This short piece goes with these previously-posted details. Enjoy and/or critique!

Last Wednesday, VMC took board members and staff on a brief site visit to Minvilla Manor.

Progress is especially evident from the inside. We didn’t get up into the third level of the structure floor, but we were able to check out the apartments at the first (basement) level and on the second level.

New openings have been cut in some of the load-bearing walls to permit construction of hallways on the second and third levels. A lot of framing and utility rough-in has been completed on these levels, and you can see the individual apartments taking shape. Many of the new framing members are joined to old framing members that had to be left in place to satisfy historic rehab requirements.

Ceiling clearances on the first level were too low for apartments. It wasn’t feasible to raise the ceilings to get the appropriate clearances, so the contractor removed approximately 22 inches of earth in that area, reinforced the foundation, and poured new concrete slab. The apartments on this level in the larger of the two buildings are relatively large, and are framed in.  They’re still excavating on the first level in the smaller of the two buildings. A seam of rock has made that a bit more challenging, and  they’re moving a lot more dirt on that side.

A new building will connect the two existing buildings. It’ll house an elevator and stairs and will face Broadway. Another staircase will be added to the back side of the larger existing building opposite the elevator. That will provide the required two means of emergency egress.

So Minvilla Manor is coming along, roughly according to schedule, in some uniquely challenging circumstances. Wood Brothers and Southeastern Housing Foundation are working very hard to make it possible for the first occupants to be able to begin moving in late this fall.

Minvilla is one of the most visible projects related to the Ten-Year Plan to End Chronic Homelessness. As such, it has focused a lot of attention on the issue of homelessness, and especially on chronic homelessness.

These folks are among the most vulnerable members of our community. A chronically homeless individual is one who is disabled and has been homeless for at least one year, or who has had four extended periods of homelessness in the past three years. The majority deal with mental illness. People who are chronically homeless cost our community approximately $40,000 per year, per person, on average, because of their very heavy consumption of emergency services.

It has been demonstrated over and over again that that it costs less for a disabled person to reside in permanent housing with appropriate support services than it costs for that same person to remain on the streets. Permanent supportive housing saves money, and it is also the right thing to do.

Minvilla will be the first new permanent supportive housing development to come online in the context of the Ten-Year Plan. We believe that we need to develop something in the neighborhood of 400 new units of permanent supportive housing, and that another 400, approximately, can be housed in already existing housing.

The News-Sentinel’s Hayes Hickman has been covering the Minvilla saga and reports here.

This is cross posted at the TYP website.

Minvilla was originally advertised through invitations to pre-qualified firms and in professional forums. It was not publicly advertised in the newspaper because that was not required. Four construction companies bid on the project in a sealed bid process. The architect unsealed the bids, and the low bidder was Wood Brothers Construction. This is a standard practice in the industry, and it satisfied all requirements at the time.

Minvilla is not being re-bid because Wood Brothers Construction’s bid came in “disappointingly high,” as has been reported elsewhere, or for any other reason. The sole reason the project is being re-bid is that in the late fall of 2008, the City committed $585,000 to the project from new federal sources, most notably the Neighborhood Stabilization Program. The City of Knoxville’s Community Development, Purchasing and Law departments now recommend that the applicable federal procurement standards should apply to Minvilla, and that’s why the developer, Southeastern Housing Foundation, is advertising for new bids as of yesterday.

Here is a copy of the advertisement for new bids. Email addresses substitute a single-space bracketed “at” for “@” and a single-space bracketed “dot” for “.”.

SOUTHEASTERN HOUSING FOUNDATION, LLC

REQUEST FOR PROPOSALS

RFP #001

Project: Rehabilitation of the former Fifth Avenue Motel (AKA: Minvilla Manor)

Southeastern Housing Foundation, LLC is seeking proposals from qualified general contractors for the rehabilitation of the former Fifth Avenue Motel, located at 447 North Broadway, Knoxville, Tennessee, 37917, to create 57 units of permanent supportive housing for the chronically homeless, including management offices and common space. Sealed proposals for this project will be received by Southeastern Housing Foundation, LLC, at 901 East Summit Hill Drive, Suite 300, Knoxville, Tennessee, 37915, until 1:00 p.m. on April 27, 2009. Proposals received after the above specified time will not be considered.

