A local nonprofit’s efforts to purchase the Creekside Apartments and maintain the property as affordable housing won initial support from members of the Missoula City Council this week, and will face a final public hearing on Monday.
Homeword, a local nonprofit that builds and maintains affordable housing, has asked the city to issue a “conduit bond” to help cover purchase of the Creekside Apartment complex on East Broadway.
Dale Bickell, the city’s chief administrative officer, said issuance of the bond comes with no obligation to the city. Rather, it allows the lender First Security Bank to benefit from Homeword’s repayment of the debt, while Homeword benefits from a lower interest rate.
“In a sense, it allows a qualifying nonprofit organization (Homeword) to piggyback on the city’s status as a tax-exempt issuer,” Bickell said. “Homeword can acquire this property and use taxes and financing to do it, which essentially lowers their interest rate.”
If approved by the City Council next week, the agreement would allow the city to issue $10.3 million in revenue bonds. First Interstate Bank has agreed to purchase the debt, effectively financing Homeword’s acquisition of the property’s 161 apartment units.
Andrea Davis, executive director of Homeword, said the property came on the market in May. When it was listed, it became clear that the potential buyers would convert the property to market-rate housing.
Davis said that had the potential to displace hundreds of residents who currently depend on the property’s status as affordable housing.
“When we were working with the broker in Washington, they indicated that all interested parties were conventional market-rate buyers,” said Davis. “In fact, Homeword was the only Montana bidder, and the only nonprofit bidder. Everyone who had put a bid on the property was interested in driving the property to market-rate housing.”
The Creekside Apartments are now rented to those earning 60 percent of the area median income, or roughly $27,000 a year. But that income restriction is set to expire in nine years, after which Creekside would likely have been converted to market-rate rentals.
“It was quite certain the property was being marketed to take it out of the affordable portfolio at least in nine years, if not sooner,” Davis said. “The property was at risk had a for-profit, market-rate owner purchased it.”
Eran Pehan, who manages the city’s Office on Housing and Community Development, said that while the purchase price is high given the market, the cost is still well below that of constructing 161 new affordable housing units.
It was important, she added, to keep the city’s portfolio of affordable housing in place.
“We know it costs us pennies on the dollar to preserve the units we already have in place as opposed to replacing them with new construction, especially given the depleting land resources we have as a community,” Pehan said.
“We have many other tax credit sites that will be sun-setting in the future,” she added. “This is an important partner and an important role the city can play in making sure we preserve the affordable housing we have.”
The final public hearing is set for Aug. 21.