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Affordable Housing FinanceREGIONAL REPORTSOUTH CENTRAL Work in ProgressAFFORDABLE HOUSING FINANCE • September 2008 Replacing public housing in New Orleans is slow, but one developer has disclosed specifics of its efforts amid questions about financing BY DANA ENFINGER It didn’t take long for Katrina to sweep through the Gulf Coast and displace thousands of New Orleans residents. Three years have passed, and the process of providing affordable housing options to residents has been anything but swift. New concerns could slow the revitalization effort. The Department of Housing and Urban Development (HUD) and the HUD-appointed Housing Authority of New Orleans (HANO) announced in March who would be redeveloping the remaining three of the four public housing developments to be demolished and rebuilt as mixed-income, mixed-use communities. [Enterprise Community Investment, Inc., and nonprofit Providence Community Housing were chosen to redevelop the Lafitte complex, the first public housing site (see AFFORDABLE HOUSING FINANCE,March 2008).] Columbia Residential, an Atlantabased affordable developer, is leading the redevelopment of the St. Bernard development. KBK Enterprises, based in Columbus, Ohio, will lead the redevelopment at B.W. Cooper. Central City Partners, a joint venture between Peete Redevelopment, LLC (mixed-income developer McCormack Baron Salazar, and Landwide Development Corp., both based in St. Louis), and the New Orleans Neighborhood Development Collaborative, will rebuild C.J. Peete. “The redevelopment specifics about C.J. Peete have not officially been released till now,” said Vincent Bennett, an executive vice president with McCormack Baron Salazar. “It’s exciting because we know this is something that will be really special for the community.” The ’Nolia The C.J. Peete development is also known as the Magnolia Projects or the ’Nolia. The first part of the 41.5-acre project was built in 1941. It was expanded in 1955 from about 700 units, incorporating six additional city blocks. From 1952 to 1978, the manager was Cleveland Joseph Peete. In the 1980s and 1990s, conditions at the development declined. The section of New Orleans where C.J. Peete is located has a local crime rate higher than many entire municipalities. At its height, the project consisted of 1,400 units. In 1998, HANO began demolishing the complex with plans to revitalize the project. By 2005, however, only the 1955 expansion had been torn down. At the time of Hurricane Katrina, the majority of the buildings had been vacant and fenced off. Only 144 of the remaining 723 units were occupied. All have been vacant since the hurricane. In March, HANO received a $20 million HOPE VI grant for the revitalization effort at C.J. Peete. The project, expected to cost $133 million to complete, according to project manager Yusef Freeman, would consist of 460 multifamily rental units (337 of those are expected to be affordable) and 50 homeownership units. The latter would be available for households earning between 50 percent and 60 percent of the area median income. More questions Questions over a routine tax exemption and financing issues could slow progress of the plans, though. The city’s Industrial Development Board said it needs more details on plans for C.J. Peete and B.W. Cooper before approving requests from HANO for 30-year property tax exemptions. Board members cited concerns about taking large portions of New Orleans off tax rolls when the city is in dire need of revenue. The development would likely not be feasible without the tax exemption. “At this point if we were going to remove the tax abatement, it would be like cutting the tax credits in half or cutting federal funding in half,” Jonathan Goldstein, vice president of McCormack Baron Salazar, told New Orleans CityBusiness. “It would be impossible to finance without it.” Financing for C. J. Peete is expected to be finalized by September. Residential construction is expected to be completed by the federal deadline of Dec. 31, 2010. Any further delays could endanger the project, which has been awarded $7.3 million in Gulf Opportunity Zone credits and $27 million in Community Development Block Grant funds, in addition to the HOPE VI funding boost. State’s Budget Problems Impact HousingGov. Bobby Jindal cut more than $16 million in proposed state spending in mid-July. The move eliminated millions that would have gone to the city of New Orleans, including a $50,000 grant that would have helped build Katrina cottages for 44 homeless people who have been living under an overpass. Defenders of the earmarks said the money would have financed museums, church groups, festivals, youth programs, nonprofit groups, and economic development initiatives. Jindal said in an April 30 letter that he would veto any spending that has not been publicly vetted and does not have a substantial or regional impact. “The Claiborne Overpass is at the edge of the French Quarter and the Central Business District. … Seeing our citizens sleeping on the street and reflecting that our state has not solved the housing shortage following Hurricane Katrina directly impact tourism, economic development, and rebuilding,” said Rep. Neil Abramson, who requested the appropriation. He added, “Brad Pitt has built more houses for us than our own government.” In April, the Louisiana Housing Finance Agency said affordable housing developers should close on financing plans as soon as possible, given that prices for tax credits have fallen substantially over the last year. “At the moment, we’re anticipating that everything is going to be fine,” Kevin McCormack, president of McCormack Baron Salazar, told the New Orleans Times-Picayune. The market downturn will probably cost the developer about $3.5 million in equity for the project. That change could be offset by lower-thanexpected bids for lighting, sidewalks, and streets, according to McCormack. Over the last two years, McCormack Baron Salazar was allocated $120 million in New Markets Tax Credits that can be used as a component of a financing strategy for the development of the Thomy Lafon Elementary School, which would be located in the center of C.J. Peete. A YMCA would also be located at the development. Meanwhile residents needing affordable housing and those hoping to move back to the city continue to wait. UNITY of Greater New Orleans estimated that the homelessness rate has at least doubled in New Orleans to 1-in-25 people. That’s four times the rate of most U.S. cities. |
