Luciano apartments for the homeless

Luciano: How taxpayers save money with $280,000 apartments for the homeless

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PEORIA — A $280,000 apartment might sound swank, but that’s the necessary per-unit cost to create 10 new residences for disabled homeless people in Downtown Peoria.

The move is cost-effective, says the South Side Office of Concern, which is repurposing two floors of office space to create the new residences at 202 NE Madison Ave. The 10 units will be built thanks to a state grant of $2.8 million, plus another $1.6 million in state money to help subsidize rent over the next 15 years.

Residents will be homeless people with a “disabling condition,” usually a mental or cognitive challenge, says Christine Kahl, the not-for-profit agency’s executive director. Although the per-unit cost might seem high to a casual observer, Kahl says the project will save taxpayers money compared to the costs of homeless living in other typical options.

“It not only gets people off the streets, but keeps them out of institutions,” Kahl says.

Founded in 1982 to fight hunger, the SSOC offers multiple services, including supportive housing (148 units total at several addresses) for homeless individuals and families. Support services help residents with life skills and other needs as a way to reduce related societal costs like unemployment, emergency services, health care and institutionalization.

In 2013, the agency took out a $1-million mortgage to buy 202 NE Madison, whose three stories of brick were built in that late 1800s as a mortuary. In fact, the faded “Cuskey Mortuary” still can be seen on the exterior south wall, while the east side still shows the brick outline of a wide portal for horse-drawn hearses.

Until late 2016, the SSOC headquarters had hosted a state-funded employment program serving 400 families a year. But the state money dried up, killing the program and leaving the building with a large chunk of unused space. Kahl says staffers asked themselves, “How can we repurpose this building in a way that supports our work?”

They decided in early 2017 to seek a grant from the Illinois Housing Development Authority for the apartment project. Architects and other consultants, including CORE Construction in Morton, were brought in to conjure a plan. By moving staffers and services around (on-site and elsewhere), SSOC could consolidate its Madison Avenue operations to the first floor, leaving the top two floors open for apartments. After juggling options and cutting costs, the agency finalized a blueprint to create 10 units: eight with one bedroom and two with two bedrooms, enough space for at least 10 people, perhaps a handful more.

The apartments will be covered by $2.8 million from the state housing authority. The rehab is less expensive than razing the place and building anew. Still, the conversion involves much more than just nails and drywall.

“This is a very, very old building,” Kahl says. ” … There are tons and tons of complications.”

The cost breakdown:

$1.48 million: This covers construction costs, including fire walls and floors, sprinkler systems and other legal requirements far greater for a residential setting than an office building.

$618,000: By the grant’s requirements, a new limited liability corporation — 202 Madison Avenue LLC, otherwise known as Madison Apartments — was created, and the property has been reclassified as condominium: SSOC owns the bottom floor, and Madison Apartments owns the top two floors. This is a precaution in case SSOC were to shut down, like the YWCA did in 2012 and left its homeless shelter in limbo (until rescued by Dream Center Peoria, with start-up help from SSOC). If such a fate were to befall SSOC, Madison Avenue Apartments would continue as a separate entity, with residents unaffected. As for the $618,000 payment, SSOC used the money to reduce and refinance its mortgage.

$390,000: This pays for an army of consultants, including architectural, financial and legal help, plus extensive environmental testing.

$130,000: This covers contingency costs. For example, at another SSOC project, a surprise discovery brought a new cost to fill ancient cisterns. There have been no contingency expenditures yet at the Madison Apartments project.

$100,000: This is a developing fee to SSOC that recoups extensive staff time used to plan the project. The money will be plowed back into the agency’s general fund.

$50,000: Asbestos was found in floor-tile adhesive. This line item covers abatement, which began days ago.

$35,000: This creates an escrow account, for repairs and maintenance after the project is completed.

The project is targeted for completion in November. Who will get to move in?

Peoria agencies that house the homeless (SSOC, Dream Center, Salvation Army and others) operate under the aegis of the Heart of Illinois Homeless Continuum of Care, which screens homeless applicants seeking help. SSOC focuses on homeless with a disabling condition, regardless of income. A waiting list — 400 total homeless in Peoria right now — is based on length of homelessness, highest service need and highest likelihood of death on the streets. Many don’t have enough money for traditional housing — “Our community does not have enough affordable housing,” Kahl says — while some don’t have the mental wherewithal to maintain an apartment without help.

Some applicants work, while others get government checks such as SSI. Through a complex formula, SSOC can receive up to 30 percent of an individual’s adjusted gross income (which takes into account certain living expenses). But an SSI check is typically $721, which at a full 30 percent would be $216 — far below the HUD-set monthly rental rates of $718 for a one-bedroom unit and $972 for a two-bedroom unit (utilities included).

Where will the difference come from at Madison Avenue Apartments? A $1.6 million subsidy from the state housing authority is to cover rent shortfalls for the next 15 years, Kahl says. Rent payments (whatever the source) cover operating costs that include utilities, maintenance, and insurance.

Rent doesn’t cover all costs for supportive housing (including addictions and mental-health therapies), which runs about $24,100 a year per person. But that investment in taxpayer dollars saves money overall, according to the Supportive Housing Providers Association, a statewide organizations of such not-for-profits. That association says that the average, alternate individual scenarios cost more per year: an additional $14,168 for prison, $15,639 for institutionalizing for mental disease, $27,983 for a nursing home, $28,095 for a county jail and $29,997 for intermediate care for developmental disabilities. And life on the streets can cost $5,900 to $25,900 more per person, depending on costs for emergency rooms, hospital beds and criminal justice.

Further, Kahl says SSOC’s approach works. On the street, homeless often fail to show up to appointments for addictions recovery, mental-health counseling and other critical needs. Rather than seek long-term goals, they’re more focused on finding a place to sleep or something to eat that day and that day only.

But couldn’t $2.8 million buy 10 nice houses rather than create 10 apartments? In fact, SSCO does own six donated dwellings, which are used in the homeless program. However, Kahl says, houses are far more costly to maintain than centralized apartments.

As far as success, Kahl points to New Hope Apartments, SSOC’s 84-unit complex at 301 NE Jefferson St. There, more than 80 percent of formerly homeless individuals stay there for at least a year.

“We define success as not returning to homelessness,” Kahl says. “We have had some residents live in our supportive housing programs for more than 20 years. The intent is to help each individual reach his or her potential and highest level of self-sufficiency. For some, the permanent supportive housing model is as self-sufficient as they may ever be.”

But about 25 percent each year move on to traditional housing. Of those, 95 percent do not return to homelessness. That’s the type of success envisioned for Madison Avenue Apartments come November.

“Ten units is small,” Kahl says. “But every unit we can add means one less person on the street.”

PHIL LUCIANO is a Journal Star columnist. He can be reached at, and (309) 686-3155. Follow him on

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