Photograph taken at street level of the Cottages at Chesapeake showing five of the townhouses in the development. The one-story units have pitched roofs covered with shingles and facades of brick and wood siding. In front of the units is a parking lot. A sidewalk and narrow lawn area with shrubs and trees are between the building and the parking lot. Two photographs taken at ground level of the freestanding signs for the Cottages at Chesapeake and the Gardens at Chesapeake located in a lawn area at the entrances to the respective developments. Each sign is about three feet high by five feet wide elevated above the ground about four feet on two posts. Buildings in the developments are in the background. Photograph taken at ground level of the front façade of a two-story apartment building. The massing of the building is reduced by recessed sections of the façade, which also have slightly lower roofs. The facade is made of wood siding above a brick base course, and the pitched roof is covered with shingles. Photograph taken at ground level of two sides of a one-story building. The entrance is on the gable end of the building. The facades are made of wood siding above a low brick base course. A shallow lawn with shrubs is on the front and side of the building. Interior photograph showing a corner of a meeting room in the new community center. Four small tables with chairs arranged in the room, which has a high ceiling and carpeting. A kitchenette is along one wall, and  large windows take up most of the other wall in the picture. Two high-altitude aerial photographs depict the Cottages at Chesapeake and the Gardens at Chesapeake before and after the rehabilitation. A line delineates the boundary of the combined properties. Each development consists of attached buildings and parking areas arranged along a loop drive connecting to a public street that the developments front on. The post-development picture shows two new buildings between the two developments where a lawn is shown in the pre-development picture. Detached houses and other low density development are in front of and to the west of the combined properties. Wooded areas are to the east and north.

 

Home >Case Studies >Elkton, Maryland: Preserving Rural Housing

 

Elkton, Maryland: Preserving Rural Housing

 

A creative partnership in Elkton, Maryland has brought two separately owned and adjacent housing developments under common ownership to preserve affordable housing stock in this rural community and to allow more efficient and effective management of the properties. The Cottages at Chesapeake and the Gardens at Chesapeake provide 98 housing units for seniors, individuals with disabilities, and families. The project represents a creative approach to improving the operating performance of existing properties in a rural setting; it received the 2013 Charles L. Edson Tax Credit Excellence Award in the Rural Housing category from the Affordable Housing Tax Credit Association.

Background and Context

Elkton is a community of fewer than 16,000 residents located in a rural portion of the state north of the Chesapeake Bay. The seat of Cecil County has experienced steady growth over the past decade, with the population increasing by 32 percent from 2000 to 2013. As in many rural parts of the country, quality affordable rental housing in Elkton and Cecil County is in short supply. The 5-year estimates from the 2012 American Community Survey show that Elkton’s rental vacancy rate of 4.6 percent is lower than that of Cecil County (6.9%) and the state as a whole (7.6%); more than 50 percent of renters in Elkton and more than half of those in Cecil County are housing cost burdened.

Efforts to expand new housing opportunities in Elkton are critical, as is the preservation of existing subsidized stock. Elkton’s subsidized rental stock included a 32-unit senior community called Chesapeake Village Apartments and a 58-unit family community known as Fox Ridge Manor Apartments. The two adjacent properties were owned by two different entities: Homes for America, a nonprofit affordable housing developer working in the mid-Atlantic region, and Severn Companies, a for-profit owner, developer, and manager of multifamily housing.

Both developments were constructed in the 1980s through the U.S. Department of Agriculture’s (USDA’s) Rural Housing Service and were in need of upgrades and new sources of capital to ensure their long-term affordability. In 2010, the two owners undertook a joint venture to bring the properties under a single ownership and management structure. By working together, the organizations would be in a better position to compete for rehabilitation financing, take advantage of economies of scale, and expand the services and amenities offered to residents.

Source:

U.S. Census Bureau. 2013. “Population Estimates,” Population Estimates Program, American FactFinder. Accessed 1 July 2014; U.S. Census Bureau. “Census 2000 Summary File 1,” American FactFinder.Accessed 1 July 2014.

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Source:

U.S. Census Bureau. “Selected Housing Characteristics,” 2008–2012 American Community Survey 5-Year Estimates, American FactFinder. Accessed 1 July 2014.

