Tax Credit Backlog Threatens Sutherland

by Curtis Black, Community Media Workshop
August 7, 2008 – Tenants at the historic Sutherland Apartments are continuing efforts to maintain their building’s affordability, despite long waits for federal housing tax credits administered by the city, which have discouraged several affordable housing groups.

“We want to keep it affordable and have a stake in ownership of the building as a tenant association,” said James Long, president of the Sutherland Apartments Tenants Association.

The building at 47th and Drexel is home to the historic Sutherland Ballroom, which hosted jazz greats from the 1940s into the 1970s. A renovation of the ballroom is being completed, Long said.

The building itself was renovated in the late 1980s and reopened in 1990 with low-income housing tax credits guaranteeing 15 years of affordability. The tax credits expired in 2005 and the owner, Heartland Housing , sought new tax credits from the city to maintain the building’s affordability.

“We were told the city was not going to have enough tax credits” and the proposal would have to wait, perhaps several years, said Andrew Geer of Heartland.

Lack of funding — and particularly lack of clarity on funding timelines — is an issue throughout the affordable housing industry, he said.

One factor in Chicago is that half of the city’s allocation of federal tax credits is going to the CHA’s Plan for Transformation .

Heartland bought out two partners at reduced rates, garnering the sellers donation tax credits, generating funds for some renovations, and extending affordability requirements for a quarter of the building’s 143 units for another ten years.

In early 2007, after the group learned the tax credits and other possible combinations of subsidies weren’t available, Heartland notified tenants of their intent to sell the building. That triggered a 90-day period when tenants could seek development partners to put together a proposal to take over ownership.

The tenants worked with Volunteers of America , a national affordable housing preservation group, but just before their deadline VOA decided they couldn’t make the deal work.

VOA wasn’t comfortable with the long wait time for tax credits, Geer said. Attempts to reach VOA were unsuccessful.

The tenants association turned to the Kenwood Oakland Community Organization for help. They’ve approached several potential developers, said Shannon Bennett of KOCO.

“There has been interest in the building from a lot of bidders, both nonprofit and for-profit, but the major obstacle is getting the tax credits,” said Long.

What’s needed is a commitment from local elected officials and city agencies to provide tax credits or other subsidies, possibly including some Section 8 subsidies, Bennett said.

“It’s not a hard sell,” he said. “It’s a prime location, it has commercial and office space, it has the ballroom.”

But “people need to know there’s a guarantee they can keep the tax credit,” he said. Without that he fears displacement from conversion to condos or high-end rental.

Kenwood-Oakland is losing affordable housing steadily, Bennett said. “Every day people are being forced out of the area.”

Historically Bronzeville was home to a mixture of professionals and blue-collar African Americans, he said. “A lot of low-income working folks stayed here through all the hard times,” he said. “Now they’re being told to move.”

“These people have to live too,” said Long. “They work, they pay taxes. They just don’t make $50,000 a year. Now they’re being tossed to the wayside.”

Meanwhile thousands of units of housing made affordable by tax credits are expiring in the next few years. Most vulnerable could be the earliest tax credit deals, which had less extensive financing and rehab, said Geer.