Jeramey Jannene
Eyes on Milwaukee

Gorman Buying 38 Foreclosed Homes

Developer will convert city-owned homes on North Side to affordable rental housing.

By - Nov 20th, 2019 04:32 pm
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A city-owned home on N. 21st. Photo by Jeramey Jannene.

A city-owned home on N. 21st. Photo by Jeramey Jannene.

Ted Matkom of affordable housing developer Gorman & Co. came before the Common Council’s Zoning, Neighborhoods & Development Committee on Tuesday morning to secure approval to purchase 38 city-owned homes for rehabilitation into rental housing.

The proposal, which relies on the developer securing low-income housing tax credits, would be the 10th such round of scattered-site work for the company said Matkom. Twelve of the 38 homes are duplexes, with the total project scope being 50 units.

Gorman intends to invest approximately $130,000 in each unit. Matkom expects each unit to be appraised for approximately $80,000 upon completion.

The properties are clustered in the city’s seventh and 15th aldermanic districts with almost all of them located between W. North Ave. and W. Locust St. and between N. 27th St. and N. 40th St.

“These are not cream-of-the-crop properties,” said Department of City Development real estate services manager Amy Turim. Some of the homes, acquired through property tax foreclosure, have been owned by the city since 2013 said Turim.

A key part of Gorman’s proposal is a partnership with Northcott Neighborhood House‘s jobs program that provides jobs and training for recently incarcerated individuals.

“This will be the fourth phase that we’ve done this,” said Matkom of the partnership. He said they’ve made substantial changes to the program as a result of learning that the program had a 65 percent recidivism rate when the participants were only doing basic tasks such as demolition, roofing and siding installation. Now the program focuses on pairing individuals with subcontractors involved in carpentry and other skilled trades.

“What we’re trying to do is give them a family-supporting wage,” said Matkom. The participants are paid out of auxiliary funds arranged by Northcott including Community Development Block Grant allocations or the city’s Milwaukee Employment/Renovation Initiative (MERI) that rehabbed homes in Sherman Park.

The tax credits, which are provided over a 10 year period, are an essential piece of the financing package. Gorman pairs a four percent state credit with a four percent federal credit, both administered by the Wisconsin Housing and Economic Development Authority (WHEDA), to cover 80 percent of the project costs. The company then secures private financing for the remaining 20 percent.

In exchange for the credits, WHEDA requires the homes be rented at below-market rates for a period of 15 years. At the end of the term individuals have the option to buy the home for the remaining debt.

Gorman is one of many firms that bid for the competitively awarded credits. “It scores pretty well too,” said the developer. “The problem with WHEDA is that lately they’ve been kind of chipping away at the scoring for scattered sites.”

Matkom estimated they’ve now done 300 homes, starting in the Metcalfe Park neighborhood 11 years ago. He said many of the tenants in those first homes are now long-term tenants who can see the value of staying in the home and being able to buy it at the end of Year 15 cutoff.

Rents range from $900 to $950 a month for a three-bedroom home said Matkom. Through the tax credit program rents are capped at 30 percent of an individual’s income level. To qualify individuals must make no more than 60 percent of the county’s median income.

What’s the actual impact on the city’s tax base? asked 15th District Alderman Russell W. Stamper, II. Matkom said he didn’t have an analysis for this round, but said a past round was generating approximately $500,000 in new, annual property tax revenue.

Gorman will acquire five vacant, city-owned lots adjacent to five of the homes and combine them with the rehabilitated properties. It will pay $1 each for the 43 properties.

The committee, which includes Stamper and 7th District Alderman Khalif Rainey, unanimously moved approval. The land sale will next go before the full Common Council.

WHEDA’s credit announcement is scheduled for March 2020.

Properties

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