEO of MDHC, told mayor and city council Nov. 22 that Dutchman’s Harvest had been a trying project for the organization. He said rising interest rates, HOA fees, taxes and insurance made it too hard for those who met workforce housing requirements to afford the units.

Moore also said some potential buyers did not want to be in a situation where they could not sell the unit and make money.

“We met with several teachers from the Cape Henlopen School District. We thought we had a good thing going with them, but they decided either to continue to rent or didn’t feel they could make that kind of commitment,” Moore said.

Schell told mayor and city council that Lewes Attainable Housing can still make workforce housing happen at Dutchman’s Harvest; however, it can only happen if the city, county and state remain committed to using American Rescue Plan Act funds for the project.

The city has pledged $200,000. The county and state have each pledged $500,000.

Schell said Lewes Attainable Housing will now pivot to a different model, where discounted and non-discounted units are scattered throughout the development.

“It’s a better type of affordable housing. You don’t have low-income people living over here and high-income people living over there. Everybody is mixed together,” Schell said.

He said the concept is already working at two of his other apartment complexes.

Schell said his group will sell 28 of the 42 units to a new entity, at the same price, that will then offer discounted rentals to qualifying tenants.

He said they can do 35 units if the $1.2 million in ARPA funds remains in place. He said Lewes Attainable Housing will use its own money to fund the remaining seven units.

Schell said the program will be administered through the Delaware State Housing Authority. The city would have to pass a new resolution committing its $200,000 to the new entity.

Schell said sales of non-discounted units at Dutchman’s Harvest are doing very well, with three-bedrooms units selling best.

“I don’t think this sets us back,” said Mayor Andrew Williams. “Our comprehensive plan says we should make efforts to address [workforce housing]. We’ve done that in several ways. It’s just that the equity piece can’t be realized here.”

Mayor and city council currently has $151,000 in ARPA funds that it must obligate by the Dec. 31 deadline. More money would be available if they decide to pull their $200,000 out of Dutchman’s Harvest.

Mayor and city council decided to wait until Sussex County Council decides on its $500,000 commitment, which could be made at its Dec. 10 or Dec. 17 meetings.

The city has received funding requests from several organizations:

• $58,000 from Code Purple for a fence and paved road at its Tharros tent city on Coastal Highway

• $15,000 from the Community Resource Center to extend its winter and summer programs for the homeless

• An undetermined amount from the Lewes Board of Public Works toward the construction of the new water tower near Cape Henlopen High School.

The city previously gave the BPW $900,000 in ARPA funds for other projects.

The city is also considering ARPA funds for refillable water bottle stations, refurbishing sidewalks, environmental remediation at the former Army Reserve Center and the Lewes Fire Department.

Mayor and city council will discuss ARPA fund allocations at its regular meeting at 5:30 p.m., Monday, Dec. 9 at city hall. The panel has also scheduled special meetings for Fridays, Dec. 13 and Dec. 20.