After the holdup of state tax credits delayed work for years, a multimillion-dollar reconstruction of the 675-unit Preservation Square subsidized-housing community is finally close to breaking ground.

Owner McCormack Baron Salazar hopes to begin the $17.9 million first phase of construction by the end of the year — three years since the U.S. Department of Housing and Urban Development gave St. Louis a $30 million grant to kick-start the near North Side project.

“Based on our engagement of families, they’re ready for it,” said Urban Strategies President Esther Shin, who has been overseeing social services and case management in the neighborhood partly funded with the HUD grant. “There’s a lot of anticipation for the transformation. We’ve been getting a lot of phone calls and questions about when, because we have been waiting a significant amount of time for the housing transformation to move forward.”

Redesigned Preservation Square layout

A rendering of a redesigned Preservation Square that integrates it into the street grid. 

The $30 million grant was part of the federal Choice Neighborhoods program developed under the Obama administration, and HUD selected St. Louis for inclusion in the last days of that administration. In addition to completely rehabbing Preservation Square, sandwiched between downtown and the site of the future western headquarters of the National Geospatial-Intelligence Agency, it is also intended to fund health, employment and other services for neighborhood residents.

While those human services programs started soon after the grant was awarded in December 2016, the planned overhaul of Preservation Square stalled as a key piece of its financing was held up in Jefferson City. Even now, the first phase redoing 131 apartments isn’t expected to be complete until March 2021.

Former Gov. Eric Greitens’ November 2017 move to have the Missouri Housing Development Commission block the issuance of low-income housing tax credits left a big hole in McCormack Baron’s financing plan. The program had taken bipartisan criticism over the years for being inefficient, but supporters say both nonprofits and for-profits use it to build affordable housing and that it’s one of the few programs left to develop in the poorest neighborhoods of the state.

Missouri had historically matched the federal share of low-income housing tax credits allocated to the state, making it one of the most generous state programs. Greitens’ appointees to the state commission that oversaw the program blocked the state match and threatened to withhold the federal credits, too, if other commissioners did not go along.

The ensuing Greitens political scandal and uncertainty in state government delayed the award of even the federal credits until October, when the MHDC granted McCormack Baron a federal low-income housing tax credit allocation for the first phase of the project worth $1.18 million annually for 10 years.

The first phase of the Preservation Square project will construct 45 new units and rehab 86 existing units. Of those, 37 units will be market rate, with the idea that residents who improve their income and lose eligibility for federal housing assistance or rent restrictions can stay in the neighborhood.

McCormack Baron is also seeking 15 years of property tax abatement, which a key city board endorsed Tuesday. The St. Louis Board of Aldermen must give final approval to the incentive, which would abate 95 percent of the taxes on the improvements for a decade and 50 percent for the last five years.

The company is also planning to tap about $1.2 million from a National Affordable Housing Trust Fund loan and use about $6 million of the Choice Neighborhoods HUD grant. The total cost of the project, which includes nonconstruction costs, is estimated at $24.79 million, according to materials submitted to the MHDC.

About $20 million of the HUD grant is dedicated to the Preservation Square building project. The second phase, which includes building and renovating 158 units, is expected to start toward the end of next year and take about 18 months. The third and fourth phases should start in late 2021 and 2022 respectively. A final phase will redo 140 units at the nearby Brewery apartments on North 20th Street, another McCormack Baron property.

But the timing of those future phases will depend on the availability of low-income housing tax credits. Missouri Gov. Mike Parson called for reform of the program in the Legislature before issuing more state credits. The Missouri Senate passed a plan to lower the state issuance to 72.5 percent of what it receives from the federal government.

“It makes it a much more complicated project if the state programs are not available, but our hope is we can find other sources to get the project done for our residents,” McCormack Baron Salazar spokeswoman Cady Seabaugh said.

The construction delay did cause some residents to become “disenchanted,” said Shin, the Urban Strategies president working with Preservation Square families. But now, some people are already moving to the Brewery apartments to make way for construction in Preservation Square, a complex developed almost 40 years ago. Research shows quality housing can promote better health and other benefits, she said.

“Folks sometimes don’t realize just how much the housing will change and how much it will improve,” Shin said.

Esther Shin

Esther Shin, president of Urban Strategies Inc., a national nonprofit organization that works to revitalize neighborhoods.

Meanwhile, the social services funded by the grant will continue for another five years. While the city will direct about $4.5 million of the HUD grant toward neighborhood improvements, Urban Strategies is using the other $4.5 million to coordinate case management with Preservation Square residents and connect them with health, employment and counseling services. Those services are provided by organizations such as SSM Health, Ranken Technical College, and Justine Petersen.

“Almost everything that we connect families to is free, because we know that our families are hamstrung when it comes to expenses,” Shin said.

So far, about half of the families in Preservation Square have engaged with Urban Strategies case managers, and about 20 percent of the surrounding neighborhood’s residents, she said. Her group has measured increases in primary care doctor utilization and employment, though average earned income has declined slightly. It’s trying to figure out why so it can better direct services to the families there.

“It’s not that families don’t want services, it’s that a lot of them don’t know what’s available,” Shin said.

Jacob Barker is a business reporter for the Post-Dispatch. 314-340-8291