CLARIFICATION: This story was updated at 1:18 p.m. on Thursday, Feb. 13, 2020, to include a quote from Daniel Hekman meant to clarify his comments to council.

Two private partners want to transform a warehouse building on Main Street into 60 affordable housing units, with supportive units for those with mental illnesses, at no cost to the city of Chattanooga.

In a presentation to the city council Tuesday afternoon, Tyler Yount, director of special projects for the mayor's office, proposed the innovative housing solution that would cost the city no more than the donation of a surplus building.

The proposed development at 1815 Main St., the former site of Arcade Beauty, would be the product of local psychosocial support nonprofit AIM Center and the Vecino Group, a Missouri-based development company that focuses on supportive residential developments with properties in seven states. It would have 15 units for people diagnosed with a mental illness and who are low-income citizens, with the rest open to others in need of low-income housing.

AIM Center, a group with more than 70 similar units already in Chattanooga, spurred the idea by reaching out to the city.

"They have really great tenants, property management and supportive services that are really high quality for people who need them," Yount said of the group. "They came to us and said that they are wanting to build some more housing, so we introduced them to the Vecino Group."

Yount said that while Vecino has no local developments, its comparable projects in other areas inspired confidence and led to a partnership.

"Unlike a lot of other developers, they're very mission-minded, and they're very experienced with building this type of housing around the country," he added. "They build very high-quality units."

With the two groups and city officials working together, representatives of Vecino came to tour available city properties and latched onto the Main Street location, which they would own and operate alongside the center.

"Because Vecino feels very strongly about working with our community and leaving it better than when we came, we always partner with a nonprofit," Heather Bradley of Vecino Group said. "In this project, we will be partnering so that AIM Center is 51% of the general partnership. AIM Center, as a wonderful community partner, will be here on the ground. They will be majority owner of this project."

The Chattanooga Housing Authority has pledged to provide support for the project's tenants, who will be asked to pay 30% of their income to rent while housing vouchers cover any additional cost.

Now, the mayor's office is asking the council to approve the first steps in the donation process.

First step of many

Despite the excitement and lack of risk for the city with the project, Yount said the development is only in preliminary stages, with funding, zoning and other hurdles to clear.

"The resolutions that are on the agenda are only for us to start the negotiation process for the land donation agreement and to move that land into the brownfield voluntary agreement," Yount said.

According to Bradley, Vecino Group is moving through the process of receiving low income housing tax credits from the state, but won't know for sure if the project will receive the funding until sometime in April.

"That would be our main capital stack," Bradley said. "We do also intend, if the project goes forward, to apply for national housing trust fund and state housing trust fund dollars. That wouldn't be a huge piece of the funding, but that would be part of the funding."

Even if funding gets squared away, to develop on the site, the partners would enter into the brownfield agreement with the Tennessee Department of Ecological Conservation to improve upon the site's environmental issues, stemming from its past as a host of the beauty company.

Since the city now leases the otherwise obsolete building to two nonprofits, it would allow those tenants to run out their leases before the project gets underway.

Then, Yount said, the property would see improvements not otherwise likely for a surplus building.

"It's in really, really bad shape. It's not going to get better," Yount said.

While the development seems like a positive to most, representatives of the nonprofits now in the warehouse fear the project may have unintended consequences for the people it is designed to help.

"We welcome change. We just feel like we've been kind of left behind," said Chattanooga Fire Department Capt. Kelly Simmons, president of the Forgotten Child Fund, which is housed in the existing building. "I just wanted to bring to the attention of the council that we helped 13,600 and something kids last Christmas. We've been housed there for 10 years, and to find out at the last minute that this was going away, or without a conversation about where we're going to go, I think that's a lot of concern with the [Chattanooga Furniture Bank] and with us, too."

Yount defended the project, saying that the two nonprofits had been made aware it was possible and that the project is still preliminary.

"Basically, we're at the beginning of the project, and it's not for sure yet, so they may not even need to leave," he said. "It's kind of up in the air. We know that this is going to be a really long process to get all the things done needed to turn this into housing, so they have some time."

A representative of the Highland Park Neighborhood Association also voiced concern with the targeted tenants.

"We have not had community meetings yet, but I've heard some confusion among neighbors about the types of tenants the facility is intended to house," representative Daniel Hekman told the Times Free Press after his comments to council.

AIM President Donna Maddox explained that, though some units will be specifically for the people with mental illnesses, all will be required to meet the criteria of the housing authority's voucher program, like those of any other citizen living in low-income housing with assistance.

"This is an apartment complex and a home for people," Maddox said. "That's who we're talking about. People that qualify for that voucher and will be paying 30% of that affordable housing rent."

"Everyone who lives there won't require [psychosocial] services, but our services will be available to them," she added.

The neighborhood association is meeting next weekend to discuss the matter.

Contact Sarah Grace Taylor at staylor@timesfreepress.com or 423-757-6416. Follow her on Twitter @sarahgtaylor.