FAMILY FINALIST

Eminent domain helps transform project

By Andre Shashaty

AFFORDABLE HOUSING FINANCE • AUGUST 2006

Sacramento—Thanks to a concerted effort by this city’s political and housing leadership, Phoenix Park has been transformed from an overcrowded, crime-ridden blight on the neighborhood to a safe and positive environment for some 1,500 people, about half of them children.

Built in the 1960s as individually owned condos, the housing development had become one of the worst in the city as absentee owners and ineffective homeowners’ associations failed to stem the theft, violence, drug dealing, and gang activity in the area. A decade of social service efforts convinced city leaders they needed to take physical control from those owners, said Janet Rice, president of Norwood Avenue Housing Corp. (NAHC), the managing general partner on the deal.

With solid backing from the city council, the Sacramento Housing and Redevelopment Agency (SHRA) used eminent domain to acquire 464 housing units scattered between 141 four- and five-plex buildings and convey them to NAHC. Some were rehabbed and some were torn down to create 36o apartments. A 10,000-square-foot resident activities center and a swimming pool were constructed, along with three laundry rooms.

The rehabilitation focused on reconfiguring the buildings to turn garages into useable indoor space. Phases I and II comprise 101 buildings, most of them triplexes and fourplexes. Units range from one-bedroom units with 550 square feet to four bedrooms with 1,400 square feet. Rehab began in early 2004 and was completed in 2006. Rents range from $600 for a one-bedroom to $1,387 for a four-bedroom.

NAHC employed Crime Prevention Through Environmental Design strategies, including opening up more space in front of the units for parking and to open up sight lines and converting alleyways into private backyards.

Managed by The John Stewart Co., the project offers a Head Start program, a computer lab, and lots of other services.

There is a zero tolerance policy for rule violations. The project also features extensive security patrols, strict tenant screening, and a keycard system for gaining access to the gated community. Managers place a high priority on getting tenants to police the property and to keep it running smoothly.

All residents earn less than 60 percent of area median income and most are below 50 percent. More than half the residents are new to the community, selected from the Housing Choice Voucher waiting list.

Acquisition was so costly and risky that SHRA had to raise $18.2 million from local sources and subordinate them to $6 million in predevelopment funds from the Bank of America, said Anne Moore, SHRA’s executive director.

Another crucial factor was the city housing authority’s successful negotiation of a Housing Choice Voucher contract that covered 80 percent of the units, said Moore. The contract allowed the project to capitalize approximately $5.4 million more in conventional debt while allowing existing and new tenants to pay only 30 percent of their income toward rent.

Major sources of project funding include the following:

• $37 million in low-income housing tax credit equity for state and federal credits syndicated by MMA Financial
• $10 million in a bond-financed first mortgage on Phase II
• $9 million in a first mortgage on Phase I from Citibank
• $2.5 million in HELP program funds from the California Housing Finance Agency
• $24.2 million in commitments from the City of Sacramento of HOME, Community Development Block Grants, local Housing Trust Funds, and redevelopment tax increment and loan repayments
• $1 million in Affordable Housing Program funds
• $8.5 million in SHRA second and third loans for both phases
• $9.1 million in a California Multifamily Housing Program second mortgage on Phase II.