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Missoula clinic looks to sell off affordable housing units

Missoulian - 5/20/2021

The Western Montana Mental Health Center has decided to sell two large affordable housing apartment buildings in Missoula that house people living with mental illness and people who live solely off disability income.

The center's top executive says they need to focus on clinical programs rather than managing real estate.

The former housing and development director for the center is critical of the move, saying that the organization is going to turn a profit by pushing out low-income residents during a housing crisis.

The buildings were constructed using federal and state grants, but rent limitations have expired and they could now be turned into market-rate housing in a city where rent prices have drastically increased recently. They are the 20-unit Bridge Apartments at 1205 W. Broadway, listed at $2.19 million, and a four-unit apartment building at 801 S. 3rd St. W., listed for $525,000.

In an interview with the Missoulian, Western Montana Mental Health Center CEO Levi Anderson explained why the organization has listed the buildings for sale.

"In our history, we've frequently identified needs in communities we serve and done everything we can do to try to meet those needs and over time that effort has frequently led us into various situations where we're operating outside the scope of our core competencies," he said.

"I would consider this a reflection of that. The situation we're in now, the last couple of years, we've been evaluating the entire real estate portfolio across western Montana through the lens of whether those assets and resources fall within the scope of our core competencies, which we consider our clinical programs."

Anderson and the center's board of directors have been evaluating how supportive housing fits into the scope of their core mission, he said.

"I think we came to the conclusion that we're not experts in being landlords or property managers so assets that absolutely serve a purpose to the community and value to the community, if they fall outside the scope of our competencies, we feel the need to focus on where our expertise lies," he said.

The center operates locations in cities and towns all over western Montana, as its name implies.

"Our services support individuals experiencing serious mental illness, substance abuse and addiction, and that's where we really need to be strong as an organization on focusing our expertise and clinical programs," Anderson said. "So in conversations with the board of directors, we've been evaluating properties here in Missoula. They really do not have a direct connection to the clinical program."

The two buildings represent assets that could be sold in order to help the center focus on the things it does best, Anderson said.

He declined to say how many people live in the two buildings who would be affected by any sale. The center hopes to find a buyer who would maintain the current use, but has not been successful, he said.

They haven't been able to find a buyer yet who is willing to manage them as affordable housing for people on disability income and for those experiencing mental illness. So last week, the center decided to list both properties on the regional Multiple Listing Service.

Patty Kent was the housing and development director for the Western Montana Mental Health Center for 23 years before retiring in 2016.

Using 14 different grants and $20,000 in Tax Increment Financing from the city, she and her staff built the 20-unit Bridge Apartments in 1998.

"That was the largest project we did," she said. "It was the first of its kind to take people from the streets directly into permanent housing. In the 1990s, the Department of Housing and Urban Development had a model to move people from homelessness to transitional housing to permanent housing. I said, that's stupid, nobody likes to move. Let's just move them into permanent housing and wrap them in services. We won a national award for innovation."

The building is debt-free, she said.

"So when folks on Medicaid and disability income moved in, it was always affordable to them, and it costs them about $600 a month now," she said.

She and her staff built the four-plex on Third Street using a low-interest loan from the MontanaBoard of Housing.

"The mortgage payments were insignificant, so the building could be paid off with the rents charged," she said.

Kent said things began to change when former Western Montana Mental Health Center CEO Paul Meyer retired seven years ago.

"There began to be a change of heart," she said. "The buildings were expensive to maintain and they wanted more rent money. Then in (late April) the board of directors decided to sell them at market price."

Because the buildings were funded with federal and state grants, including Community Development Block Grants, there was a period of time when they had to be rented to people who qualify as having income below a certain threshold, Kent said.

However, the restrictions on these two buildings have expired, and Kent is worried that when restrictions lapse on other properties owned by Western Montana Mental Health Center they'll be sold as well.

"I'm guessing there isn't anywhere for folks to go immediately due to the housing crisis," she said. "These things were all built with grant money. So the Western Montana Mental Health Center has projects funded with grant dollars and they want to sell them at market rate to a private company who will likely raise rents that will be unaffordable to anyone living with mental illness and disability income."

Kent believes the Western Montana Mental Health Center only contributed about 10% of the total cost of the buildings, she said. The buildings were never planned to be profitable, because they were designed to serve a community need.

"They're supposed to be a charitable endeavor," she said. "It's just really disheartening. All it will do is shift the cost of caring for people to law enforcement or whatever else. Especially after COVID, these people are not going to have services and now they're taking their house away. I hope they can figure out how to maintain them with a nonprofit owner. It's a service."

Market-rate rents have soared through the roof in Missoula during the pandemic, and the vacancy rate is extremely tight.

Anderson said some residents in the two buildings receive services from the Western Montana Mental Health Center, but not all of them.

Housing is simply not his organization's area of expertise, he said.

"In Missoula there are many organizations that do have a focus on that," he said. "My understanding, and I've only been here a couple of years, is that these facilities were purchased and put in place using state Home Investment Partnership Program funds and Housing and Urban Development dollars. They had restricted use and rent limitations. We're beyond that period of affordability. We've maintained rent limitations even beyond that period. We've done our part."

Anderson said the 2017 Montana Legislature cut the amount of money that agencies like the center are reimbursed by Medicaid. In November of 2020, the Missoulian reported that the center laid off 24 employees.

"About 80% of our clients are on Medicaid, so that was extremely devastating," he said. "When we're talking about such razor-thin margins on programs, even a 2.9% cut can be catastrophic to agencies like ours."

Anderson couldn't list how many other properties the center manages.

"As an agency, we operate a tremendous volume of residential living facilities," he said. "These properties are single-tenancy. An individual lives independently, kind of like an apartment building versus a group home environment. And we operate a number of different group homes which have direct connections to services. In these residential living facilities, there are some individuals who receive services from us but there's much less of a direct connection there."

Anderson said the decision didn't come lightly.

"We recognize issues of housing internally in our board, but we also recognize the need to acknowledge our expertise and focus our resources on clinical programs," he said.

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