An Arkansas developer hopes to reach a settlement this week with the city of Little Rock over allegations that it tried to block him from completing a $25 million low-income housing project in west Little Rock.
In November, RichSmith Holdings LLC and Ridge Construction LLC, both of North Little Rock, and The Peaks at Little Rock Ltd. filed a federal lawsuit against the city of Little Rock in U.S. District Court in Little Rock following the city’s suspension of the Peaks’ building permits after construction had started on the project.
The developers said in court papers that neighbors complained that the project would hurt their property values. Other defendants included Mayor Frank Scott Jr. and the Little Rock Department of Planning & Development.
Keith Richardson, a member and co-founder of RichSmith Holdings and Ridge Construction, which is developing the project, told Arkansas Business in November that the project received all the necessary approvals to build 72 units in the first phase of the project at the end of Dover Drive, near West 36th Street and Shackleford Road. The second phase of the project, which he said was zoned for multifamily housing, would have 96 units.
The developer secured $11.6 million in low-income tax credits for the first phase of the development and $14.8 million for the second phase. Both phases have deadlines they must meet to keep the credits.
As construction was underway, the city’s Planning & Development Department sent Richardson a letter on Nov. 10 that said it was suspending the project’s building permits.
The department said in the letter, which was attached as an exhibit to the suit, that it awarded the permits on the grounds that the project was going to be an apartment complex for people 55 and older.
“Since your intention is to build a multi-family development without this restriction, we are suspending your building permits until this issue can be resolved,” the letter said.
In December, a month after the lawsuit was filed, the city reinstated the building permits, but that didn’t end the dispute.
The developers alleged the defendants were going to deny a certificate of occupancy for Phase I and additional building permits for Phase II. For property owners, a certificate of occupancy is the key document that shows that the structure meets all safety and building codes.
At a hearing in January, the plaintiffs provided as an exhibit an email from Little Rock City Attorney Tom Carpenter to Mayor Scott and members of the board of directors that discussed the reinstatement of the building permits, according to an order for U.S. District Court Judge Billy Roy Wilson filed in February.
In the email, Carpenter said that “this outcome is not really one to be distressed by. Had the Board ruled that the suspension was proper, it was the intention of this office to offer the developer the right to complete construction, but not to provide a certificate of occupancy until the issue of senior living was decided in Court,” according to Wilson’s order.
Carpenter declined to comment on the case.
The developers filed a motion for the preliminary injunction and temporary restraining order against the city and after a January hearing, Wilson agreed with the developers on some of its allegations against the city.
“Plaintiffs have established a likelihood of success on the merits of substantive due process claims,” Wilson wrote. He also said that an “irreparable harm would exist if Plaintiffs’ vested property rights were violated.”
The city objected because the certificate of occupancy was pending.
But considering all “of the evidence in this case, Plaintiffs need not wait to seek relief,” Wilson wrote. He said the threat “is real and imminent.”
Wilson said that the defendants couldn’t deny certificates of occupancy for Phase 1 for any reason related to the age restrictions that served as the basis for the suspension of the building permits.
The city appealed the order to the 8th Circuit Court of Appeals.
Richardson told Arkansas Business last week that he expects first-phase construction to be completed before the end of the year. The phase two of the project is projected to start in 45 to 60 days and will take about 14 months to complete.
Richardson told Arkansas Business last year that he’s been in business 25 years and it was the first time that this situation has happened.
His company, Richardson Builders LLC of North Little Rock, reported $116.6 million in revenue in 2021, an increase of 276% from the previous year, making it the 8th largest commercial contractor in Arkansas.
RichSmith Holdings LLC bought the undeveloped 5-acre property in 2013 for $225,000. In 2015, RichSmith Holdings had the property under contract to sell to a nonprofit that planned a multifamily development for people 55 and older. That project had applied for tax credits, which would have restricted the property from being developed as anything other than housing for that age group. But that project didn’t happen.
The Richardson lawsuit said that because the senior housing project didn’t materialize, the land reverted back to its original zoning, giving the developers the authority to build low-income housing at the site. “We even had three separate zoning verification letters from city planning before we actually started construction,” Richardson told Arkansas Business last year.
The building permits, which were issued around the first of October, listed the value of the first phase of the project at $3.24 million, which included three three-story 24-unit apartment buildings, a clubhouse and a mail kiosk.
On Oct. 25, the Kensington Place Property Owners Association held a meeting to discuss the project, according to suit.
The lawsuit said that Doris Wright, the city director for Ward 6, which covers the property, said in that meeting that she didn’t want that type of housing in Kensington Place. Wright also has been named as a defendant in the lawsuit.
“Director Wright admitted that Plaintiffs had the right to develop the Property, but what she could try to do is to protect the neighborhood’s interests by blocking the development,” the suit said.
At a Nov. 9 City’s Board of Directors’ meeting, Wright said that no single-family neighborhood wants a multifamily development next to it, the suit said.
The next day, the city’s Planning & Development Department wrote to Richardson and told him the building permits were pulled.
The settlement conference, which both sides requested, is scheduled for Wednesday and will be in front of Magistrate Judge Edie Ervin.
An attorney for the developers, Thomas H. Wyatt of the Little Rock office of Quattlebaum Grooms & Tull LLC, told Arkansas Business that settlement conferences are confidential and he couldn’t comment on them.