The Request for Proposals (RFP) can be obtained from Southeastern Housing Foundation, LLC, at 901 East Summit Hill Drive, Suite 300, Knoxville, Tennessee, 37915, beginning April 6, 2009. Information on obtaining project drawings and specifications will be included in the RFP document.

A mandatory pre-proposal conference and site visit will be held at Volunteer Ministry Center, Inc., 511 North Broadway, Knoxville, Tennessee, 37917, on April 13, 2009 at 1:00 p.m. Failure to attend this mandatory meeting will result in the disqualification of proposals.

Respondents shall provide name of bonding company and bond issuance rate. Bonding capacity must be in excess of the Guaranteed Minimum Price specified in the respondent’s proposal. If selected, the contractor shall be required to post a payment and performance bond equal to 100% of the Guaranteed Minimum Price.

All respondents must be a licensed general contractor as required by the Contractor’s Licensing Act of 1994, and all acts amendatory thereof. Respondent’s name, address, license number, date of expiration of license, and that part of the license classification applying to the proposals must be placed on the sealed envelope containing the proposal.

All inquiries must be received in writing by mail, email or facsimile no later than 1:00 p.m. on April 20, 2009.  Inquiries related to construction documents should be addressed to Allan Associates Architects, PLLC, by mail at P.O. Box 26140, Knoxville, Tennessee, 37912, by fax at (865) 546-0787, or by e-mail at markallan at allanarch dot com. Inquiries related to all other aspects of this RFP should be addressed to Southeastern Housing Foundation, LLC, by mail at 901 East Summit Hill Drive, Suite 300, Knoxville, Tennessee, 37915, by fax at (865) 525-4213, or by email at darning at klf dot org. It is the sole responsibility of each respondent, prior to submitting proposals, to determine if addenda were issued and to make such addenda part of their proposal. A “non-collusion affidavit” is required to be submitted with the proposal.

Because federal funds will be used to support this construction project, Davis-Bacon wage rates and other areas of federal regulatory compliance will be required of the selected contractor.

Cross-posted at tenyearplan.org.

We suggest that Minvilla’s per-unit cost is reasonable, and that there are several other ways to look at that per-unit cost and at the complementary relationship between historic preservation and affordable housing.

Mixed marriages make sense for some projects

It is not at all uncommon to combine historic preservation and affordable housing. Companies actually specialize in it. There are numerous examples of historic + LIHTC (Low-Income Housing Tax Credit) projects, several in the Carolinas and Georgia in particular.

The marriage of historic preservation and affordable housing can make good sense. Often historic properties like Minvilla have been abandoned and/or neglected for years. Due to their deteriorated condition, they are too expensive to develop as typical market-rate projects.

• That’s why no private for-profit developer ever came forward with a viable redevelopment plan for Minvilla prior to its purchase by VMC.
• It’s why no such developer has come forward inquiring about purchasing and redeveloping the property since its purchase by VMC.
• It’s also why no such developer would be able to make a market-rate project work at Minvilla in our present economic environment.

The historic tax credits and low-income housing tax credits provide access to equity for difficult-to-develop projects like Minvilla. Qualification for and sale of the tax credits is what makes these challenging projects possible. The equity is only obtainable because of the building’s historic character and the project’s designated use as affordable housing.

80% of the funding for Minvilla is specific to this particular project. The money cannot simply be transferred to another project. The tax credits and grants are competitive and they were awarded solely to Minvilla based on the merits of the project.

With this funding comes an extra measure of accountability. Minvilla was required to undergo a “Subsidy Layering Review” because of its federal sources of funds. That review examined cost per unit and other factors to determine that the project was financially feasible and not over-subsidized.

