When the principals of Elmington Capital Group were vying for city aid two years ago to help build an affordable apartment complex on Chattanooga's Southside, Hunter Nelson and John Shepard began detailing plans for their Chestnut Flats apartment complex and all of its advantages for Chattanooga when Mayor Andy Berke stopped their pitch in mid sentence.
"You had me at 60% AMI," Berke quipped, referring to the targeted tenants for the 199-unit complex who must earn no more than 60% of the adjusted median income (AMI) in the area. "Chattanooga is a place that is thriving, but it is awfully hard to enjoy this great city if you live 20 miles away where more and more of the affordable housing is being built. We need quality, affordable housing for all people in our central city and that is what this project helps provide."
Berke and U.S. Rep. Chuck Fleischmann, R-Chattanooga, who has supported the federal tax credits for more affordable housing, helped cut the ribbon Tuesday for Chestnut Flats. The Southside development already has 65 tenants and will have 110 of the 199 apartments occupied by the end of the month, Nelson said.
"This is really beautiful and a place where people can afford to live and work in this great city," Fleischmann said.
Tenants who meet the eligible income guidelines pay only $697 a month for a one-bedroom apartment, $831 a month for a two-bedroom apartment, and $955 a month for a three-bedroom apartment at Chestnut Flats.
A study by the real estate firm of Cushman & Wakefield found that median rental rates in Chattanooga grew last year by 2.7% to an average effective rent of $908 a month for a typical one- or two-bedroom apartment. Downtown rental rates for apartments in Chattanooga which are not subsidized are even higher.
The complex on Chestnut Street just south of Riverfront Parkway is close to downtown and still offers free parking and a fitness facility and common meeting area for tenants. The apartments include granite-top cabinets and wood floors "that are better than some places I have lived in at times of my life," Berke said.
Chestnut Flats is the biggest new HUD-subsidized affordable housing project in Hamilton County since 2007, Nelson said.
"It takes every part of the federal, state and local government to make a project like this work," Nelson said.
The federal tax credits, which are allocated through the Tennessee Housing Development Agency, combined with local property tax breaks and a brownfield redevelopment grant to help finance the project, which Nelson said totaled nearly $25 million.
Nelson said the project, which relies upon federal tax credits for nearly half of its funding, nearly stalled when those credits became less valuable last year with the implementation of the White House-backed tax cuts that reduced marginal taxes and thereby limited the value of tax-advantaged investments.
"We scratched and clawed, shook the couch cushions, and were able to make this project work," Nelson said "In this property you see both the past and the future of Chattanooga. This was the site of a number of former foundries and was a brownfield site that we were able to clean up and bring new affordable housing, which we like to say is where jobs sleep at night."
Elmington also purchased Chattanooga's Patten Towers on 11th Street earlier this year and expects to complete the renovation of that 221-unit affordable apartment facility by the end of 2020.
"You've seen a lot of economic growth in Chattanooga without much increase in the stock of affordable housing," Nelson said.
Despite the addition or planned development of thousands of additional apartment units downtown in the past three years, Berke voiced confidence in the central city market for housing.
"The downtown housing market is strong," he said. "I have investors coming in to see me on a regular basis who say we need more apartments. Occupancy is still strong and prices are rising."
Contact Dave Flessner at email@example.com or at 757-6340.