FREDERICKSBURG, VA. - After failing its federally mandated inspections for two years in a row, the oldest HUD-subsidized apartment complex in Virginia was on the verge of being lost to the community as an affordable housing resource.

HUD was threatening to foreclose on Hazel Hill Apartments unless the then-owner disposed of the property, which likely would have led to its conversion to a market-rate apartment complex. Then NHT/Enterprise Preservation Corp., a joint venture between Enterprise and the National Housing Trust, stepped in to purchase and do a gut rehabilitation on the deteriorated property.

To satisfy HUD’s desire for a quick transfer of ownership, the developer took out a bridge loan from the Enterprise Foundation to cover the cost of the acquisition, which was completed in 2004.

The rehabilitation was completed in July 2006. The 147-unit property now houses 450 residents, including more than 141 children, in a markedly different environment.

“It’s not just an affordable place to live, but, consistent with our mission, it tries to address the overall quality of life for the residents who make it their homes,” said Scott Kline, a vice president with NHT. “By doing that, not only do we help the folks who live there, but we help the entire community.”

The biggest challenge for the development was figuring out how to get the Sec. 8 contract rents increased to levels that would support the debt service. “Ultimately, the Richmond HUD field office worked really hard with us to get that done,” said Kline. Because HUD allowed NHT/Enterprise to mark up the rents to market, tenants now pay only 17 percent of the rental income collected; HUD pays the rest.

Rents range from $852 per month for the 649-square-foot one-bedroom apartments to $1,068 per month for four-bedroom apartments, which are 1,265 square feet. Although 98 percent of the units are set aside for households earning at or below 60 percent of the AMI, the vast majority of resident households earn less than 30 percent of the AMI, according to NHT/Enterprise.

Residents have access to an on-site computer lab, a food bank program that provides a once-a-month delivery to eligible residents, a variety of classes, a meal program for seniors, and after-school programs for children—including a homework club.

A nurse who is on site for between eight and 12 hours per week provides blood pressure checks, diabetes screening, and other basic health services. Two police officers are assigned to Hazel Hill Apartments (one is paid for by the city of Fredericksburg and one by NHT/Enterprise) and walk the community in “dress-down” uniforms of slacks and polo shirts. “You know they’re the police but they don’t look so intimidating” without their full uniforms, said Kline. The officers sponsor regular community movie nights.

All these changes have made a big difference for residents. “I remember one woman that came up and said, ‘I was embarrassed to have company over before, and now I’m so proud,’” recalled Kline. “She just didn’t want anybody to see where she lived.”

The $15.6 million rehabilitation was funded with $8.15 million in proceeds from tax-exempt bonds as well as $4.7 million in equity from the sale of 4 percent LIHTCs. Enterprise Community Investment, Inc., was the syndicator. There was also a $75,000 loan from the Virginia Foundation for Housing Preservation, now known as Virginia Community Capital, Inc.

Additional project information, as provided in application by the nominator.

Q. Why does the nominated project deserve to be recognized based on the award criteria of this contest?

A. Hazel Hill Apartments was developed in the early 1970s in response to the shortage of affordable housing for very low-income families and the elderly in Fredericksburg, Va. The project developer and sponsor was the nonprofit Hazel Hill Apartment Corporation (HHAC). Hazel Hill was the first HUD-subsidized apartment complex in Virginia, and HHAC owned, operated, and managed the property for 33 years. HHAC’s “mom and pop” culture of management served the property well for its first 30 years, but oversight of an asset with many systems at the end of their useful life, combined with an ever-changing HUD regulatory environment proved more than HHAC could handle. The property began deteriorating at a rapid pace.

In November 2002, Hazel Hill received a Real Estate Assessment Center (REAC) inspection score of 17, well below the 60-point minimum HUD requirement. Hazel Hill then failed another REAC inspection in May 2003. Per HUD regulations, a property that receives two consecutives failing REAC scores must submit a plan to either dispose of the property or bring it into compliance. HHAC was not prepared to submit such a plan, and HUD insisted that HHAC dispose of the property and have no further ties to it, or risk foreclosure.

NHT/Enterprise acquired Hazel Hill in 2004, and completed all scheduled renovations in July 2006, at a cost of more than $47,000 per unit. The rehabilitation of Hazel Hill included the replacement of outdated building components; modernization of unit interiors; addition of unit enhancements, such as central air conditioning; a complete facelift of the building exteriors; and numerous other exterior and common area improvements. The renovations also incorporated the addition of newly constructed, 2,500-square-foot free-standing community center that includes a multipurpose room and computer lab, and which has become the center of community activities at Hazel Hill.

Hazel Hill Apartments is a 147-unit, project-based Sec. 8 property consisting of 147 two-story garden-style apartments. Hazel Hill is home to 450 residents, including more than 141 children. The majority of current residents have incomes below 30 percent of the area median income, and all of the current residents are below the federal poverty guidelines. The property is located just two blocks away from historic downtown Fredericksburg, and the VRE, a local train system that runs to and from downtown Washington, D.C., an area that has recently experienced a surge in gentrification.

What makes the Hazel Hill redevelopment unique, however, is the Hazel Hill Community Enrichment Program. With this creative program, NHT/Enterprise has improved the immediate social and economic fabric of the property and surrounding community; substantially contributed to social change; and developed a delivery system that offers outstanding social services for tenants.

Under the Community-Based Policing Initiative, two police officers have been assigned to Hazel Hill. They walk—not patrol— the community, meet with residents, and facilitate and participate in service programs and community social events, including a monthly Movie Night. A part-time community nurse addresses health-related issues and questions onsite.

A Resident Services Coordinator is responsible for designing programs that meet the needs, wishes, and schedules of residents. Recent programs have included computer classes, student tutoring, Tai-Chi, financial and budget seminars, GED classes, parenting classes, nutrition seminars, and fundraising for back-to-school supplies.

This comprehensive approach to providing affordable housing and improving the quality of life for families and the elderly who live there, is a unique, replicable, and award-worthy model.

Q. How does this project represent an innovative solution to a specific development challenge?

A. The Fredericksburg area has seen significant increases in housing costs over the last several years, and Hazel Hill is one of only a few affordable housing developments in the area with Section 8 assistance. It was important to NHT/Enterprise and HHAC to maintain Hazel Hill as project-based Sec. 8 housing.

Financing and completing the many necessary improvements were only a part of the development challenge addressed by NHT/Enterprise. Hazel Hill was no exception was perceived throughout the city as a community of illicit activity and housing of last resort. Developers needed a plan to address these social and economic needs; the innovative solution took form in the Hazel Hill Community Enrichment Program.

Resembling Maslow’s Hierarchy of Needs, the Enrichment Program incorporates a triangle of activities that complement one another: Onsite Healthcare Assistance, Community-Based Policing, and Resident Services and Community-Building Activities. The essence of the program focuses first on providing basic needs—housing—and then adding services—health, community policing, and resident services—so Hazel Hill residents feel safe and secure, and have the resources to achieve greater self-esteem, respect for themselves and others, and self-actualization. Combined, the activities and services provided through the program construct a foundation for reaching the top of the pyramid, self actualization. Pastor Davies spoke of his hopes for Hazel Hill in the Freelance-Star on June 6, 2006, saying that “We pray that the houses in which they live can thrive.”