A complicated, years-long process to develop new housing for residents of a subsidized housing complex in downtown Johnson City has taken another step forward.
On Monday, the Johnson City Development Authority unanimously approved an agreement with LHP Development, a Knoxville real estate company that has proposed constructing a new, 145-unit housing project at 2162 S. Roan St. The development would replace aging accommodations at the John Sevier Center, 141 E. Market St.
“There’s been an enormous amount of effort to get us to this point today,” said JCDA Chair Hank Carr, “to make a decision about what we think is best for the residents of the John Sevier, for the city and its investment in the John Sevier, and ultimately someday its redevelopment.”
Johnson City leaders are considering approval of a $5.9 million loan to LHP, which would plug a funding gap in the roughly $31 million project. If the project goes over budget, LHP would absorb the additional costs.
The JCDA purchased the Sevier Center in September 2019, and LHP has served as its property manager since last April.
The contract also includes a 20-year payment-in-lieu-of-taxes agreement that would abate property taxes LHP pays on the new housing. Once the project is complete, LHP will pay the city $30,000 per year, an amount that would increase 2% annually.
With the JCDA signing off on the agreement, the City Commission will now hear the proposal during their regular meeting on Thursday. If approved, it will proceed to Johnson City’s industrial development board, which will iron out finer details.
One crucial lynchpin for the project is an upcoming inspection from the U.S. Department of Housing and Urban Development — one that the Sevier Center previously failed in 2015 and 2017. Carr said the 98-year-old building has at least 10 years of deferred maintenance.
The JCDA has invested almost $400,000 in repairs to prepare for that inspection, which will decide whether HUD allows the city to transfer the housing assistance payments contract at the Sevier Center to the new site identified on South Roan Street.
Because transferring the Sevier Center’s housing assistance payments contract to a new property freezes rents for five years, it’s likely that the city wouldn’t begin to receive loan repayments from LHP until that time or later. Rent increases wouldn’t affect residents.
Among other challenges, JCDA members pointed to the recent growth in construction costs, which Carr estimated have jumped 19% in the past 12 months.
“The comfort I have is that we have found the right partner in LHP,” board member Robert Williams said. “… They’re the premier housing development company in the state of Tennessee and historically ranked in the top in the country. They’ve got 44 years of experience, over 100 projects they’ve done.
“It’s not the first time that they’ve probably had to deal with some increased costs,” he said. “I’m confident that we have the right partner that’s going to see this project through.”
Assistant City Manager Randy Trivette said the $5.9 million loan is a necessary part of this development plan, and the deal includes safeguards to ensure the city faces little risk.
“There are a lot of mechanisms in there that really protects the city and the city taxpayers … and plus it’s going to provide safe, affordable, secure housing for a number of people inside the city,” Trivette said.
Carr said the deal is an investment in the downtown area and in the people who live there.
“I made my mind up early on that I wasn’t going to support this project unless it was the right thing for the residents of the John Sevier,” Carr said, “and I believe this is.”
Where are residents going?
The proposed site for the new housing on South Roan Street is 1.5 miles from the Sevier Center’s existing location on East Market Street.
It’s next door to a Food City, which includes a pharmacy, and is a short distance from a bus stop, a commercial zone and the Haven of Mercy thrift store. As opposed to a single, 10-story structure, LHP will spread the units across a few smaller buildings.
Nance said the complex will also include green space and will consist of one-bedroom apartments larger than many of the units available at the Sevier Center. The agreement states LHP is targeting a project completion date of Dec. 31, 2025.