Subsidy portage, proof of concept
If you do something innovative, you should win an award, no?
I’d like to thank the Academy for creating awards so I can win one!
Henry Hudson Townhouses, the property so badly built it had to go somewhere to die, has been reborn as Village Green Apartments, and is up for Best Preservation of the Year as judged by the readers of Affordable Housing Finance (the industry’s monthly magazine, to which I’ve contributed on many occasions). If you’re an Affordable Housing Finance subscriber, Vote here.
Vote for Charlie and all your wildest dreams will come true
[Full disclosure: I had a hand in this transaction, because as Recap we represented the seller for a period of several years, during which we persuaded the town and HUD that there was a responsible counterparty involved (us), that the owners would sell for a truly nominal price (enough to pay their exit taxes), and that they were not going to be able to wish the problem away. We also found Charlie Allen and Evergreen – easy enough to do, as Charlie was a partner at Recap for a dozen years – and suckered Charlie into persuaded Charlie what a great opportunity it was.
… Here’s what it looked like before
Key to the transformation is the concept – which we conceived and Charlie put into practice – of subsidy portage.
And what it looks like today …
To see why it was necessary, let’s go to the Affordable Housing Finance article nominating it:
Evergreen Partners, LLC, and Marathon Development Group, Ltd., kept federal subsidies flowing to the old affordable housing project even as they demolished the buildings.
We had to keep the subsidy flow continuous, because under various of the contract documents, once they stopped, they could not be revived. The buildings themselves were a catastrophe, and had to go:
The 136 new townhouse apartments, all reserved for low-income households and subsidized with project-based Sec. 8 vouchers, are replacing 136 crumbling apartments originally built in 1973 under the Sec. 236 program administered by the Department of Housing and Urban Development (HUD).
Henry Hudson residents watching their homes being demolished
Once you free yourself from the shackles of the current exoskeletal structures, you realize that the awful buildings are the problem. So you demolish them, while preserving the money. As veteran reporter Maury Thompson of the
A year ago, officials hoisted sledgehammers to mark the start of demolition of the Henry Hudson Townhouses.
On Thursday, they used a giant pair of scissors to snip the ribbon on a new three-story “mid-rise” apartment building, the latest of the new apartment units at Village Green.
To make subsidy portage work, you have to have local political buy-in. Getting that took several years, and required the sellers to refuse to give up and allow HUD to foreclose – otherwise they’d have hoped that on a foreclosure, the housing could be bulldozd and shiny new medical offices could rise to take their place – and ethe buyer to convince everybody that their plan could succeed.
“We’ve been on an exhaustive construction schedule for exactly a year now. … We’re almost there,” said Charles Allen, a principal in Evergreen Partners.
Hudson Avenue Housing Associates, a joint venture between Evergreen Partners and Marathon Development Group, is in the process of replacing the old 136-unit townhouse complex with an equal number of apartment units for low-income individuals and families.
Charlie Allen, putting up with me photographing him in Recap’s offices
Again, we needed 1-for-1 replacement, so the subsidies would match up. Like the knife that stays the same through two new blades and three new handles, the transaction required sustaining a continuity even as Charlie did the most complete gut rehab imaginable – not a single stick of the old buildings survives. That means doing the work in phases, a rolling rehab that moved around the site:
The developers have been demolishing older townhouse units and building new apartment buildings in phases.
The last of the older buildings will be demolished this month and next, with construction of new buildings expected to be completed around the end of the year, Allen said.
Fortunately, the site was big enough, and low enough density, there was space to make it work (particularly if the complex had a natural 15% or so vacancy when demolition began).
The three-story building that opened Thursday includes single-floor apartment units designed for the elderly.
Other new buildings have multilevel apartments designed for families.
The old structures could not possibly have been modernized:
The former townhouse complex, often called “the chicken coops,” was long considered an eyesore and had a reputation as a hotbed of crime.
