Demolition Preserves Affordable Housing

AFFORDABLE HOUSING FINANCE • August 2008

BY BENDIX ANDERSON

GLENS FALLS, N.Y. - Sometimes to save affordable housing, developers have to tear it down. That’s what happened to the dilapidated, crime-ridden Henry Hudson Apartments, which were torn to splinters by bulldozers to make way for Village Green Apartments, a new affordable housing complex on the same site.

Evergreen Partners, LLC, and Marathon Development Group, Ltd., kept federal subsidies flowing to the old affordable housing project even as they demolished the buildings. The 136 new townhouse apartments, all reserved for lowincome 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).

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.

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 lowincome housing tax credits—four times larger than the median tax credit award in New York in 2006.

With this large tax credit reservation, the developers thought they’d cleared their biggest hurdle. But their troubles had only just begun.

Local opposition delayed the project for more than a year. 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.

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.

Planning officials finally allowed the redevelopment of all 136 apartments on the original site to begin in August 2007 after delays added nearly $1 million to the project costs, including $750,000 in extra financing costs. The first apartments were finished in March, with the last units expected to open by this December.

The developers financed the $29.4 million redevelopment with $19.5 million in equity from the sale of tax credits to First Sterling Financial, Inc. The New York State Housing Finance Agency (HFA) provided a $3.4 million, 30-year loan. HFA and the New York State Division of Housing and Community Renewal also provided $4.3 million in soft financing. Another $1.7 million came from the deferral of the developers’ $3.6 million fee.

Local officials have become enthusiastic as construction proceeds. A new property management team has made the property, which has been more than twothirds 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. 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.

Corde