Downtown Affordable Housing Complex Could Go ‘Belly Up’ Without Loan Forgiveness
Owners of an affordable housing complex in Downtown Louisville are asking the city to forgive a $500,000 loan the city granted them 15 years ago.
More than half of the 40 units at Cathedral Commons are reserved for people making less than 60 percent of the area median income, or $46,500 annually for a family of four. Christ Church Cathedral developed the complex on S. 2nd Street. They still have about $4 million of debt from the project.
Matt Bradley, who heads Christ Church Cathedral, said they got into the project as a “heart move,” and not as a business decision.
“Fifteen years in, we’re realizing that owning one 40-unit property, given the margins on affordables, makes it a real challenge for a congregation with an average Sunday attendance of about 110 people,” he said.
The Cathedral Commons apartment complex was funded through various sources, including a loan from the Kentucky Housing Corporation and a community development block grant from the U.S. Department of Housing and Urban Development. Because the church signed what’s called an “extended use agreement” with the Kentucky Housing Corporation, rents on the property must remain below market value for another 15 years in order to receive subsidies.
Representatives for Christ Church Cathedral said they are planning to sell the property to an organization that has experience running affordable housing developments. They are seeking loan forgiveness in the meantime, which could also make the property more attractive to prospective buyers.
Marilyn Harris, the city’s director of housing, spoke at a recent Metro Council meeting in favor of forgiving the debt. She said that, like many affordable housing developers, the church is having a difficult time meeting its debt obligations.
“As you can see, if they try to repay this, it will make this project go, in layman's terms, belly up,” she said.
If Cathedral Commons is sold, it would still be reserved for low-income residents. Harris said that sales after the first 15 years of operation are normal in the affordable housing industry.
“What will generally happen is … a new buyer will come in and they will recapitalize this, and by that I mean they will put a new application in for low-income housing tax credits, they’ll do major renovation repairs, and we’ll get another 30 years out of the deal,” she said. “It’s just kind of a cycle.”
Louisville Metro Council’s Budget Committee unanimously approved the loan forgiveness for Cathedral Commons at a meeting last week.
Jecorey Arthur (D-4) is sponsoring the proposal. He said it’s important to maintain the city’s stock of affordable housing right now. The city’s most recent assessmentshows an unmet need of more than 50,000 affordable housing units for Louisville’s poorest residents.
“So, if we can’t have our families here, if they don’t get to stay here, I’d raise the question: Where do they go?” Arthur said.
The full Metro Council is expected to vote on the ordinance to forgive the $500,000 loan at its next meeting on Thursday.