A Federal Housing Boon

Knoxville stands to benefit from the Neighborhood Stabilization Plan

Amid all of the mega-billion-dollar economic "rescue" measures Congress has approved of late, a little-noticed $4 billion Neighborhood Stabilization Program (NSP) adopted in July pales by comparison.

Yet Knoxville could well derive more tangible benefits from its allocated share of the $4 billion than from the $700 billion in rescue funds that the Treasury Department is now in the process of doling out, mainly to shore up ailing banks.

The City of Knoxville is due to get $2.7 million in NSP funds directly from the federal Department of Housing and Urban Development (HUD). The city has also been expecting to get an additional $1.8 million channeled through the state. However, the Tennessee Housing Development Agency has deferred allocation of these funds until January. So while city officials remain optimistic they will receive the full $4.5 million, they've had to proportionately reduce their NSP allocations to the projects described in this column for the nonce.

A primary thrust of the program, however well conceived, is to let cities buy foreclosed houses in the name of lessening their adverse impact on residential property values, whose downward spiral has precipitated a crisis in the housing market. But the program allows communities considerable flexibility in using the funds for other forms of housing assistance, particularly for lower-income households and the homeless.

In deciding how to allocate the NSP money, the director of the city's Department of Community Development, Madeline Rogero, says, "We tried to build on what we're already doing, addressing issues that have been on the plate for some time and in need of funding... low-income housing is where the big needs are, and we're happy that HUD's regulations were flexible enough to allow for that." Assuming the full $4.5 million that's anticipated becomes available, the city plans to deploy it as follows:

An $869,000 allocation will go for acquiring and rehabilitating abandoned Eastport Elementary School to yield 25 one-bedroom public housing units for the elderly. The money will go to Knoxville's Community Development Corp. toward covering the $3.1 million total cost of the project; KCDC is responsible for raising the balance via federal low-income housing tax credits and other sources.

Eastport is adjacent to Walter P. Taylor Homes, the city's largest and most troubled public housing complex. Relocations to the 25 Eastport units represent a stepping stone toward what KCDC's president, Alvin Nance, terms "de-densification" of Walter P. His goal is to reduce the number of units there by half, which he believes will bring the same sort of revitalization to the Five Points neighborhood that KCDC has brought to Mechanicsville and Lonsdale via the transformation of their public housing.

The NSP funds will also support a significant start toward another city goal: namely, its 10-Year Plan to End Chronic Homelessness. A $975,000 allocation is earmarked for completing the financing of the $7 million renovation of Minvilla Manor (the former Fifth Avenue Motel) into 57 units of supportive housing for now-homeless individuals. Tax credits didn't yield as much as its developer, the Southeastern Housing Foundation, had been counting on, and the NSP funds are intended to fill the gap.

An additional $800,000 is being set aside for another 50 units of what's intended to be permanent housing (not a shelter) for the homeless at a site to be determined. Rogero is sensitive to concerns about a concentration of such housing in the center city and says the site will "preferably be out west." Southeastern Housing Foundation is again responsible for raising the balance of an estimated $4.8 million total cost and is expected to operate the facility, which will provide case management for its residents. The foundation's director, David Arning, also expects to be partnering with the city on the creation of yet another 300 residential units to fulfill the goal of the 10-Year Plan by 2015.

Only $1.1 million of the money would go for the purchase of foreclosed houses, covering a total of 18 dwellings. Five of these would be bought and rehabilitated by Knoxville Habitat for Humanity at a cost of $250,000 for resale to buyers whose household incomes are less than half the Knoxville area's median of $58,500. Another five, to be concentrated in a high foreclosure section of South Knoxville, would be purchased by Knox Housing Partnership (KHP) for rehabilitation primarily as rental houses with a $390,000 outlay of NSP funds. The other eight would be purchased by KCDC in Mechanicsville for resale that would protect against their becoming rental properties that could have a negative effect on homeowner property values. A $500,000 NSP allotment for these purchases would be supplemented by KCDC funds for down-payment assistance to buyers who could have incomes up to 120 percent of the $58,500 median.

Rogero is wary of buying foreclosed houses, observing that "One of the problems with acquisitions is that you have to have a market for them. We already have some really great properties for sale, and we don't want to become a land bank." Habitat for Humanity, she points out, only builds or rehabs houses it's already got sold, and KHP's experience with rentals lessens the risk of its houses remaining on the shelf. So that leaves only the Mechanicsville acquisitions at the risk of a very weak housing market. But protection of the character of that neighborhood is deemed to warrant it.