Five years later, old Lee Apartments site awaits redevelopment

KINGSPORT— It has been five years since the Lee Apartments, a 128-unit housing development built in 1941, were demolished due to deteriorating conditions.Yet, despite ongoing efforts, the Kingsport Housing and Redevelopment Authority has been unable to secure funding to replace the units."We're actively trying to find a developer to help us secure tax credits through the Tennessee Housing Development Agency," said KHRA Executive Director Terry Cunningham. "These tax credits are essential for making the project financially feasible and ensuring the housing remains affordable for low-income residents."The agency has applied for tax credits several times but has "not scored high enough to be able to get a 9% tax credit," Cunningham said.Tax credits and restrictionsCunningham described the role of tax credits as a "dollar-for-dollar reduction" in an investor's tax liability, spread over several years. These are financial benefits to investors and they allow KHRA to offer affordable rents without taking on significant debt."The rent structure for affordable housing doesn't allow you to carry much, if any, debt. Without these subsidies, the cost of development would make the units unaffordable," Cunningham said.He said applications for tax credits are sent to the Tennessee Housing Development Agency who then scores the applications. In recent ones, Cunningham said Kingsport and Sullivan County have consistently ranked lower than surrounding counties."On our most recent application, we were six points behind on the need factor compared to cities like Knoxville, Nashville and Chattanooga," he said."We're competing not just with other housing authorities but also with private developers for the same pool of tax credits," Cunningham added.Recent adjustments to THDA's qualified application plan may improve Kingsport's scoring prospects, but the agency continues to face other hurdles.Another challenge comes from HUD owning a Declaration of Trust on the Lee property, dating back to 1941 when the apartments were built. The declaration places restrictions on the site, mandating that any redevelopment must replace all 128 units with the same bedroom count and remain affordable housing."But you see, the initial 128 units that Lee had were just too tight for people," he said. "That's a lot of people in one area, that's about 44 people per acre and it's less than a seven-acre site."One of the agency's goals is the deconcentration of poverty which can partly be achieved by limiting the number of people in a space. Cunningham said having highly populated areas in small spaces can lead to "more crimes, drug and social problems."To meet the requirement to replace all 128 units, KHRA has acquired nearby properties to develop smaller sites and remodel existing homes."KHRA and the city are working on a comprehensive redevelopment plan that includes Boone Street, Tennessee Street, Rotary Park and surrounding properties we own," Cunningham said. "We're working on pulling that together."Other optionsWhile KHRA operates independently, Kingsport city staff have been working closely with the agency to find out if there any other options for redevelopment aside from tax credits."If we can't make the tax credit options work, then we need to find other options," said Kingsport Mayor Paul Montgomery.Alderman James Phillips called the delay a "stalemate.""The city has offered to fund consultations with redevelopment experts," Phillips said. "We'll do anything we can to assist—whether it's setting up meetings with consultants or exploring public-private partnerships—but we have yet to be asked for help."Phillips also believes there are other alternatives that exist."We've been told there are no other options besides the tax credits, but we feel very strongly that there are other options and there can be other options," he added.Montgomery said the BMA appoints members to the KHRA board of directors. However, there are no current BMA officials on the board.Phillips said one struggle of not having current BMA representation on the board is how complex it is to understand the inner workings of KHRA and how the agency operates."The number one thing I want to accomplish right now on my list with KHRA is having BMA representation on their board so that we can fully understand the decisions that are being made," Phillips said.