Little Rock board debates options as foreclosure looms for Madison Heights housing complex

The Little Rock City Board of Directors on April 15 held a lengthy discussion about the threatened foreclosure of Madison Heights 1 and 2, two subsidized apartment complexes owned by the Metropolitan Housing Alliance (MHA), and directed the mayor and city attorney to explore financing options to avoid a courthouse-auction sale.

The board discussed four broad options presented by city staff: pay off the loan via a financing transaction and take title; purchase the first‑lien notes and provide forbearance while MHA rehabilitates units; allow foreclosure and attempt to acquire the properties at auction; or take no action and permit the foreclosure to proceed. Mayor Frank Scott Jr. said the city’s priority is protecting housing security for residents as the parties seek a path forward.

Why it matters: Madison Heights 1 and 2 together contain 241 apartment units in a mixed subsidy/market portfolio a short distance from UAMS and other medical centers. A creditor filed for summary judgment and a foreclosure hearing is scheduled for April 29, 2025. Board members said a foreclosure sale to a private investor risks displacing residents and removing locally accountable stewardship of the properties.

City staff and outside advisers gave the board financial and legal context. Nicholas Harper, described in the meeting as a city finance official, said the total debt outstanding tied to the Madison Heights loans is about $5.4 million — roughly $4.2 million in unpaid principal and about $1.2 million in accrued interest, late fees and legal costs. Staff reported 52 vacancies at the two properties as of March 24 and said MHA occupancy for remaining units has improved from about 50% to roughly 80–85% in recent months.

City Attorney Tom Carpenter and volunteer counsel who has worked with MHA outlined constraints and risks. Carpenter said short-term financing under state law would likely require the city to acquire the entire property (not a partial ownership), and earlier estimates discussed in staff briefings placed a working financing target in the $7.5 million range (which, after fees and interest over several years, could cost nearer $10 million). Carpenter warned of potential legal and fiscal risks, including whether stepping in could expose the city to MHA’s longer-standing state-level liabilities; he said that question needs further legal review and possibly written assurances from HUD.

MHA Executive Director Dr. Nadine Jarman and MHA board chair Carrie Wright told the board they have taken multiple steps to stabilize operations. Jarman said MHA recently submitted its 2024 audit; retained an auditor to complete prior missing years; improved landlord payments (moving nearly all landlords to direct deposit); and has been working to liquidate surplus assets to raise funds. Wright said the authority has pending offers on some surplus parcels (Wolf Street, Vernon Place and a gymnasium) but said closings and HUD paperwork are not yet complete.

Volunteer attorney (and longtime adviser) Curtis — who described himself as a volunteer and lawyer working on the matter — urged the board to consider buying the first‑lien notes rather than taking title to the buildings outright. He outlined a scenario in which the city, as noteholder, would forbear interest during a rehabilitation period while MHA used a revolving line of credit to bring vacant units back online. He estimated the properties could generate about $110,000 monthly and argued that, with improved rent rolls and a short forbearance, the city could be repaid within roughly 30 months if the rehabilitation and management succeed.

Board members repeatedly raised three constraints: (1) HUD’s unresolved oversight and potential recovery claims — a number commonly cited in earlier public reporting was about $29 million — and whether HUD would assert liability against a municipal backstop; (2) legal limitations under Arkansas law on short‑term financing and what form a city intervention could legally take; and (3) the city’s fiscal capacity and bond-market implications of tapping reserve funds or pledging general revenues. City staff said the city’s formal “rainy day” reserve has about 13% of the target adopted by ordinance, and that using that fund would affect credit ratings and planned capital spending.

Multiple board members asked staff to seek a written HUD position that a city purchase of the first-lien note would not create additional HUD liabilities for the city. Several members also asked the city attorney to obtain a formal legal opinion about whether the city can use short‑term financing to acquire the relevant interest without taking full title to the properties.

At the end of the discussion the board voted by voice to direct the mayor, the city attorney and outside counsel to pursue possible financing paths and to prepare a plan (to return to the board for ratification) that could be presented to the lender and the court before the April 29 hearing. The board did not commit city funds in that vote; members emphasized any expenditure would require a further board vote and, where appropriate, written assurances from HUD and other parties.

Resident testimony: Several Madison Heights residents spoke at the meeting during citizen communications. Linda “Bumblebee” Williams, an original resident, described the complex as well-located and said she and neighbors fear losing affordable housing; Malik Blackman, who said he has lived at Madison Heights 15 years, urged action to preserve stability for seniors and veterans who live at the property.

What’s next: The foreclosure hearing remains scheduled for April 29, 2025. City staff and the city attorney reported they will seek a legal opinion about short-term financing options and aim to provide the board with actionable alternatives before or at the April 29 meeting. The board directed staff to communicate those options to the lender in the hope of obtaining an interim continuance or delay of the sale while options are pursued.

A note on scope: The board’s April 15 action was limited to directing staff to explore financing and legal paths; the city did not authorize payment, purchase, or take title to MHA property at this meeting.