BELLINGHAM - Catholic Housing Services could begin construction of a 42-unit housing complex this summer at 1100 Cornwall Ave., including 20 units for chronically or mentally ill homeless people.

The inclusion of homeless housing in the project triggered heated complaints from some downtown merchants last summer, but the people who live in the project will get round-the-clock supervision, Catholic Housing Services division director Steve Powers told City Council Monday, Jan. 28.

The startup of construction on the $9 million project this year will depend on whether it succeeds in getting tax credits from the Washington State Housing Finance Commission to help with funding, Powers told the council. He said his agency already has applied for city review of the project's design - the first phase of the permitting process.

Council member Terry Bornemann observed that merchants felt blind-sided because there was no mention of housing for the homeless mentally ill at the time the city sold the property to Catholic Housing Services in December 2011 for $1.18 million.

Powers acknowledged that his agency's plans for the property changed because of funding constraints. The original plan had been for senior citizen housing, but the agency failed in an effort to get U.S. Housing and Urban Development funds for that purpose. They succeeded in obtaining state financial assistance for a project with a significant amount of housing for the chronically homeless, which is now getting a high priority at the state level, Powers said.

The 42-unit building will take up about one-third of the roughly one acre at Cornwall Avenue and Maple Street. In four or five years, Powers said his agency could build a second phase with 72 more dwelling units plus ground-floor office space and 100 parking spaces on two levels. As many as 104 units could be built if the new building included only housing.

Powers also stressed that the second phase is still in the concept stage. There are no firm plans and no way of knowing what kinds of funding will be available when his agency is ready to take on another project.

Catholic Housing Services now operates rental housing in the Washington Grocery building and Kateri Court near the proposed new project, as well as the Mount Baker Apartments. The three existing housing complexes include 180 units. Powers said 45 percent of those tenants are making less than $14,000 a year.

Catholic Housing Services staffers will discuss their plans with downtown business owners at a 6 p.m. Wednesday, Jan. 30, meeting of the Downtown Neighborhood Association at the Leopold, 1224 Cornwall Ave.

The name of the group hosting the Wednesday, Jan. 30, meeting was corrected Jan. 29.

Reach John Stark at 360-715-2274 or john.stark@bellinghamherald.com. Read his politics blog at blogs.bellinghamherald.com/politics or follow him on Twitter at @bhamheraldpolitics.