For institutions that seek to finance affordable housing, adaptive reuse feels like a special bonus. The complexity of adaptive reuse can test the stamina and creativity of all involved, but the results can be both spectacular and far-reaching. When a much-beloved building is restored to life, the surrounding neighborhood shares in this invigoration. The impact on residents can also be profound. There is something reaffirming about living in a community landmark, particularly one that so clearly exhibits the care that went into its restoration.
Other benefits of adaptive reuse as a strategy for affordable housing are highlighted in Real Trends: The Future of Real Estate in the United States, a report commissioned by Capital One and written by the MIT Center for Real Estate. The authors note that structures selected for adaptive reuse are usually close to city centers and embedded in the urban infrastructure, affording improved access to transportation and employment opportunities. They also cite the lower environmental costs of retrofitting existing buildings over building new ones.
Capital One’s Community Finance team has seen these trends play out in our work. As the country’s affordable housing crisis continues, finding new life in the hidden gems found in our city centers makes sense for all involved.
Baltimore’s Columbus School
Opening in 1891, the Columbus School was a linchpin of Baltimore’s South Clifton Park neighborhood. The school was built in an imposing Romanesque Revival style meant to convey to young scholars the importance of education. They evidently received the message, because for years the Columbus School was considered one of the best in the Baltimore system.
Despite being placed on the National Register of Historic Places in 1979, the school struggled to find a new role after it closed in the early 1970s. An initial conversion to apartments failed, and by the turn of the century the building was abandoned. It was derelict in 2012, when The Woda Group, one of the nation’s largest developers of affordable housing, began planning to convert the building to affordable housing.
The $13 million Columbus School Apartments, completed in 2014, marks the rebirth of a landmark and epitomizes the benefits gained by combining affordable housing and adaptive reuse. It adds 50 units to the local housing stock, with units reserved for residents earning less than 30%, 40%, and 50% of the area median income (AMI). It is within walking distance of The Johns Hopkins Hospital, and, thanks to a number of intersecting bus lines, the building provides excellent access to jobs across the city. It is also contributing to community revitalization; Baltimore authorities have characterized the reopening of the building as an important piece of the city’s renewal strategy for the North Avenue corridor, just a block away.
The combination of these benefits and the quality of the team assembled to restore the building were powerful inducements for Capital One’s participation. In addition to a highly respected developer like The Woda Group, the team included architects CBH Associates and the Center for Urban Families, a Baltimore nonprofit that is providing social services to residents. To support the effort, Capital One purchased $12.3 million in low income housing tax credits (LIHTCs) and historical tax credits through Hudson Housing Capital.
Capital One felt comfortable enough with adaptive reuse in Baltimore to apply the solution more broadly. Even while Columbus School was underway, our Community Finance team began working on another affordable development in Baltimore, the adaptive reuse of an abandoned 1920s police station in the Fells Point neighborhood.
Seattle’s Building 9 at the Former Sand Point Naval Air Station
In its heyday during World War II, the Sand Point Naval Air Station supported 8,000 civilian and military personnel, 150 shops for repair and modification of fleet aircraft, and training schools for radiomen, aviation metalsmiths, and aviation machinists. During peacetime, its primary mission was training naval reservists. As a result, most Seattleites of a certain age are likely to know someone who was stationed there, if they weren’t stationed there themselves.
Flight operations ceased in 1970, and 350 acres of the base were given to the city of Seattle in 1975, which developed it as Magnuson Park. When the Navy vacated the base entirely, it turned over Building 9, just north of the park, to the U.S. Department of Education.
The 240,000-square-foot, Colonial Revival structure, built in 1929 and expanded in 1938, was used primarily as a barracks. After passing through a number of hands, the state of Washington purchased the building to redevelop as affordable housing. In 2014, it entered in an arrangement with Mercy Housing Northwest, a leading developer of affordable housing in Washington and Oregon, to convert the structure.
The Building 9 development is not a stand-alone venture, but part of a larger redevelopment effort underway in Magnuson Park that includes 106 units of new housing for homeless families, an art gallery and studios, an events building in a former hanger, and a community center. As a result, the context for the adaptive reuse of Building 9 is in many respects different from that for Columbus School. In Baltimore, adaptive reuse allowed Woda to restore the fabric of an existing community. In the case of Building 9, Mercy is helping to create a new one.
Capital One was drawn to the undertaking by the opportunity to work with a developer of Mercy’s caliber on an adaptive-reuse venture that resonated strongly with the people of Seattle. It provided a $13.4 million construction loan, a $1 million Washington Community Reinvestment Association permanent loan, and approximately $16 million in LIHTC equity purchased through Enterprise Community Investment. Other project partners include Tonkin Architecture, city of Seattle Housing Levy, Washington State Department of Commerce funds, Washington State Housing Finance Commission, city of Seattle Childcare Bonus, and Washington State Building Communities Fund.
Capital One’s experience with complex ownership structures for affordable housing proved invaluable. Because the development qualified for a mix of 4% and 9% tax credits, the property was divided into two components, each of which were separated into two legal condominium parcels owned by a limited partnership.
When Mercy broke ground at the end of 2017, Building 9 had been abandoned for more than 20 years and had been repeatedly vandalized. When it opens in 2018, the $73 million development will offer 148 apartments, ranging in size from studios to three bedrooms, for working families and small households with incomes between 30% and 60% of the AMI.
In addition to the affordable housing, the repurposed barracks will include a community center, computer lab, and gathering spaces, as well as an early childhood education center and a health clinic. Mercy will provide a full suite of resident services, with an emphasis on health and wellness, after-school and summer programs for youth, financial literacy, and housing stability. When completed, this adaptive reuse venture will move Seattle’s vision for a community at Magnuson Park closer to its realization.
Converting Vacant Buildings into Something People Want
Capital One has found that adapting historic structures for affordable housing is particularly gratifying for a number of reasons. For example, it provides an opportunity to work with some of the most skilled developers in the nation. Our Real Trends report notes that only leading developers such as these have the skills to take on a complex adaptive reuse effort. At the same time, adaptive reuse gives us a chance to transform neglected, but nonetheless cherished, structures into something that communities desperately need—affordable housing. It is also a way of demonstrating to residents that their lives—like the restored buildings they now call home—have lasting potential.
Laura Bailey is senior vice president of community finance at Capital One.