Approximately $123,000 per unit will not be the typical cost to develop permanent supportive housing for the Ten-Year Plan. But Minvilla is not an either/or proposition. As we’ve discussed elsewhere, we will develop Minvilla and simultaneously pursue other, less expensive PSH options.

Benefit: Public money saved over time

The amount of public money saved over time by ending the chronic homelessness of Minvilla’s residents will greatly exceed the amount of public money invested in Minvilla. Remember, each of these residents, if they continued living on the streets, would cost our community somewhere around $40,000 per year in 2008.

What if we reduce that figure by 25%, or $10,000 per year per resident? Our community would save $570,000 per year a result of Minvilla operating at full occupancy. Over the 15-year minimum time period that the building would be committed to this use, its residents would cost the community over $8.5 million dollars less than they would if they kept living on the streets.

Pretty amazing, but is it real? Well, no. It’s probably too conservative, and it’s purely hypothetical.

The Denver Housing First Collaborative released a cost benefit analysis in December 2006.

The Cost Benefit Analysis focused on examining the actual health and emergency service records of a sample of participants of the DHFC for the 24 month period prior to entering the program and the 24 month period after entering the program. … The findings document an overall reduction in emergency services costs for the sample group. The total emergency related costs for the sample group declined by 72.95 percent, or nearly $600,000 in the 24 months of participation in the DHFC program compared with the 24 months prior to entry in the program. The total emergency cost savings averaged $31,545 per participant.

This study demonstrates one of the main benefits of permanent supportive housing like Minvilla, which is its return on investment in the form of cost savings. The Denver study plays out over four years. Click on the graphic to the left to see a revealing before and after picture of the effects of permanent supportive housing on costs to community emergency services systems. The light blue bars represent costs during the 24 months prior to entry into PSH. During this time, subjects were living on the streets and were heavy consumers of emergency services. The purple bars represent costs during the 24 months after the same individuals were housed. During this time, their utilization of emergency services fell drastically.

At the same time, their quality of life improved. The Denver Study also demonstrates significant improvement in the health of its subjects. The study also points out that

…the overall quality of life for the community can be significantly improved as the
negative impacts of individuals living and sleeping on the streets are reduced.

Click here if you’d like a copy of the entire study.

Private investment and cost compared to similar projects

Minvilla’s projected cost of approximately $123,000 per unit is actually at the lower end of the cost scale compared to other historic preservation projects used as permanent supportive housing.

Are historic-affordable projects expensive compared to new construction? They are. But they are invariably funded by the same sorts of funding: low-income housing tax credits, historic tax credits, Federal Home Loan Bank Affordable Housing Program funds, etc. These funding sources represent significant private investment via purchase of tax credits and direct grants. These investments come precisely because they will help to fund historic rehab into affordable housing. They also generate community development.

It costs money to generate this level of investment. Tax credit projects incur more legal, accounting and transactional fees than traditional development. However, these expenses are necessary to qualify for the tax credits and, in fact, the additional expenses themselves generate more tax credits.

Additional cost is also incurred by retaining the building’s historic character, but again, the private equity generated by doing that far outweighs the added expense. The real cause for Minvilla’s unusually high expense is the poor physical condition of the building, not its historic status.

Expensive isn’t the same as extravagant. Precisely because Minvilla is affordable housing, it’s apartments will not be “gold plated” units, contrary to what some have suggested. The units will actually be quite modest in size and finish. The project’s expense is related to

• bringing a severely neglected property back up to code and
• adapting 13 townhomes into 57 one-bedroom and efficiency apartments with their individual kitchens, baths, plumbing, electrical, mechanical, etc.

Furthermore, these investments will be made somewhere. It seems wise to bring their advantages to our community. All of Tennessee’s Low-Income Housing Tax Credits will be allocated to build affordable housing somewhere in our state. Why not bring that $2,300,000 investment here? The same is true for the $1,000,000 that will be generated by the sale of Historic Tax Credits. Who here doesn’t want to see that investment made in Knoxville? The Federal Home Loan Bank will invest its $500,000 to stimulate some local economy somewhere as it constructs an affordable housing project. We want to see that money used to preserve historic property in our community as it provides jobs for the people who will do the work necessary to preserve it, and as it provides permanent supportive housing for our neighbors who need it.

