Residents in ‘limbo’ at Davidson affordable housing site with rent hike, probable sale
When Shelli Roberts received a rent increase letter on Veterans Day, she wasn’t alarmed. After living a decade in the Bungalows, located in Davidson, she has come to expect these notices mid-November.
But this time, the letter came amid different circumstances.
In September, residents of the 32-unit affordable multiplex located in northern Mecklenburg County learned the property, managed by Excel Management, would be listed for sale — a request of an investor with majority owner not under Excel.
With the probable sale, Roberts was shocked to read that everyone’s monthly rent could go up $150 next year. Days later, another notice stated the increase was not yet finalized. On Wednesday residents received a revised email saying rent would only increase by $50.
“Since I have lived here the highest rent increase has been $25,” Roberts said. “It’s just excessive.”
The back and forth feeds the growing uncertainty residents feel about the Bungalows and its future.
The letters over the past months have heightened worries for several residents, according to Roberts, with many fearing a rent hike, with others angry.
Tenants include the elderly, people with section 8 vouchers, and some on disability, she said. Many were uncomfortable having their names in the Charlotte Observer when talking about it.
Those who cannot afford the high rent increase likely can’t afford to move out, Roberts said. The coming holidays adds to the uncertainty.
Residents have several questions of what new ownership may mean, including if it would further affect the complex’s affordability, she said.
“It’s a terrible limbo,” Roberts said.
The Bungalows ownership history
The Davidson Housing Coalition and Mosaic Development Group are two nonprofits which make up Excel Management, said Bill Bolstad, who heads Mosaic.
Bolstad declined to name the majority owner.
The new proposed $50 increase is less for residents, but it means each nonprofit would need to pull from their general funds to support the complex, he added.
“The dollar amount in the original notice was the minimum amount we needed to keep the property self-sustaining into the next year,” Bolstad said.
The current situation is tied to the affordable multiplex’s origins.
In 1999, the town of Davidson gave more than 2 acres to the Davidson Housing Coalition for its affordable housing initiative. The coalition later deeded the land to Davidson Limited Partnership I that same year, according to Mecklenburg County property records.
Bolstad said an investor then bought into the partnership to become the majority owner before selling its part to the current investor in 2001.
Through the partnership, the private investor is able to benefit from the Low-Income Housing Tax Credit, a federal tax reduction given for investments in affordable housing, while the two nonprofits oversee daily operations.
The tax credit was available for two decades, but for this investor that benefit has ended.
Bolstad said investors typically allow their nonprofit partners an opportunity to buy them out after 15 years. But the majority owner opted instead to list the property for sale, he said.
This left the two nonprofits unable to refinance the property, which is what’s needed for a property this old, he said.
Refinancing would have allowed them to do a major retrofit for the affordable complex, which would help keep maintenance costs from going up — a long held concern for residents.
“Because we’ve had to negotiate this sale, those things have been forestalled,” Bolstad said.
Operating expenses have continued to increase and make it hard for the property to be self-sustaining with current rent prices, he said, which contributed to the rent increase.
Receiving maintenance in a timely manner can already be difficult, and for some residents issues have long persisted, according to Roberts.
A push for code inspection late last year led to some residents getting new appliances. But many still have maintenance issues, she said.
The Bungalows’ deed
The North Carolina Housing Finance Agency, which manages federal tax credit programs, caps income for the Bungalows residents at 50% of area median income, or around $30,000 for one person, per 2021 guidelines. All rent increases have to be approved by the agency, which denied the $150 increase initially proposed for the Bungalows.
“NCHFA said they were comfortable with it being $50, but not any more than that,” Bolstad said.
The Bungalows’ affordability also is contractually protected for the next decade, says John Woods, a Davidson Housing Coalition member and former mayor of Davidson. The original agreement between the town and the housing coalition states the land must be used for affordable housing until 2030, with an automatic three-year extension, he added.
An additional deed restriction also requires housing on the land remain affordable indefinitely, Woods said.
“It’s always been DHC’s intent to own the project once the tax investor exits the project,” he said. “We have been negotiating with them to try and make that happen.”
The property is expected to be listed for sale by January. Woods said while the listing may cause worry, the coalition views it as a needed transaction to buy out the majority owner.
“The Bungalows are not going to be torn down and then a high rise condo be built there,” he said. “This is not going to change the nature of what’s there right now.”
A meeting has been scheduled for DHC, Mosaic Development and residents of the Bungalows at 4:30 p.m. on Dec. 15 in the community building on the property.
This story was originally published December 9, 2022 at 6:00 AM.
