Last call for affordable housing at the Telephone Factory Lofts

Were it not for the Telephone Factory Lofts, Atlanta might never have been blessed — or is it cursed? — with Sister Louisa.

The sass-talking, Jesus-obsessed alter ego of local artist and bar owner Grant Henry was, as he puts it, “conceived” in the Poncey-Highland loft complex in the mid-’90s following a European trip he’d taken with Atlanta writer Hollis Gillespie. Upon the duo’s return, Henry exhibited artwork on a spare wall in Gillespie’s loft unit, one of several in the building she’s inhabited. A few years later, he, too, moved into the complex that had become a haven for creative types.

“It was amazing,” Henry says, likening the art deco brick-and-concrete building abutting the Atlanta Beltline’s eastern edge to lower Manhattan’s art scene: “Like the Bowery in 1978, everybody you knew, everybody you saw, were artists.”

So, how did a bunch of bohos afford lofts in such a cool and meticulously restored historic structure? Residents point to an often overlooked affordable housing program that, for 15 years, offered artists, writers and designers inexpensive places to live and work.

In May, however, that program will come to an end. Some longtime residents have already begun boxing up their belongings.

“It’d be to the building’s detriment if that group of people has to move out,” says Caryn Grossman, an interior designer who five years ago moved into the studio space she’s maintained since 2000. “They’re the core and the heart of the building. If they have to leave, I think the whole personality of the building might change.”

But what’s happening at the Telephone Factory next month isn’t the result of skullduggery by greedy developers or a screwup by local bureaucrats. Instead, the transition from partially subsidized to market-rate housing was scheduled years ago as part of a financing arrangement that made the building’s development possible in the first place.

And the changes at the loft complex aren’t isolated. There are more than 4,000 rental units throughout the city whose occupants benefit — temporarily — from such programs. Affordable housing advocates say Atlanta should adopt a different model if it wants to achieve the goal of encouraging stable, mixed-income communities.

Built in the late 1930s, the former Western Electric Co. factory once manufactured and repaired telephones and switchboard systems were owned by Ma Bell and rented to customers. But when pioneer developers Rhodes and David Perdue came across the building in the early ’90s, it had been vacant for years, occupied only by hundreds of pigeons.

The brothers envisioned spacious studios and living units in a gritty setting with exposed brick walls, concrete floors and flared “mushroom columns” rising as high as 30 feet. But commercial lenders didn’t appreciate the Perdues’ plan for the building, which was still zoned for industrial use. So, in 1995 the pair applied for bond financing from the Atlanta Development Authority, a public entity that serves as the city’s economic development arm. In turn, the ADA required a fifth of the project’s 65 units be made available for people earning half the area median income, which in 2010 was roughly $25,000 a year.

Word of mouth spread about the program after the building opened the following year, Perdue says, especially among artists, who could scoop up a 1,000-square-foot studio for little more than $500 a month. Henry says the subsidized housing program allowed creative types the luxury of being able to “focus on their passion instead of figuring out how to make a bunch of money.”

Loft parties and other gatherings have become hot tickets; this December, the annual Telephone Factory Loft Art Show will mark its 16th year. Over the years, says longtime property manager Sarah Rosenberg, the roster of past tenants has included an Emmy-winning video documentarian, a former ultimate fighting champion, photographers, performance artists, actors, painters, musicians and even circus performers.

But come May, those unable to pay the higher rent and whose leases have ended will have to leave. The Perdues plan to gradually raise rents to match market rates, which could start around $1,000 a month for a 1,000-square-foot space.

Unless the ADA changes its housing policies, this scenario will repeat itself in many parts of Atlanta over the coming decades. Nearly every affordable housing program in Atlanta — including units created with Beltline funding and possibly City Hall East — lasts no more than 15 to 25 years.

“The preservation of affordable housing is an ongoing struggle,” says Andy Schneggenburger, executive director of the nonprofit Atlanta Housing Association of Neighborhood-based Developers, which advocates for affordable housing. “Affordable housing is hard to develop in the first place. Having to continually replace units while there’s a reduction in inventory makes things even more difficult. And in a city like Atlanta, where there’s a deficit of affordable units, it’s even worse.”

The most realistic solution to this conundrum, says Schneggenburger, is to create community land trusts, a nonprofit financial model that allows teachers, police officers, artists and other wage-earners to afford to live next door to more affluent residents.

A nonprofit corporation typically overseen by a board with input from the neighborhood, a land trust develops homes on land it owns. A person living on a low to moderate income can buy a home but can only lease the property, often at a nominal price. Since the land cost is removed from the equation, the home is more affordable than market-rate real estate. When the homeowner sells the house, he’s often restricted by legal covenants to a fixed profit margin, thereby ensuring the property remains affordable.

Last year, the Atlanta Beltline Partnership formed the Atlanta Land Trust Collaborative — a coalition of more than 30 community development corporations, philanthropic organizations and clergy groups — to find ways to reduce displacement due to gentrification as the transit and greenspace project moves forward. And other land trust experiments are taking place in Reynoldstown and in Pittsburgh, a neighborhood hit hard by mortgage fraud and house flippers south of downtown.

Schneggenburger would like to see the city adopt a so-called inclusionary zoning policy that requires developers to set aside a certain percentage of apartments they build for people with low incomes. Even when the housing market was booming, he says, the political will to pass such a measure was lacking. And it became even less likely after the city’s law department advised then-Mayor Shirley Franklin that such a policy could violate state law.

In the meantime, there seems to be no easy solutions for the starving artists living in subsidized units at the Telephone Factory. Building owner Rhodes Perdue says he and his brother are faced with refinancing the project at a time when property values have diminished while expenses and taxes have increased. “To continue the affordable housing units when they are no longer required would make refinancing impossible,” he says.

While the program’s end comes at no surprise to the tenants, the reality is only now settling in. But there are some upsides: No longer bound by the program’s rules, former affordable-housing tenants will be allowed to share their space with roommates.

“The Telephone Factory will always be an unconventional property, given the nature of the units, the owners and the tenant mix that’s attracted to the atmosphere,” Perdue says. “We hope we can maintain the mix that has worked so well.”