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MOU October 20, 2021

District: H | EaDo

The 800 Middle project represents a partnership between the Houston Housing Authority (HHA) and The NRP Group to develop 398 affordable units, replacing housing lost to I-45 redevelopment. The project structure utilizes HHA's land ownership and tax exemption, with HHA retaining fee title while entering into a 75-year ground lease with the partnership (extendable to 99 years if required by investors).

The ownership structure places a for-profit subsidiary of HHA's non-profit affiliate as general partner, with an investor limited partner owning 99.99%. The remaining 0.01% is split between an HHA affiliate (0.0051%) and NRP's Class B Limited Partner position (0.0049%). Despite the small percentage ownership, NRP maintains significant control rights due to their guaranty obligations.

The development's financing combines 4% tax credits with up to $48 million in private activity bonds through HHA's public facility corporation. A critical infrastructure component is funded through a $9.525 million City of Houston loan. If this loan falls short, the partnership will contribute up to $2 million, with HHA providing any remaining amount up to $7.5 million through a subordinate loan.

The fee structure is precisely defined: developer fees are set at 15% of eligible basis, split 60% to NRP and 40% to HHA after an initial $50,000 to Structure Development. Management fees are the greater of $40 per unit monthly or 5% of effective gross income, with a $4,995 monthly minimum. The contractor receives a 14% total fee (6% profit, 2% overhead, 6% general conditions). Additional fees include a $25,000 one-time management setup fee and annual accounting fees of $200 per unit, capped at $35,000.

The project includes 95 project-based vouchers at 110% of fair market rents, creating a deeper affordability layer. The unit mix skews toward larger families, with 152 three-bedroom and 53 four-bedroom units. The income restrictions split between 303 units at 60% AMI and 95 units at 30% AMI.

A unique aspect of the construction arrangement positions HHA as general contractor to secure sales tax exemption, with NRP's affiliate as master subcontractor. The 5% construction contingency can be restructured to 2.5% inside and 2.5% outside the contract with lender and investor approval.

After priority payments, ongoing cash flow and eventual sale or refinancing proceeds follow the same split as developer fees: 60% to the general partner and 40% to the Class B LP. HHA retains a right of first refusal to acquire the project at the statutory minimum price after the 15-year compliance period.

2024 Update

Recent reporting reveals significant concerns about environmental hazards and misrepresented infrastructure at 800 Middle Street. TCEQ found soil contamination exceeding safe levels for multiple toxic substances, and cited HHA for failing to report these discoveries during construction. Documents from 2019 show HHA and NRP knew about contamination before proceeding with development.

A critical infrastructure issue involves a nearby radio tower, which stands 921 feet tall but was reported as 300 feet in documentation. The residential building currently under construction falls within the tower's fall zone, raising additional safety concerns.

Regulatory bodies have responded: TDHCA mandated a new environmental analysis due February 2024, and HUD had previously intervened in 2019 when HHA failed to disclose contaminated ash landfills in the initial property purchase. A criminal complaint has been filed with the Texas Rangers.

Despite these revelations about the $130 million project, construction continues. HHA and NRP maintain the development is safe for future residents, while critics, including Council Members Mario Castillo and Willie Davis, have called for further review. Council Member Tiffany Thomas defended the project, noting nearby high-end development and questioning where Clayton Homes residents would otherwise relocate.

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