A Chattanooga panel on Wednesday approved more affordable housing and, for the first time, used a new financing package to help solve what one official called "skyrocketing" rents in the city.
"The diversity of projects we have for housing is imperative," said Hicks Armor, who heads the city's Health, Educational and Housing Facility Board, adding that costs are "skyrocketing in places where people can't truly afford housing."
The panel endorsed a 47-unit apartment complex planned for 1715 Union Ave. in Highland Park by the nonprofit housing group Chattanooga Neighborhood Enterprise (CNE).
The board gave its OK to tax incentives in the form of a 10-year payment in lieu of tax (PILOT) agreement with CNE.
City taxes will be at the predevelopment level of $721 per year, according to CNE, while Hamilton County taxes will be $876 annually. All the school taxes will be paid under the PILOT, officials said.
Donna Williams, the city's administrator of the Office of Economic and Community Development, said $360,000 in federal grant money from a U.S. Housing and Urban Development fund that comes to Chattanooga will be used along with the PILOT for the project.
"For the first time, we have allowed city resources to be stacked on a project," she said. "This is the right project for the stacking of incentives."
Williams said the cost of housing is "unbelievable in Chattanooga."
"In a neighborhood like Highland Park, prices are really rising," she said.
Williams said CNE had earlier estimated the project at about $5.5 million, with work expected to start this year.
Martina Guilfoil, CNE's president and chief executive, said that 26 of the planned 47 units will have rents lowered due to the PILOT. Nine other units will offer reduced rents because of the federal money, she said.
"The goal is to provide the most affordable rents to people," she said, adding it will create "a mixed-income community."
For the 26 PILOT units, rents will range from $695 to $850 per month, according to CNE. For the nine units related to the federal grant money, rents will be from $617 to $751 monthly. Rents for the 12 market rate units are to be $1,250 a month, CNE figures show.
According to CNE, the average rent in the Chattanooga area is $1,035 per month, citing January figures from CoStar. The average rent in the downtown area is $1,292, it reported.
Guilfoil said the new project, called the Mai Bell II, will feature a different design than an earlier 49-unit complex called Mai Bell I at Bailey Avenue and Hawthorne Street raised in 2017 for $4.7 million.
The new apartments will go in six buildings, according to CNE.
At a 2018 rezoning meeting before the Chattanooga-Hamilton County Regional Planning Commission for 1715 Union Ave., some Highland Park residents raised questions about an earlier proposed project by CNE.
The main concern among some in the neighborhood was the design of the proposed building, they said then.
But Guilfoil at the time said some residents appeared to be using language that was "code" for not wanting blacks or the poor in the community, which the homeowner association's president denied.
She said Wednesday that CNE worked with the neighborhood concerning the new design.
Also at the board meeting, the panel approved a PILOT to raise one of the largest new apartment complexes in Alton Park in years.
The 240-unit apartment complex on 13.4 acres at 4905 Central Ave. would hold multiple three-story buildings, a clubhouse and a small pool house. The Reserve at Mountain Pass complex would be raised by LDG Development of Louisville, Kentucky.
Contact Mike Pare at mpare@timesfreepress.com. Follow him on Twitter @MikePareTFP.