Fireside Park Apartments is unlikely to continue to provide much-needed affordable housing if the city can’t commit $2 million towards its purchase, the director of the public housing agency seeking to buy the Rockville apartment complex told city residents and officials last week.
The Rockville City Council is scheduled on Monday to discuss the proposed purchase of the property by Rockville Housing Enterprises.
Residents at a meeting of the city’s Town Center Action Team on Tuesday asked RHE Executive Director Ruth O’Sullivan why RHE would seek to purchase the property for $36 million when it was most recently assessed for $22 million and when it already provides a mix of affordable housing units.
“Because it’s a new buyer and it’s likely not to stay that way,” O’Sullivan said.
A Florida-based company that made an offer for the property earlier this summer could raise the rents and/or redevelop the property with a higher density of units, she said.
The floundering national economy has made it difficult for many families to buy homes.
“This is the time to make a lot of money in the rental market,” O’Sullivan said.
RHE’s focus is on the shortage of affordable housing in Rockville, which “is in the thousands [of units],” O’Sullivan said.
A publication on housing trends published by the City of Rockville in June included a 2009 analysis by the Urban Land Institute showing that the supply of affordable workforce housing in Rockville was 8,532-units below the demand.
“That’s our basic goal, to provide a base of housing for the people who work here who can’t afford the market rents,” O’Sullivan said.
RHE is scheduled to provide the Council an update on its plans to purchase the 236-unit garden-style Fireside Park complex at 735 Monroe Street, near Dogwood Park.
RHE faces a mid-October deadline for lining up financing, O’Sullivan said.
City Councilwoman Bridget Donnell Newton pledged Tuesday that the city would hold a public hearing on the proposal before then. The Council is expected to discuss a possible public hearing at Monday’s meeting, when it will accept testimony on the proposal during Citizens’ Forum.
Residents also can email testimony to the City Council at firstname.lastname@example.org.
Meanwhile, City Councilman Tom Moore said last week that he is confident the proposal would move forward.
“I have the votes to get them the money and do the rest of the terms,” Moore said. “We’re good there.”
RHE is seeking to exercise its right of first refusal and sew up about $37.5 million in financing for the purchase, including about $1.5 million in closing costs.
RHE is in the process of obtaining an independent assessment of the property’s value. If the assessment comes in significantly below $36 million, RHE will pull its purchase offer, O’Sullivan said.
The $2 million city loan is the linchpin in the deal, she said.
RHE is asking for a combined $5 million in city and county aid to be added to a mortgage secured by RHE for 90 percent of the purchase price.
Montgomery County has agreed to match up to $2.8 million. The remaining $2 million would come from a $1.5 million loan from the city. RHE is proposing a 3 percent fixed annual rate on the city’s loan, similar to the terms of the county loan.
The remaining $500,000 could be funded through the city’s Housing Opportunities Fund, according to a report by city staff.
City staff is recommending that $300,000 of the aid from the fund be in the form of a loan and that $200,000 be a grant.
The loan would require an amendment to the city’s fiscal 2013 budget.
RHE would use any profits from the property to pay back the city, county and private loans over seven years, O’Sullivan said. RHE also would utilize tax credits that it is entitled to as a government agency, and would refinance the mortgage after seven years, she said. RHE would be indebted for 40 years.
RHE also is requesting that the city forgive $60,641 in payment in lieu of taxes for fiscal 2013, which began July 1.
If the Council approves the loan terms, it would have to do so in a resolution at an October meeting.
RHE is proposing that 60 percent of the complex’s units (142 units) be rented at the market rate, with the remaining 40 percent of units renting at rates affordable to families earning up to 60 percent of the Area Median Income or below.
AIM for a family of four, as determined by the U.S. Department of Housing and Urban Development, is $107,500.
The mix of affordable and market-rate units at Fireside Park are “essentially though not exactly” the same under its current owner, O’Sullivan said.
According to O’Sullivan, affordable rents for families earning 60 percent AMI are:
- One bedroom: $1,209/month.
- Two bedrooms: $1,451/month.
- Three bedrooms: $1,613/month.
RHE would hire a management company to manage the complex, O’Sullivan said.
“Nobody will be moved out,” she said.