Nemont Manor Struggles to Finance $4.6 Million Reno

Nemont Manor’s new ownership, Affiliated Developers Inc., has told the Courier that they are struggling to acquire the necessary Housing and Urban Development (HUD) loans and grants required to complete their planned $4.6 million renovation of the building. The announcement comes just over a year after the property was sold to Affiliated Developers in July 2018.

At the time of the sale, Nemont Manor housed around 65 tenants at 65 percent occupancy, which put them well within the occupancy rate needed to gather the HUD financing and grants. According to Affiliated Developer’s Chief Executive Kirk Bruce, however, the numbers were not entirely forthright. Following their taking ownership of the building the management company – Tamarack Property Management Company in Billings – determined that many of the residents had not undergone the requisite income verifications to qualify for living at Nemont Manor.

According to Bruce, the company sent out letters informing the residents that the income verification would have to be done and that those who did not qualify would be required to obtain the necessary waivers from HUD. Following the letters, Bruce told the Courier that a number of residents moved out on their own accord, before any of the income verifications had been completed, and leaving the remaining occupancy of the building at 40 to 45 residents.

To increase occupancy Affiliated Developers has worked with HUD to lessen requirements to live at the Manor. One such barrier being taken down is the age requirement. Prior to the purchase of the building the minimum age to qualify was 62, unless granted a waiver, but HUD has lessened the age requirement to 55 and, according to Affiliated Developers, they may even be able to lessen it to age 50 in the future.

Similarly, Affiliated Developers has looked at lessening the income qualifications through HUD waivers and recent Section 42 laws. They also recognized the topic as a “historically contentious issue” between the community and the company following last year’s exodus of residents.

Also along those lines, Bruce acknowledged the company’s termination of the meal service at Nemont Manor as a point of contention. He explained that the service had been losing a large sum of money – in the area of $50,000 a year – and that it had been subsidized by the rental income of the building. According to Bruce, they were forced to change the practice in an effort to meet HUD guidelines.

“Per HUD guidelines, the mandatory meals program ‘must be operated as a non-profit operation’,” explained Bruce in a statement to the Courier. “Rental income cannot be used to subsidize the meals program. As was the case with many mandatory meal programs across the nation, the meal budget was not able to support itself independently.”

Bruce also stated that the company had never officially informed any resident that they had to move out. After determining that the residents would need income verification in order to move forward with financing the company sent letters to the residents stating that they would undergo the verification process.

Bruce stated, “While we have started the qualification process, no one has been told, at this time, that they must leave due to not meeting the requirements specified by the funding sources. We have conducted a resident meeting, which was held in August of this year and a notice was issued to the residents. The residents that have moved out have done so at their own discretion.  Residents that do not qualify for the program will not receive an 'eviction' notice, rather they will receive a notice that they no longer qualify for the programs and they will need to transition to other housing. We will assist where and when we can to help them in the transition period.”

Bruce clarified that the programs guidelines for Section 8 should have been in place before his company bought the building, but whether it was an omission by the previous owners or a lack of oversight by HUD he was not willing to speculate.

He did say, “If the HUD PBS8 guidelines would have been followed the tenants would have not been in a ‘panic’ because they would have been accustomed to income verifications.” He was clear, however, that in order to finance the nearly five million dollar renovation the verifications would need to be done to ensure compliance with federal law.

He also wanted to be clear that those who would have been required to move out would not have been “evicted,” but rather notified of their non-qualifying status and that they would need to “transition” to other housing options. The distinction seemed to be a parsing of words, but Bruce clarified that an eviction would be reflected on a tenant's rental history and would affect future housing options and, he stated, that the transition would not have a similar effect.

“Income verification can seem complicated, but necessary for program compliance for subsidized rent,” explained Bruce. “I would say that very few will be turned away now, due to waivers from HUD and other program updates.”

Mayor Becky Erickson – speaking to The Courier about Nemont Manor and low-income housing in Glasgow as a whole – urged the need for the community to support the mission of Nemont Manor to preserve the building for low-income housing in the future. She described the housing there saying it was an, “essential facility to the city and we want it to be successful.”

According to Erickson, the city had worked for the last few months with Affiliated Developers Inc. to secure a Department of Commerce, Home Fund Grant through the state that would have allowed the city to receive the money and grant it to Nemont Manor in the tune of $492,000. That money, however, never materialized and the state also cited the low occupancy level at Nemont Manor as justification for refusing the grant. Currently, the grant is on a four-month extension and could be extended further if occupancy continues to make progress.

As a result of the loss in funding options, the only course of action left open to developing the complex is to increase the occupancy level to the 60 to 70 percent range. Once they have reached those numbers the facilities renovations should receive the required financing and even the potential Commerce grants through the city to fund the renovation. According to Bruce, the tenants might not even be required to move in prior to the renovation, but the facility might qualify if they could demonstrate the potential for meeting the occupancy levels. Bruce stated it would take a waiting list of roughly 20 to 25 future tenants to meet that qualification.

The Mayor drove home the facility's importance citing concerns that Glasgow lacked affordable housing for many of their residents. She pointed out that the town’s average age as of 2015 was 45 years old – a number that was well above the state average and even higher above the national average. She also pointed out that in 2015 over 27 percent of the city was age 65 or higher and the number was expected to keep climbing. Her last point was that 13.99 percent of the city was below the poverty line and 30.35 percent of the city was considered low-income by state standards.

“When you look at Glasgow’s population it is aging, when you look at rent monies going up and low-income housing/fixed-income housing is in demand,” explained the Mayor. “We have to be able to look down the road and see where we’re heading. I could see Nemont Manor getting more residents in the future and that’s why we need Nemont Manor.”

The Mayor stated that there were only 72 low-income housing units in the city with 60 at Northern Heights (which is Section 8 HUD funded) and 12 units at Valley Court (which is owned and operated by the city and subsidized by Rural Development money). The Mayor clarified that the entire program at Valley Court is revenue neutral to the city and funded by rent income and federal subsidies meaning no local taxes assist in the facility's operations or maintenance. That being said she added that the only other low-income housing in the community is Nemont Manor which is also HUD funded but tailored towards seniors and those with qualifying disabilities.

As for the city purchasing and operating Valley Court the mayor provided some background but summed it up by saying, “We felt it was our duty in a way.” The project came about as the previous owner looked to sell and the city believed it was better to purchase the apartments and keep them low-income accessible. She later added, “Everybody should have the opportunity to be able to live in a safe environment.”

As for the end result at Nemont Manor, it depends on the number of residents that move in or express a desire to move in over the coming months. Bruce said that Affiliated Developers is looking to reach out to the community for their support.

He stated, “We are open to suggestions on making Nemont Manor better than ever because we want to attract long-term tenants. People who will move in because it’s an affordable place to live, but stay because of the community atmosphere.”

The Mayor, during her remarks to the Courier, cautioned that she was not operating as a spokesperson for Nemont Manor nor was she hoping to promote the company. What she did say was, “The city wants to be as supportive as possible. It’s an essential and vital service in our community and when you look at these kind of stats – like I said earlier, when you see that our community is getting older and that they are on a fixed income – we need it right now but we’re really going to need Nemont Manor down the road.”