The Mechanicsville Cityside Initiative Provides Scattered-Site Housing for Low-Income Atlanta Residents

The Mechanicsville Cityside Initiative Provides Scattered-Site Housing for Low-Income Atlanta Residents

Located just south of downtown Atlanta, Mechanicsville is one of the city’s oldest neighborhoods, with a long history as a racially diverse, working-class neighborhood. Throughout the early to mid-twentieth century, however, the neighborhood experienced decades of economic decline and population loss, spurred by factors such as the construction of Interstate75/85, white flight, and a failed urban renewal program. In 2016, the Atlanta Department of City Planning, in partnership with the state of Georgia, a local community development corporation, and a local affordable housing developer, launched the Mechanicsville Cityside initiative. The initiative’s goal is to improve neighborhood stability by renting 74 scattered-site, single-family houses to low-income families, who will then be able to purchase their units after 15 years.

Innovative Use of Low-Income Housing Tax Credits

In May 2013, the Office of Housing and Community Development (OHCD) of Atlanta’s Department of City Planning began working with the state of Georgia’s Department of Community Affairs (DCA) to launch a pilot initiative that would use allocations from the Low-Income Housing Tax Credit (LIHTC) program to build a scattered-site rental housing project.

The LIHTC program is a federal program that promotes the development of affordable rental housing by providing tax credits to states. Each state distributes credits to individual project developers, who then exchange the credits for a capital contribution from a private investor or group of investors, thus funding the low-income development. Although the LIHTC program is the most significant source of new affordable housing in the United States, it is difficult for scattered-site projects to leverage it because of state regulations. To address this problem, DCA formed a special set-aside of tax credits for the 2013 round of funding to be used for the Atlanta pilot application. Simultaneously, OHCD partnered with two local entities to apply for the special LIHTC funds, one in Mechanicsville and the other in a nearby neighborhood.

DCA selected a partnership composed of Columbia Residential, an affordable housing developer, and the SUMMECH Community Development Corporation (SUMMECH CDC) to receive the set-aside LIHTC allocation, and the two began work on the Mechanicsville Cityside initiative. The two entities began assembling sites for new construction. When the partners found that they were unable to obtain as many empty lots as planned, they acquired eight houses for renovation. The city assisted by transferring four lots of Atlanta Housing Authority land to the partnership and by providing Neighborhood Stabilization Program funds to the project for property acquisition. Construction of the $19.5 million project began in 2016 and concluded in December 2017.

New and Renovated Affordable Homes

The completed Mechanicsville Cityside project consists of 74 single-family rental houses scattered throughout a 20-block area. Of these houses, 66 are new construction and 8 are renovations. Although the renovated houses are all different, the new builds are available in 11 floorplans of 1 or 2 stories. All the homes have either three or four bedrooms except for one renovated house with five bedrooms. All the new houses and some of the renovations also have driveways. Each house has unfenced front and back yards, hardwood floors, granite countertops, energy-efficient appliances and attic hatches, dishwashers, washers and dryers, and central heating and air conditioning. In addition, four units were built to be wheelchair accessible.

Most of the project’s $19,571,595 cost derived from $15,199,020 of LIHTC equity. The city of Atlanta issued $1,689,631 in federal Community Development Block Grant funds as a federally guaranteed HUD Section 108 loan, as well as $500,000 in nonfederal funding and $299,351 in Neighborhood Stabilization funding. Additional funding sources include a $1.65 million permanent loan and a $532,944 deferred developer fee. The average cost for each new build was $209,000, and the average cost for each renovation was $143,000. Although the units are managed by Columbia Residential and owned by a partnership entity formed by Columbia Residential and the SUMMECH Community Development Corporation, the city of Atlanta monitors the development to ensure that affordability requirements are met.

To be eligible, applicants must earn no more than 60 percent of the area median income (AMI) per year. Unlike many LIHTC-funded projects, Mechanicsville Cityside will not revert to market-rate rentals when the 15-year affordability period expires. Instead, tenants will have the option to purchase their homes. If the tenant chooses not to purchase, the unit can be sold for a to-be-determined limited sum to a new owner-occupant with an annual income of no more than 120 percent of AMI. The city hopes that helping low-income residents remain in affordable homes for the long term will stabilize the neighborhood, promote community cohesion, and reduce blight and disinvestment.

The purchase program will not begin until the affordability period expires in the early 2030s, and the exact details for the program have not yet been established. Valerie Bernardo, director of housing and community development within the Atlanta Department of City Planning, reports that prospective buyers will have access to homeowner readiness training years in advance of the houses being offered for purchase. Possible resources to help tenants purchase their homes include downpayment assistance, a forgivable or deferred-payment second mortgage, and more.

The Mechanicsville Cityside project houses filled up quickly, in part because of the area’s desirability. The properties are near downtown Atlanta and numerous amenities such as a public library, recreation center, large public park, and a pocket playground. “We probably get more calls on this project than any other project, and the calls are from people wanting to buy the houses,” says Bernardo. All 74 houses were occupied within a month of their individual completion dates.

Remediating Blight and Spurring Private-Sector Investment

Although the city of Atlanta is still in the process of evaluating the pilot and assembling the retrospective report, Bernardo reports that the Mechanicsville Cityside project has already demonstrated positive results. “Even though the last set of units were just completed and occupied, you can still see the difference: [the Mechanicsville Cityside project] dramatically changed the neighborhood by dealing with blight and vacancy,” says Bernardo. The neighborhood has already begun seeing market-rate development of vacant properties as the result of the new, attractive affordable housing. Bernardo described the project as a successful means for managing community change and preventing economic displacement: “This is a way to address gentrification before it happens.”

There has not yet been a second round of funding under the special LIHTC set-aside, but as the city finalizes and publishes the debrief report, hopes are high that the state Department of Community Affairs will approve an additional round of pilot funding. After sufficient testing, the city of Atlanta hopes that Georgia’s LIHTC disbursement policy will be amended to allow scattered-site developments.