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Cecil County Seeks Rent Hike Limits in Return for Support of New Subsidized Housing

March 13, 2012
By Nancy Schwerzler

Cecil County should require developers of new taxpayer-subsidized housing projects to agree to limit rent increases for low and moderate income residents, the county’s housing director told County Commissioners Tuesday. The proposal is in response to a massive rent hike for some tenants proposed by developers of the new Elkton Senior Housing project in Elkton.

David Mahaney, the county’s housing director, had urged the Commissioners a week ago to withhold support for a new project being developed by the Ingerman Group in North East because the developer had proposed rent increases up to 20 percent or more for five low income tenants at the Elkton project who received federal rental aid under the Section 8 program, which is administered by the county housing agency.

At the time, he said the rent increases to be effective July 1, when some of the tenants had only moved into their apartments in January or February, demonstrated bad faith with residents who might be forced to find other housing.

However, on Tuesday Mahaney did an about face after discussions with the Ingerman developers and he proposed a new “tax credit policy” to require developers– who need county resolutions of support to get state approval of new subsidized housing projects– to abide by an accord that would limit rent increases for Section 8 tenants to the same increases charged to other tenants who do not have those federal rent vouchers.

The county administers the Section 8 voucher program and has authority to accept or reject rent increases, and Mahaney had notified Ingerman that he would not approve the proposed rent hikes for the five Elkton tenants.

The remaining 55 units at the senior housing project are governed by regulations of the state department of Economic and Community Development. The state agency’s director of multi-family housing, John Manaville, told Cecil Times that he would not approve rent increases as large as those proposed for the Section 8 tenants. A rent increase proposal had not yet been made to the state, he said, but a 2 percent increase in July was expected and that level of rent hike would be approved.

The Elkton project received a total of $6.6 million in state and federal aid and subsidies, including a special allocation of over $4 million in economic “stimulus” money, $2 million in state Rental Housing Funds, and $588,235 in federal low income housing tax credits. The government aid covers the bulk of the costs of the project, which was initially reported to the state as costing $10.8 million.

(However, the total cost of the Elkton project rose to about $11.5 million, according to state records, after its approval by the state when the developer agreed to buy a derelict Collins street property about a block away from the apartments as part of a deal with Cecil Bank. The bank owned the Collins property and was involved with financing of the senior housing project. The house on the Collins property was subsequently demolished and the lot is vacant.)

The Elkton Senior Housing project was pushed through the local approval process by Town of Elkton officials, and some local citizens filed a lawsuit, charging violation of town zoning and other laws to advance the project. A Circuit Court judge sided with the citizens, but town officials changed some procedures in order to push the project through yet again.

[SEE special report on that process here:
http://ceciltimes.com/2010/07/elkton-senior-housing-anatomy-of-a-deal/

Several months ago, Ingerman approached the county seeking support for a multi-family housing project off Razorstrap Road, New East Crossing. The developer initially tried to get the county government to be a co-owner of the New East Crossing project as a way for the project to qualify for another state program that would give the developer special grants that would not have to be paid back as loans would. [See previous report here: http://ceciltimes.com/2011/08/cecil-county-asked-to-be-co-owner-of-private-housing-project-north-east-boys-and-girls-club-center/

However, county officials declined to do that but they did agree to send a letter to state officials stating they endorsed the housing project.

The state then approved Ingerman for nearly $1 million in federal tax credits and $2 million in state Rental Housing aid funds for the New East project, state officials said. Manaville said the total value of the tax credits, which are sold to private investors to offset taxes on their other income, was worth $8.5 million to the developer.

But for the project to proceed, it must have a formal resolution of support from the Cecil County Commissioners and it was that resolution that Mahaney had previously asked County Commissioners to reject.

David Holden, a development “principal” for Ingerman, told Commissioners there had been “confusion” over the developers’ rent increase proposals for the Elkton apartments and said it was up to Mahaney to decide whether to approve or reject them. Mahaney said he and the developer would now ‘negotiate’ over the rent increases but that he hoped the Section 8 tenants would only get the same rent increases as the other tenants, or 2 percent.

His new proposal for keeping the Section 8 tenants’ rent boosts in line with those of other tenants could not be applied retroactively to the Elkton Senior Housing project, Mahaney said.

But in the future, requiring developers to abide by the policy to keep rent increases for Section 8 and non-Section 8 tenants comparable, the county would be able to stretch the limited federal rent aid to help more families, he said. He estimated additional four or five families per year could be assisted to get apartments if rent increases were limited.

The county would have a carrot/stick advantage in adopting such a policy because developers could not get state approval of funds for new projects unless they had a resolution of support from the county government.

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OUR CECIL COUNTY DELEGATE DELIVERED (Part 4)

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*Sponsored Bill to Boost Income Tax Breaks for Veterans Pensions

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