Finally, when you look at other projects comparable to Minvilla, you see that its cost is reasonable in its proper context. You might debate whether or not public investment of any kind should be used to preserve historic property or build affordable housing, but those are arguments that have already been resolved in favor of preservation and housing.

Some concrete examples are listed below.

Project Name: Ohio Avenue Commons
Location: Dayton, OH
Total cost: $4,000,000
Number of units: 27
Cost per unit: $166,666

Project Name: St. Barnabas Apartments
Location: Minneapolis, MN
Total cost: $7,400,000
Number of units: 52
Cost per unit: $142,307

Project Name: Nantucket Lofts
Location: Kinston, NC
Date started: 2005
Total cost: $5,100,000
Number of units: 28
Cost per unit: $182,143
2008 cost per unit: $210,853

Project Name: Courtyard at Highland Park
Location: Rock Hill, SC
Date started: 2006
Total cost: $13,200,000
Number of units: 116
Cost per unit: $113,793
2008 cost per unit: $125,457

Project Name: Cleveland School
Location: Clayton, NC
Date started: 2005
Total cost: $3,500,000
Number of units: 25
Cost per unit: $140,000
2008 cost per unit: $162,068

Project Name: Lassiter Square
Location: Madison, NC
Total cost: $4,500,000
Number of units: 36
Cost per unit: $125,000

Project Name: Pacific Hotel
Location: Seattle, WA
Date started: 1992
Date completed: 1995
Total cost: $8,534,694
Number of units: 112
Cost per unit: $76,202
2008 cost per unit: $143,690

Project Name: Shelly School Apartments
Location: West York, PA
Date started: 1997
Date completed: 2001
Total cost: $1,884,700
Number of units: 17
Cost per unit: $110,865
2008 cost per unit: $155,998

Project Name: Northern Hotel
Location: Fort Collins, CO
Date started: 1998
Date completed: 2001
Total cost: $11,691,725
Number of units: 47
Cost per unit: $226,631
2008 cost per unit: $318,893

Project Name: Van Allen Apartments
Location: Clinton, IA
Date started: 2000
Date completed: 2003
Total cost: $3,180,706
Number of units: 25
Cost per unit: $127,228
2008 cost per unit: $162,379

Last night’s public meeting about the Ten-Year Plan and permanent supportive housing was very well-attended (we’ll post some follow-up to the meeting here by the end of the day tomorrow). We hope the same will be true for tonight’s joint City Council/County Commission workshop which is open to the public.

One goal of this workshop is to start a process for defining the siting considerations that would inform location of permanent supportive housing developments in various parts of the city and county to meet TYP objectives.

Another other goal is to help define the guidelines by which developers of this housing will engage neighborhoods where such housing may be located. A good process for neighborhood engagement is critical to the success of the TYP’s efforts to develop necessary permanent supportive housing stock.

At tonight’s meeting, as at last night’s, Tim Klont from the Corporation for Supportive Housing will speak about what permanent supportive housing is, how effective it is, how it affects property values, the different models of development, how different communities site this type of housing, and other points of interest. After his presentation, Mr. Klont will answer questions.

The TYP is committed to a scattered-site approach to developing housing to end chronic homelessness. In order to reach its goal of creating 400 units of permanent supportive housing, the TYP will need to encourage construction and/or rehabilitation of perhaps a dozen or more apartment complexes scattered across the city and county.

A public meeting will give neighborhood representatives and interested members of the public an opportunity to learn about and comment on critical aspects of the Ten-Year Plan to End Chronic Homelessness.

The meeting will take place at on December 10, 2008 at 6pm in the small assembly room in the City/County Building.

