The News-Sentinel’s Hayes Hickman has been covering the Minvilla saga and reports here.

If you want to know more about the project, you can visit our Minvilla website. This is cross posted there.

The former Fifth Avenue Motel is probably Knoxville’s most notorious flophouse. Volunteer Ministry Center now owns that property, and is moving towards rehabilitating the historic structure into Minvilla Manor, an apartment building with 57 units of permanent supportive housing for people who are chronically homeless.

Minvilla Manor is not without controversy. It’s expensive, largely because it’s an historic renovation. It’s perceived by some to be an impending expansion of homeless services in an area already suffering from oversupply. Some fear that residents of Minvilla will be threatened by their surroundings. Others believe that they’ll wander the adjacent streets and neighborhoods.

Yesterday’s Rockford Register Star ran this piece about a project that has a lot in common with Minvilla.

Known for years as a flophouse swarming with drug dealers, addicts and prostitutes, the former Grand Hotel is but a memory to those who are there today.

The Grand, located at Broadway and Eighth in Rockford, is home to people who have struggled with homelessness.

Zion Development, a faith-based, nonprofit neighborhood development organization, bought the property in 1997 and opened it as permanent supportive housing in December 2001.

Zion’s website says that the Grand was “the most dangerous building in a nine county area.” Now in its seventh year of operation, it’s not the same place at all.

Boyd Glovier of the Take It Back neighborhood watch group said the Grand Apartments of today are “like night and day” compared with the old Grand Hotel, which was privately owned. “There was an awful lot of drug dealing and prostitution. It was like they weren’t even trying to hide it,” Glovier said. “That all stopped when Zion Development moved in. I don’t see the lowlifes hanging out like I used to. Now, you see people walking down the street. It’s not 100 percent, but we’re working on it.”

It seems that Zion Development has focused its security protocol more on keeping bad influences out than on policing the behavior of residents. “While the neighborhood outside the Grand offers a lot in terms of shopping, dining and social services — all within walking distance — it’s still a troubled area.”

About 10% of the Grand’s residents move out each year into an independent living situation. For others, the Grand is a good situation and they stay on. They all sign leases and pay rent, most of them using subsidies of one kind or another, or in combination.

It’s been a successful seven years for this permanent supportive housing project in Rockford, Illinois, a city roughly the same size as Knoxville. This is exactly the kind of story we believe we’ll be telling about Minvilla Manor eight years from now.

The old 5th Avenue Motel on the corner of 5th & Broadway has been a rough spot for a long time. You can find all kinds of stuff about it in the press, online, and on the tips of the tongues of people who are interested in the renascence of the Broadway and 5th corridor.

A lot of that info is recent. Some of the most germane is below. This post is related to cost and purpose: what this project will cost, who’ll pay for it, and what it’ll do. If you’re interested, you may have more questions. If so, comments are welcome. So are phone calls. As long as they’re not in the middle of the night.

Cost: well below $200/sf.

There’s been a lot of speculation about the cost of this project. It’s definitely not cheap. Minvilla is an expensive project because it’s historic rehab. When early estimates hit the papers and the pixelverse, they were very low. The former developer made the best estimate that he could with the information he had at the time. We now have much better information (completed construction documents, for one thing) and a firm estimate. It is much higher than the preliminary one to which people indexed their expectations, but it is also realistic. Based on revised cost estimates and post-rehab square footage, the cost is well below $200 per square foot.

Where will the money come from?

Corporate investors will supply approximately 75% of this project’s funding. The investors who purchase the equity generated by historic tax credits and low-income housing tax credits, the bank issuing the mortgage, the Federal Home Loan Bank, all of those are ultimate sources of funding for this project and others like it. These investors see this project as a good investment in our community, and their dollars could come to Knoxville from anywhere.

Another 25% of the funding for Minvilla will be public funds set aside by the Federal Government for the purpose of making housing available to those who otherwise couldn’t afford it. Other dollars are set aside by the Feds to be disbursed by local entities like the City and County, both of which are committed to ending chronic homelessness.

Why not do this somewhere else? Aren’t developers interested in developing a market rate project at Minvilla?

Nobody involved with this project is seriously entertaining notions of developing some other permanent supportive housing project in lieu of Minvilla or of selling the property to a private developer. Any professional developer who considers purchasing this property is probably going to be aware that prior to its transfer to Volunteer Ministry Center, at least two different developers tried to make a go of something there and couldn’t make the numbers work. That was in a much stronger real estate market with much lower construction costs than today’s. If Minvilla were such an attractive property to developers, VMC would not own it right now.

Too, Minvilla has access to low-income housing equity to the tune of about $2 million. That’s around a third of this project’s financing. That money goes away if you do a market rate project there.

Expansion of what?

Minvilla does expand the footprint of VMC in 5^th & Broadway. That is a technical fact. But Minvilla’s not a business-as-usual expansion of homeless services in the mission district. And that is the truth.

Minvilla is permanent supportive housing, which is the proven, effective approach that we will use to end chronic homelessness in Knoxville. Minvilla’s not going to be a shelter or transitional housing or a feeding program or a street ministry or a sidewalk-strangling swarm of panhandlers. Instead, it’s going to be an apartment complex that will house rent-paying residents.

All of Minvilla’s residents will have some things in common: relationship with a case manager, some form of income, accountability, healthier relationships. The most significant of those things they’ll have in common? They won’t be homeless anymore. They’ll be like this guy.

Gary Waddell is the kind of resident who’ll be at Minvilla. He’s one reason that it’s fair and true to say that Minvilla does not represent an expansion of service to homeless people. Minvilla is about ending homelessness.

When it opens its doors, Minvilla Manor will house up to 57 people who had been chronically homeless. Minvilla’s residents will be people who have chosen to seek help to get off the streets. Permanently. If you’d like to know more about them, and why permanent supportive housing is what they need, click here to walk through our FAQs.

As Stambaugh’s piece points out, the costs for this project have increased. Here’s a little more detail as to why.

• The overall economy affects Minvilla just like it does everything else. Construction costs have gone up, driven in large part by increases in fuel costs.
• In the two to three years since original projections were made, materials costs have gone up. That shouldn’t surprise anyone. Too, we now know more much more about the structure and its material condition than we did when this project started.
• Using Historic Tax Credits requires that builders adhere to architectural standards that can increase costs. On the other hand, the increase in costs generates more tax credit equity that can be sold to investors.
• BUT, the tax credit market is soft right now. Investors who typically purchase tax credits don’t have the earnings, hence the tax liability, to use the tax credits. That means demand for tax credits is lower now than it was just a year ago. Prices offered by investors for tax credits is lower, and that lowers the availability of tax credit equity to the project.

Is Minvilla an expensive project? Well, yes. It will cost more to do this project as a renovation of an historic property than it would to build new. But keep in mind that the funding for this project originates almost entirely outside of the local community. It’s federal dollars that are designated for this kind of project; almost all of it flows through HUD. It’s going to be spent in some community. Best that it be ours.

Will this permanent supportive housing project help to end chronic homelessness? We have every reason to believe that it will, and that’s the bottom line.