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Source:

Information provided by Kathy Ebner, director of asset management, Homes for America, 17 June 2014.

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Source:

Information provided by Kathy Ebner, director of asset management, Homes for America, 17 June 2014.

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Rehabilitation and Preservation

The rehabilitation of the 90 existing units included upgrades to the kitchens (new cabinets and energy-efficient appliances and fixtures), bathrooms (new fixtures, cabinets, and vanities), and heating and air conditioning systems. Insulation was blown into the walls and energy-efficient windows were installed to improve thermal performance. The development’s owners report that these renovations have generated significant savings for the residents, whose average utility costs have decreased by approximately 37 percent at Gardens at Chesapeake and 38 percent at Cottages of Chesapeake. The units were upgraded without having to relocate any residents. The rehabilitation cost $71 per square foot, significantly less than the $82 per square foot threshold established by the state of Maryland for rehabilitation projects.

In addition to the rehabilitated buildings, the project included the construction of a new community center and a new two-story residential building with eight one-bedroom apartments. The community center features a library and computer room, children’s room, and offices for the management and service staff. The center also contains rooms for the provision of services, including fitness and wellness classes, computer training, and reading programs for children. Before the rehabilitation, services were available only to seniors. After combining the properties, the development is now large enough to support full-time management and maintenance staff and a coordinator who manages various services and programs for the seniors and families.

The new buildings are located on a former vacant lot that had separated the original developments. The resulting properties offer 32 units for seniors at Cottages at Chesapeake and 66 units for individuals and families at Gardens at Chesapeake. Although the properties are under common ownership, to comply with fair housing laws, they are operated as separate facilities with distinct names, signs, and entrances; separate tenant applications; separate tenant selection policies, rules, and regulations; and separate marketing materials.

Source:

Information provided by Kathy Ebner, director of asset management, Homes for America, 17 June 2014; Information provided by Kathy Ebner, 26 June 2014.

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Source:

Interview with Kathy Ebner, 26 June 2014.

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Source:

Information provided by Kathy Ebner, 17 June 2014.

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Source:

Information provided by Kathy Ebner, 17 June 2014.

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Source:

Information provided by Kathy Ebner, 17 June 2014.

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All of the units are reserved for households earning less than 60 percent of the area median income; however, most households also receive rental assistance through the USDA’s Rural Rental Assistance program (53 units) and HUD’s tenant-based housing choice vouchers (24 units).

Financing: Existing and New

Financing for the project totaled $12.2 million and included sources of funding for the rehabilitation and new construction and for assumption of the existing debt by the new owner (see table 1). Approximately $4.7 million in low-income tax credit equity helped finance the rehabilitation and new construction, along with a $2.7 million loan through the state’s Rental Housing Production program. The existing Rural Rental Housing loans (section 515) were set to a term of 30 years.


Table 1. Financing for Cottages at Chesapeake and Gardens at Chesapeake

Rural Rental Housing Loans (Section 515)

$3,437,380

Federal Home Loan Bank Grant

250,000

HOME Investment Partnerships Program Loan*

245,000

Maryland Affordable Housing Trust Loans*

165,000

Reserve for Replacement Escrow

144,891

9% Low-Income Housing Tax Credit Equity (Enterprise Community Investment)

4,712,808

Rental Housing Production Program Loan*

2,741,567

Be SMART Multifamily Energy Loan*

306,775

Energy Grant*

7,800

Interim Income

209,242

Total

12,220,463

Note: Sources in bold are existing financing sources. Other sources are new financing used for the rehabilitation and new construction.
*Maryland Department of Housing and Community Development.

 

Source:

Information provided by Kathy Ebner, 17 June 2014.

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Lessons Learned

The rehabilitation of the Cottages at Chesapeake and Gardens at Chesapeake represents a creative approach to the preservation of affordable housing in a rural community. By combining the properties under a single ownership structure, the developers were able to complete the rehabilitation and construction projects through a single financing package. The developers were also able to meet fair housing regulations while benefiting from the operational efficiencies that larger developments make possible. Through the rehabilitation and new ownership structure, the residents have also benefited from lower utility costs and expanded services and programs.