Heavy rains and flooding from Hurricane Harvey caused an estimated $125 billion in damages in Houston, tying Hurricane Katrina for costliest hurricane. Before the hurricane, the affordable housing market was tight, said Robert Fiederlein, Avenue CDC’s Senior Director of Real Estate Development. The hurricane only made it tighter: in 2017, HUD estimated a need for 54,300 new for-sale homes in the next five years; as of August 2017, only 4,600 homes were under construction (just 8% of demand.)
Repeat customer Avenue CDC is working to bring much-needed affordable homes to the Houston market, one of the most expensive in Texas. To help, NeighborWorks Capital recently closed a revolving $2.5 million construction line of credit with a 5.5% fixed interest rate for Avenue Park, a subdivision of 53 single family homes that will affordable to families earning $60,000 to $90,000 (80-120% AMI), with about 7 homes sold without income restrictions. NeighborWorks Capital’s line of credit will also finance public improvements and infrastructure upgrades, including utility installations and road/sidewalks, on a 7.1-acre site that Avenue CDC purchased in late 2017. The subdivision will be constructed in five residential phases, 10-11 homes per phase. Avenue CDC is finalizing home designs and will break ground on the first phase in early 2019.
“It would be challenging to get as flexible terms and conditions with a commercial bank as we did with NeighborWorks Capital,” Fiederlein said. “This line of credit really gives us the flexibility to construct in phases; to use it, build the homes, sell them, pay down, draw again, repeat. We don’t have the capacity; even if we had the money to build all at once, we couldn’t do it. The flexibility of this line of credit really fits in with our construction plan, which is great.”
“We have experience working with developers who have public money and soft lenders where deadlines move, and offer flexibility and adaptability. We are able to modify deals as we move along and better understand the public subsidy requirements for projects,” said NeighborWorks Capital Senior Loan Officer Tamar Sarkisian.
Avenue Park will feature 33 three-bedroom/2-bathroom homes and 20 three-bedroom/1.5 bath homes. The current projected sales prices are 15 to 30% below market prices, aligning them with the $100,000 – $250,000 range that half of the region’s unmet demand falls into. The development will feature energy-efficient green homes, Energy Star appliances, security systems, ceramic tile in kitchen and bathrooms, carpet in living spaces, drought tolerant plants, fully fenced back yards, and patios.
The Northline neighborhood where Avenue Park is located wasn’t heavily affected by Harvey and is considered “hurricane-safe”, unlike many low-income neighborhoods in Houston. Much of the neighborhood is ranch-style homes built in the 1950s and 60s; Avenue Park will be the first new single-family homes in the neighborhood in many years.
Avenue CDC’s developments have been concentrated in the rapidly gentrifying Near Northside neighborhood, expanding into Northline three years ago. Northline is a lower-income and predominantly Hispanic community. Avenue CDC’s first activities in Northline were focused on education, health and public safety. We previously worked with them on a $5.4 million acquisition loan for Oak Arbor Townhomes, a 94-unit mixed income rental development also in the Northline area. While Avenue CDC hopes to work with NeighborWorks Capital on future multi-family properties, Avenue Park will be their main single-family project for a few years, Fiederlein said.
One of the key amenities of Avenue Park is Clark Park and Community Center, across the street. There is a major retail center (Northline Commons) less than a 10-minute drive south. The Houston Community College Northline Campus is adjacent to Northline Commons. The property is also about 10 minutes from the METRORail Red Line light rail, with direct service to downtown Houston. There are also multiple bus routes that connect directly to METRORail at the Northline Transit Center/HCC stop.
Avenue CDC was formed in 1991 in northwest Houston helping communities organize themselves around basic initiatives like health, education, and gentrification, and provided leadership training. They provide a variety of programs and services dedicated to improving economic opportunity and community leadership and engagement for residents of the Near North Side and Northline neighborhoods of Houston. Avenue CDC develops affordable single-family and multifamily projects. Its portfolio includes nearly 700 apartment homes in multifamily rental properties, as well as single- family homes rented to low and moderate-income households.