Affordable housing, or chicken coop? You decide!
You are what you live in; bad properties invite bad residents, and encourage the observant herd to veer from good into bad tenancies. As the new properties come online, there are new enforcement of lease policies:
Allen said his company is not just improving the appearance of the neighborhood, they’re changing its reputation by enforcing tenant rules.
Since the company took over in January 2007, 45 households have been evicted or have left voluntarily because they were facing eviction, he said.
Forty-five exist out of 136 means that fully one-third of the old residents didn’t deserve to live in quality accommodations. Truly, there’s a new sheriff in a new town.
You don’t follow the rules, I’m gonna drool on you
Officials say the new apartments are a model for other communities.
“I think this project really shows the kind of work we want to do in housing around the state,” said Deborah VanAmerongen, state commissioner of housing and community renewal.
VanAmerongen: supporting Village Green with words and lots and lots of dollars
The developers’ unique plan saved the project from foreclosure. Preserving affordable housing usually means fixing up old apartments to keep a stream of HUD subsidies flowing. But shoddy insulation, inefficient electric heating, and decades of less-than-attentive management made Henry Hudson much too expensive to rehabilitate.
Not just expensive, impractical. Remarkably, when property gets older than a certain age (which varies from twenty to eighty years, depending on its construction and layout), it can never be brought to market standard – it must be demolished and rebuilt from scratch.
Demolition and redevelopment were also costly options. “Our initial thought was we would never assemble enough money,” said Charles Allen, principal for Evergreen. In 2006, the developers won an enormous $20 million reservation of low-income housing tax credits—four times larger than the median tax credit award in
There is no financial problem in affordable housing that cannot be solved by the application of very large sums of money. The key is creating the political capital to secure the money.
With this large tax credit reservation, the developers thought they’d cleared their biggest hurdle. But their troubles had only just begun.
Who could possibly oppose such an innovative and vital plan? You’ll never guess:
You going to blame the locals?
Local opposition delayed the project for more than a year.
This didn’t surprise me – but it was irritating nonetheless. Here was the property, located smack-dab in downtown
A new mayor demanded that the redevelopment locate its new apartments on an underutilized park on the outskirts of town in early 2006. Other planning officials opposed even that much preservation and seemed to be waiting for HUD to shut down the apartments, which had failed several HUD inspections and owed the agency $110,000 in overdue mortgage payments, said Allen.
Yes, many locals did want the place to disappear. The sellers refused, and gave Charlie a long-term patient exclusive, which gave Charlie the leverage. Meanwhile, both the sellers and the buyer were telling HUD that it could have the property any time it wanted – remind me to post sometime on why foreclosure of crappy real estate is a lender’s worst nightmare – and HUD backed us up, by doing what HUD is so magnificently capable of: nothing.
None shall shut down Henry Hudson
HUD officials saved the project with their support, Allen said. The agency made it clear to local officials that even if HUD foreclosed, the apartments would remain affordable housing.
Now that it’s actually happening, the locals have come around:
Local officials have become enthusiastic as construction proceeds. A new property management team has made the property, which has been more than two-thirds occupied throughout the process, a safer place to live. The team has worked closely with police and earned the trust of residents, who are willing to identify and remove tenants breaking the law.
The herd is observant. Give them a fair deal, treat them as customers, say what you’ll do, then do what you say, and they become your allies.
By April, the number of calls to the police from the property was less than a third of what it was the year before, said Allen.
I’ve previously argued that housing is the catalyst of cities, and that Mission Entrepreneurial Entities are the change-makers. One reason is that elected officials, administrators, and policy makers have difficulty believing anything will work. Demonstrating by example actually proves concept. That’s what happened here. Without Charlie, this property would not have turned around. It’s the best story of the year – of many a year.
Henry Hudson is gone, but the property lives on
Vote for Charlie as Best Preservation and all your wildest dreams will come true.
A dance in celebration of Village Green in
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