KANKAKEE, ILL.—A half-empty, crime-ridden property here that had entered foreclosure was rescued and rehabilitated through the combined efforts of a preservation-minded developer, lenders, and federal, state, and local officials.
The Crestview Village Apartments had fallen on hard times before Preservation of Affordable Housing, Inc. (POAH), a Boston-based preservation nonprofit, purchased it in 2005. Built in 1968 under the Sec. 236 program and converted to project-based Sec. 8 in 1986, the six-building, 132-unit property had fallen into disrepair and its previous owners had racked up years of regulatory compliance disputes with the Department of Housing and Urban Development (HUD).
In 2003, HUD imposed a rental freeze and began mortgage foreclosure proceedings against the owners. It also scheduled termination of the Sec. 8 funding for the complex.
The tenants were offered vouchers to find other housing, but only 40 of the families were able to find another place to live; there simply wasn’t sufficient affordable housing available in the area, according to POAH executives. “The compelling dynamic that first made preserving Crestview so important is that the other 90 families here really had nowhere else to go,” said Amy Anthony, POAH’s president.
Having the opportunity to save a property once it enters HUD’s foreclosure process is rare, according to POAH. But HUD proved interested in preserving the 37-year-old affordable property and “was able to work with us on the price of the property because they were holding the debt,” said Rodger Brown, POAH project manager for Crestview. POAH paid about $3.8 million to acquire the project. The Illinois Housing Development Authority (IHDA) eased the exit for the previous owners by giving them an allocation of state donation tax credits. (The donation tax credit allows individuals or organizations to give a minimum of $10,000 in value to participating nonprofit developers. In return, the donor receives a 50-cents-on-the-dollar state income tax credit.)
Locals had begun to assume the best thing to do with the property was to tear it down. “When you live around an eyesore all the time, it’s hard to see it any other way,” Brown said. But to POAH’s staff, who were new to Kankakee and could look at it with outsiders’ eyes, the run-down property “looked like an opportunity.”
After about a year of work, the rehabilitation was finished in June 2006. The developers added new rooflines to the previously flat roofs, painted, installed new landscaping and better drainage, added new signage, and put in new kitchens and bathrooms. POAH also added a 700-square-foot community space to its enlarged on-site office building.
When POAH took over the property, only 55 percent of the units were occupied. The group turned that circumstance to its advantage by rehabbing the many vacant units first. That way, the nonprofit could immediately start leasing the units as they were completed, generating additional revenue with reduced tenant-relocation costs. As of late June, the property was nearly 100 percent leased. Crestview is managed by Preservation Housing Management, POAH’s management company.
Rents at Crestview are $515 for a one-bedroom unit, $590 for a two-bedroom, and $700 for a three-bedroom unit. All of the residents pay 30 percent of their incomes for rent; project-based Sec. 8 funding covers the rest.
POAH spent about $11.7 million to purchase and improve the property. Financing included $3.5 million in 4 percent low-income housing tax credit equity, which was provided by the National Equity Fund, Inc., a $2.8 million first mortgage from Prudential Multifamily Mortgage, Inc., a $2.8 million award of HOME funds by IHDA, and a $2.2 million note from POAH.
