The Charleston Housing Authority plans to take advantage of the real estate downturn by buying privately owned apartment buildings in the city, some of which already are used for subsidized housing.
If the authority's plans are successful, the housing agency could add as many as 170 apartments to its current inventory of about 1,400 publicly owned units.
The acquisitions would happen in two ways. The first involves using funding from the South Carolina State Housing Finance and Development Authority to buy small, privately owned apartment buildings on the open market.
The authority has $4.25 million to spend and advertised on June 28 for proposals from property owners, as well as for consultants to evaluate the proposals and inspect the buildings. The goal is to buy about 60 apartment units, which the authority would rent to low-income and moderate-income households.
The second way the authority plans to increase its inventory is by purchasing three existing buildings of subsidized apartments on the peninsula. The 110 apartments in the buildings on King and Nunan streets already serve low-income clients but are privately owned.
The buildings were developed by the Humanities Foundation with tax-credit financing, which means private investors provided financing in exchange for getting federal tax credits for less than face value, perhaps getting a dollar of tax credit for 90 cents. The buildings are now majority owned by those investors, and minority owned by Volunteers of America, which manages the buildings.
Tax-credit financing deals require that developments provide housing at subsidized rates for a set period of time, often 30 years, and then the owners can sell them or raise the rents. In the meantime, rent caps and property taxes can make the properties financially unattractive to private investors once they have gotten all the value out of the 10-year tax credits.
The Housing Authority expects to acquire the three buildings by assuming the existing loans.
Don Cameron, director of the city authority, said the primary goal is to preserve existing housing available to low-income households.
"With all of these, some time before 2030 they could theoretically be on the open market," he said.
The State Housing Finance and Development Authority already has approved the transfer of ownership. Cameron said the city authority hopes to renegotiate some loan terms.
"Their interest would be the same as ours, which would be to maintain these properties as affordable housing," said Clayton Ingram, spokesman for the state authority. "We are sort of the middle man, the steward of the funds."
Cameron said the city authority expects to see a positive cash flow from the apartments immediately. He noted that the authority does not pay property taxes on its buildings, and typically pays lower insurance rates.
The three buildings are:
• 17 and 21 Nunan St., with 20 apartments, some of which are used as transitional housing for teen mothers.
• 670 King St., a 40-unit building of apartments for the elderly and disabled.
• 676 King St., a 50-unit building of mostly single-room apartments, for single adults.
Cameron said that if the authority is successful in acquiring the buildings, tenants could expect to see improvements, followed by rent increases.
"In all three properties, the rents are below what they should be, and below what would be allowed today," Cameron said. "We don't think it would be appropriate to raise the rents unless the people felt they were getting something in return, like better maintenance, new appliances, and that sort of thing."
He said rents at the Nunan Street building, for example, would likely rise from the current $418 to $492.
The additional apartment buildings the authority hopes to find and purchase on the open market would range from four to 35 units per building, and would ideally be in stable neighborhoods, Cameron said.
"As people hopefully approach us, we'll try to evaluate each one individually," he said.