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A recent rendering of the 213 College Ave. affordable housing development from HDC MidAtlantic, from the perspective of the former St. Joseph Hospital across the street on College Avenue.

The developer of Lancaster city’s largest affordable housing project in decades wants neighbors opposing the project to be held accountable for any potential lost funding resulting from an ongoing lawsuit to the tune of $3 million. The neighbors recently appealed a judge’s decision, handed down last month, to dismiss their February 2022 lawsuit over the project at 213 College Ave. They are seeking to overturn zoning approval that was granted in January 2022.

The decision came as HDC MidAtlantic faced a deadline set by a key investor to close on financing for the $23.4 million project. HDC previously said if the neighbors’ lawsuit continued past May 31, it risked losing $1.25 million in low-income housing tax credits from the Pennsylvania Housing Finance Agency.

After the neighbors filed their appeal to Common-wealth Court, HDC responded with a request for a court order requiring the neighbors to post a $3 million bond, arguing the bond would cover any potential loss. HDC claims the neighbors’ appeal’s only purpose is to force it to miss the deadline and lose the tax credits.

“Any continued delay will result in (HDC) losing funding for the project. Due to the significant losses which (HDC) would endure as a result of the frivolous appeal, appellants should be required to post a bond which covers those potential losses,” the developer said in a recent court filing.

According to HDC, $3 million covers “lost development fees, resident service fees, escrow subsidies for residents.”

To get the judge to impose a bond, HDC has to prove that the neighbors’ argument is frivolous. The April 21 hearing on the bond will involve the neighbors’ legal arguments that the zoning hearing board decision in January 2022 didn’t match the evidence that was presented. Judge Margaret Miller has said she will decide that day if the neighbors have to pay the bond — and if so, how much it will be.

No hearings have been scheduled in the Common-wealth Court appeal.

The case will go to Commonwealth Court regardless of whether the judge requires the neighbors to post the bond.

“It’s appropriate to ask the judge, who is the most familiar person with this case, to hold a hearing on whether a bond should be posted,” said Neil Albert, an attorney representing the city.

The city joined the case in support of the developer because the project fits with its goal of adding at least 300 affordable housing units by 2026 to address a housing shortage in the city.

HDC, a nonprofit affordable housing developer, is proposing a 64-unit, five-story apartment building aimed at households making $11,000 to $40,000 per year. Twelve of the units would be reserved for people with physical disabilities.

The uncertainty over financing is the main issue holding up the project, which has all the approvals it needs from the city to move forward. The neighbors have never asked the court for a temporary stay on construction.

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