Council committee backs site-control step for Melrose/Orange Mound affordable housing project

City housing staff and a developer told a Memphis City Council committee on April 14 that a proposed 51-unit affordable-housing project at the Melrose building in Orange Mound needs site control now to remain competitive for state bonds and tax-credit financing.

The Department of Housing and Community Development presented a construction budget of about $16.9 million for the housing portion and a projected rental income of roughly $640,000 a year. The presenter said operating income and debt service leave modest long-term cash flow — “the project is anticipated to cash flow at about $29,000 per year,” she said — and modeled a debt-coverage ratio of about 1.15, stabilizing toward 1.5.

Housing staff outlined the capital stack: approximately $9 million from bonds and tax-credit equity, about $1 million already allocated from the city’s Affordable Housing Trust Fund, a $3 million congressional appropriation, and planned use of CDBG and other funds. The team identified an outstanding financing gap near $2.6 million that they expect to bridge with tax-credit equity, a deferred developer fee and trust-fund dollars.

Why a 50-year, $1-a-year ground lease? Staff said tax-credit financing requires long-term site control and that a 50-year ground lease preserves long-term affordability while reducing financial pressure on the developer and tenants. The city also holds a nominal acquisition cost on the site, which staff said limits exposure.

Councilmembers pressed on per-unit cost and housing type. Councilwoman Pearl Walker and Councilwoman White questioned a reported average development cost of about $332,000 per unit. “That just seems like really expensive to me,” Councilwoman White said, asking whether the city should prioritize single-family homeownership and blight removal instead of multifamily investment. Staff and the developer responded that the figure reflects both ground-up townhomes and interior retrofits (one-bedroom units above the library and two-bedroom townhomes on adjacent land), higher prevailing wages and building-code transitions from residential to commercial standards that raise per-unit costs.

Officials also said 100% of the project’s units are expected to be project-based voucher units, and that the city will place affordability covenants on the property; HCD’s compliance team will monitor eligibility and ownership changes. Council members asked whether the city could include a mid-term “reopener” or recapture provision to recover value if the property is refinanced decades later. John Xan, chief of development and infrastructure, said city and interagency staff are reviewing legal and statutory constraints.

After discussion, the committee voted to forward a favorable recommendation for the site-control / lease-option step so the developer can demonstrate site control to THDA and pursue the next round of financing. The vote was taken by voice and carried.

What’s next: Staff said securing THDA bonds and tax-credit equity is not guaranteed even with site control; the next procedural step is the full lease and final council approvals as required by law.