Like most American cities, Salem, Ore., is experiencing an affordable housing shortage.
In fact, Beth Hays, CEO of Community Resource Trust, estimates a 6,000-apartment shortage of affordable housing in Marion County, which includes Salem. That’s significant for a city of 167,419 people, which makes up nearly half of the county’s population.
To address Salem’s need for affordable housing, Community Resource Trust and Mountain West Investment Corporation have come together to build the Cornerstone Apartments, a 180-apartment affordable housing development, reserved for residents earning up to 60 percent of the area median income (AMI). The development will include 12 studios, 25 one-bedroom, 95 two-bedroom and 48 three-bedroom apartments. Thirty-six apartments will be set aside for Department of Human Services clients and 20 apartments will be set aside for families living at St. Francis Shelter, which will offer its clients one year of wrap-around services once they move to Cornerstone Apartments. Rents will range from $595 per month to $911 per month.
The services are crucial.
“People enter transitional housing and get everything in order, but where do they go after that?” said Hays.
“There is not enough housing, period, at every level of income,” said Richard Berger, project manager at Mountain West Investment Corporation. “We need more housing in Salem.” Berger said that the city is an advocate of affordable housing development.
In December 2017, developers were pouring the foundation of the Cornerstone Apartments. Hays expects to have construction complete and the property fully leased by February 2019, and Berger is excited for the property to open. “For us its purely philanthropic,” said Berger. “We are a development company by trade. Real estate is our business, but our passion is people.”
Services and Amenities
Residents will have access to services in a 4,500 square-foot community center and leasing office. This space will include two conference rooms, which the Department of Human Services, Catholic Community Services and others will use for on-site case management and classes. Community Resource Trust is in conversation with the local YMCA to help get families access to the gym.
The community room will also have a recreation room with a kitchen; a multipurpose room for fitness, financial literacy and parenting classes; and a computer lab with 10 computers provided by the Mid Valley Literacy Center, which will also provide English literacy classes for English as a second language (ESL) learners and general education development (GED) preparation, among other things.
There will also be a clinical room for preventative health care with a small examination room where residents can receive vaccinations and have check-ups. The development will have a food pantry where food gets delivered as part of the Fresh Connect program.
Amenities at Cornerstone Apartments will include washing machines and dryers in every apartment. The property will also have a playground, a sport court and community gardens.
The development was financed primarily using 4 percent low-income housing tax credits (LIHTCs). KeyBank Community Development Lending & Investment (KeyBank CDLI) was the LIHTC equity investor, providing $8.9 million in equity. KeyBank CDLI also provided a $13.9 million construction loan and a $9.2 million Freddie Mac tax-exempt loan.
“Mountain West Investment Corporation is a client of KeyBank. We have seen the quality work they do with market-rate and affordable housing,” said Beth Palmer, vice president, senior relationship manager of KeyBank CDLI. “There has not been a lot of new construction affordable housing in Salem in recent years.” She added that the development targets families, which is perfect as the development is close to the local school.
Cornerstone Apartments was the first development to close in Oregon using the Local Innovation and Fast Track (LIFT) program. Oregon Housing and Community Services (OHCS) provided a $4.9 million loan under the LIFT program, an $8.8 million 4 percent LIHTC allocation and the tax-exempt bond financing.
“We are facing a significant housing crisis,” said Rick Abrego, loan officer at OHCS. When looking to combat this crisis, Abrego said, “the LIFT program is a good program to combine with the 4 percent LIHTC.”
Other financing includes $850,000 in tax increment financing and $300,000 in HOME funds from the city of Salem.
“It’s been a while since a bond deal has been done in Salem,” said Warren Sebra, partner in the Portland, Ore., office of Novogradac & Company LLP, which acted as a financial consultant by working on the LIHTC application and helping the developer understand what to include in the eligible basis, among other things. “The development team used LIFT funds to meet the gap in the capital stack.”
Sebra said that because the development is located in a qualified census tract, it became eligible for the basis boost under the LIHTC program.