Charlottesville approves $3.85 million forgivable loan, tax-increment boost for 501 Cherry Avenue affordable housing project
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Summary
The city approved a $3.85 million forgivable loan and a separate performance-agreement change that grants 100% of the project's tax increment for 30 years to support the 71-unit 501 Cherry Avenue redevelopment, which includes long-term affordability covenants and a small rental-assistance voucher pool.
Charlottesville City Council approved an ordinance and a related resolution Tuesday to support the redevelopment of 501 Cherry Avenue, a mixed-use project that will include 71 affordable rental homes and ground-floor community-serving commercial space.
Acting housing program manager Madeline Metzler presented the ordinance, telling council the project has already secured 9% low-income housing tax credits and expects construction to begin later this year with completion in 2027 and occupancy by 2028. “The development will include 71 affordable rental homes along with commercial space for the music resource center and a community grocery store,” Metzler said, and she described a long-term affordability plan that keeps all 71 units affordable for 99 years.
Under the ordinance, the city will provide a forgivable loan of $3,850,000 from the capital improvement program. Metzler said the funding may be used for site work, construction of the affordable units, and up to 10% for soft costs such as planning and design. The loan carries a 42-year term and a 3% interest rate, but Metzler said the loan and accrued interest will be forgiven if the developer completes and operates the project according to the agreement and recorded covenants.
The package also reserves $324,000 to provide rental assistance (project-based vouchers) for up to 10 units at 40% of area median income for at least five years; Metzler said the city will negotiate details of continuing subsidies if council chooses to extend them beyond the initial period. Council members asked staff how those short-term vouchers would be monitored; Metzler said annual reporting and recorded covenants will provide oversight and that staff will return with more detailed agreements as needed.
Council then took a separate vote on a resolution amending a previous performance agreement. Chris Engel, director of economic development, said the amendment increases the share of the project-created tax increment returned to the developer from 50% to 100% for 30 years to close a $1.7 million gap. “About $1,000,000 of that gap is covered by the tax-agreement change and an additional $700,000 by a CIP contribution,” Engel said.
Council moved, seconded, and approved both the forgivable-loan ordinance and the performance-agreement amendment by voice vote. No roll-call tally was recorded in the public transcript; the clerk announced the items passed. The loan documents include annual reporting requirements, and the affordability covenants will remain in effect once recorded.
Next steps: staff said construction is expected to begin later in 2026 and that council will see final loan documents and monitoring language before project occupancy.