According to TYP Director Jon Lawler, one major goal of this meeting, and the joint City Council/County Commission workshop on the following day (this meeting is also open to the public), is to start a process for defining the siting criteria by which permanent supportive housing would be located in various parts of the city and county to meet TYP objectives.

The other goal is to help define the guidelines by which developers of this housing will engage neighborhoods where such housing may be located. A good process for neighborhood engagement is critical to the success of the TYP’s efforts to develop necessary permanent supportive housing stock.

At each of these two meetings, Tim Klont from the Corporation for Supportive Housing will speak about what permanent supportive housing is, how effective it is, how it affects property values, the different models of development, how different communities site this type of housing, and other points of interest. After his presentation (20 – 25 minutes), Mr. Klont will answer questions.

The TYP is committed to a scattered-site approach to developing housing to end chronic homelessness. In order to reach its goal of creating 400 units of permanent supportive housing, the TYP will need to encourage construction and/or rehabilitation of perhaps a dozen or more apartment complexes scattered across the city and county.

Jon Lawler, director of the city-county 10-Year Plan to End Chronic Homelessness, said 80 percent of the public funds secured for Minvilla, including historic and low-income housing tax credits, are specific to that project.

Several folks have requested more specific information about this statement. Click here for a copy of the Dedicated vs. Portable funds worksheet distributed to City Council on 11-25-2008.

These are fair questions. Minvilla is expensive compared to new construction for a comparable use. Its expense is mostly due to several years of neglect by previous owners, neglect which led to its deteriorated condition; the unique challenges posed by the changes the structure will undergo as it’s adapted for its new use; and certain requirements related to the historic character of the building. Those additional costs are more than absorbed by the considerable equity made possible only by historic designation, but even so, some people ask, “Why not take the money going towards Minvilla and put it towards more, cheaper, readily-available units?”

Here’s why:

• The City wants to preserve Minvilla. VMC brought forward the only viable approach to doing that in approximately three years on the market. Other developers tried and failed to make their numbers work, but VMC’s project made preservation a real possibility.
• Minvilla Manor serves two purposes, not just one: historic preservation AND permanent supportive housing. The community had a strong enough desire to save this building that City Council voted to approve a significant CDBG grant for its preservation, and to the best of our knowledge, that was before VMC was in the picture. Rehabbing the building for use as PSH enabled access to more than $2,000,000 of funding that would not have been available for any use other than affordable housing.
• Most of the funds aren’t portable. Minvilla’s total project cost is right around $7,000,000. You can’t spend most of that money elsewhere. About 80% of it is tied specifically to the Minvilla Manor project, and the funding that’s most firmly attached is some of the most challenging to get in the first place. Click here for a PDF version of a table that compares dedicated versus portable funds in Minvilla’s financing.
• We DO look at lower-cost properties than Minvilla. Frankly, that’s pretty easy to do, because Minvilla is unique. Some people in the community have suggested specific properties. We’ve approached several different owners concerning several existing properties that we think might be appropriate for PSH, but we have not been able to come to terms with any of them yet. Keep in mind, too, that the simple fact that an apartment complex is super-cheap does not mean that it’s suitable for permanent supportive housing.
• We need to grow our capacity to deliver good case management. This is important. If we acquire a large number of PSH units and place residents in them before we have built a good case management infrastructure and assured its funding going forward, those residents will fail. They will not remain housed. This is why “housing more people sooner” won’t work. In PSH, housing and support are linked. You don’t have PSH without housing, and you don’t have it without case management. The case manager relationship is essential to a resident’s success in housing, and that is one reason PSH has to be developed at a pace that makes sense.

Does all this mean that Minvilla serves as a model for future PSH projects in Knoxville? No. When it’s completed, we believe Minvilla will be a great project, a symbol of our community’s commitment to ending chronic homelessness, a beautiful historic anchor property in the area in which it’s sited, and a home that will change the lives of hundreds of people who are now chronically homeless. But we intend to focus in the future on projects with less complexity and cost.