If there’s a common theme to much of the apartment construction occurring in the Triangle, it is luxury.
The majority of the new projects being built are targeting tenants who don’t mind paying monthly rents that are comparable to a mortgage payment. Many older communities in the Triangle have also been acquired and renovated in recent years as the new owners seek to reposition the properties to cater to a higher-end tenant.
This dynamic has raised concerns about the supply of affordable housing in the region. The marketing of the Washington Terrace apartments – a 245-unit affordable housing complex east of downtown Raleigh – last year as a property with “classic redevelopment potential” only heightened those concerns.
Washington Terrace ended up being acquired by DHIC, a nonprofit housing agency that plans to renovate the property and make it available to a variety of income levels.
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Among the groups that DHIC outbid to secure the Washington Terrace deal was another Raleigh-based nonprofit, Consumer Education Services Inc. CESI, which is best known as a credit counseling company, has been seeking to expand its services by becoming an owner and developer of affordable housing.
After CESI lost the Washington Terrace deal, the firm handling the marketing of the complex told the nonprofit about another property for sale: Cambridge Village in Durham.
CESI recently put the Durham complex, which includes 83 single-family homes, under contract for $4.7 million. CESI is taking over the existing $3.1 million Fannie Mae loan on the property and getting a bridge loan to cover the rest of the transaction.
“We are just very excited to have this opportunity,” said Diane Chen, CESI’s CEO.
CESI is paying $900,000 more for the property than the seller, a for-profit company, paid to acquire Cambridge Village in 2012. Chen said CESI originally offered $5.325 million, but after doing more due diligence renegotiated.
“A lot of renovations need to be done, and we lowered the price,” she said.
Occupancy rates in Cambridge Village have remained above 95 percent through much of its recent history, and currently 98 percent of the units are leased.
To be eligible to live in Cambridge Village, a tenant’s minimum annual income must be less than three times the cost of the rent. Monthly rents are $810 for three-bedroom units and $910 for 4-bedroom units. (The minimum does not apply if the tenants have a voucher or public assistance. The maximum income depends on how many people are in the home.)
CESI brings a potentially valuable skill set to its new role as a developer and landlord. In addition to its credit counseling efforts, it has in recent years expanded into offering assistance to potential homebuyers and teaching classes on financial literacy at shelters, soup kitchens and other locations around Triangle.
CESI plans to offer all of these services and classes to its tenants to help them better manage their finances.
“We will have counselors working on-site,” Chen said. “The whole purpose is not making money. It is community development. The board really wants to do something to give back to the local community.”
Gregg Warren, president of DHIC, said a mission-based nonprofit such as CESI has a long-term interest in improving the property and keeping it affordable.
“There’s tremendous demand to do this sort of stuff,” Warren said. “CESI has considerable resources, so if they make a success of this, I’m sure they’ll try to move more into this space, and that’s great.”
CESI’s credit counseling services, which it offers over the phone in all 50 states, are financed by consumers who use the services and grants from major banks and credit card companies. The nonprofit also receives funds for housing counseling services from the N.C. Housing Finance Agency and the U.S. Department of Housing and Urban Development.
Chen said the goal is indeed to acquire other local affordable housing properties in the future. Given its experience helping people get their finances in order, there’s a possibility that CESI’s on-site counseling efforts may create vacancies within Cambridge Village as tenants make the move from renters to homeowners.
“We would consider that a tremendous success,” said Tracy East, CESI’s director of communications.