Rail~Volution Transit Oriented Development and Affordable Housing: Does Life Really Have to be So Hard? September 10, 2005

Transcription

1 Rail~Volution 2005 Transit Oriented Development and Affordable Housing: Does Life Really Have to be So Hard? September 10, 2005 Robert M. Ruzzo Presented. Deputy by Robert Director M.. Ruzzo, MassHousing Deputy. Director, Rail~Volution Staff 2005 Attorney,. September MassHousing 8-10, 2005

2 The Players MassHousing State s Affordable Housing Bank All 50 states have a housing finance agency Created In 1966; financed more than $6 billion in affordable housing 93,000+ units of housing under MassHousing management FY2004: largest lending year ever; $704 million in lending : 85% of multi-family rental developments financed by MassHousing located within ¼ mile of a transit node

3 The Players Massachusetts Bay Transportation Authority The MBTA is the oldest and fourth largest transit system in the country Since 1980, the MBTA has invested billions of dollars improving and expanding the light, heavy and commuter rail infrastructure of eastern Massachusetts MBTA serves 1.2 million riders per day The MBTA district is comprised of 175 cities and towns Collaboration Together, MassHousing and the MBTA introduced the Take the T Home Mortgage Program in 2003, offering no-down financing to regular T riders

4 The Market: Skyrocketing Real Estate Prices $700,000 Yearly Average Sales Price Comparison Greater Boston Area $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $ Source: Massachusetts Association of Realtors

5 The Market: A Challenging Rental Market is Further Threatened by Rising Costs Metro Areas with Worst Declines In Real Effective Rents Metro Area Boston MA Boulder CO Detroit MI Pittsburgh PA Sacramento CA % Change % -5.7% -3.2% -1.3% -1.0% % Change % -7.3% -5.2% -4.3% -3.7% Source: Joint Center for Housing Studies of Harvard State of the Nation s Housing 2005

6 The Market: Construction Costs Continue to Climb Construction Cost Trends: City of Boston $170 $165 $160 $155 $161 $165 $150 $145 $140 $140 $142 $144 $146 $148 $150 Cost/Square Foot $135 $130 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Source: Based on RS Means Statistics, applied to Typical Construction Cost/Sq Ft

7 The Market: Some Glimmer of Hope A significant bump-up in interest rates this year could spell good news for the local rental market, which has suffered as more and more tenants encouraged by the attractive rates have been about to become first-time homeowners. Banker & Tradesman, January 3, 2005 While a recovery of the multifamily market is expected to be felt in the next months, property managers are still feeling the effects of prolonged concessions, necessary to attract renters in a fiercely competitive single family market. Moody s Investors Service, 05 Outlook

8 The Market: Occupancy Rates 2 BR units Sample Metro Boston Developments 102% 100% 98% 96% 94% Back Bay Cambridge Quincy Peabody Burlington 92% 90% Source: Occupancy Data Tracked by MassHousing Appraisal Staff, select developments

9 The Market: Monthly Rents, 2-BR Apartments Sample Developments Metro Boston $2,400 $2,200 $2,000 $1,800 Back Bay Cambridge Quincy Peabody Burlington $1,600 $1,400 $1,200 $1, Source: Rental Data Tracked by MassHousing Appraisal Staff, select developments

10 The Means: The Priority Development Fund $100 million commitment by MassHousing to spur new housing production $63m for mixed-income developments $12m earmarked for lowincome developments $22m for TOD Projects $3m for planning for municipalities Intended as flexible gap filler financing Typical Structure: Low- or no-interest loans

11 Affordable Housing Trust Funds Across the Country

12 And If That s Not Enough Give a Little Help to Your Friends Agree to continue to promote Take the T Home Mortgage Program MassHousing: MBTA s housing lender of choice MassHousing to prioritize TOD money in PDF for T -owned sites MassHousing to provide up to $250K in planning funding to MBTA

13 Taking Action: Amory Street Residences Roxbury, Massachusetts Population 55,663 Median household income ~$27,133 [Insert Renderings/Photo1] [Insert Site Plan/Rendering Photo2] Amory Street Residences Total property < 1 acre used as warehouse space Catalyst for neighborhood revitalization (the first multi-family development in the neighborhood in the last 25 years) Complements overall Jackson Square revitalization plan New Rental Housing Development 64 rental units, 1, 2 & 3BRs 100% affordable $826 to $1,138 avg. rent/mo 10 Section 8 PB units $1,295 to 1,519 avg. rent/mo Six-story building with townhouse type units on first two floors Two, four-story townhouse buildings Close proximity to MBTA Orange Line

14 Taking Action: Amory Street Residences $20,000,000 $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- 1,349,754 1,510,000 3,289,585 12,331,000 Uses 673, , ,500 1,000,000 2,396,691 8,330,458 4,485,000 Sources } Direct Construction Soft Costs Acquisition Devel Fee/Overhead MassHousing Loan FED. Tax Credit Equity City Funds AHT PDF Loans State Home Funds Deferred Developer Fee TDC of $288,755/unit Somewhat high cost due to steel frame construction used in midrise building Substantial amount of subsidy required to support TDC (seven separate subsidy sources totaling 72% of TDC) Low-Income market area supports small first mortgage loan

15 From Park N Ride Lot to Live and Ride Community Arbor Point at Woodland Station, Newton Newton, Massachusetts Population: 83,829 Median household income $86,052, High priced housing market Arbor Point Transforms sea of asphalt into vertical garage + rental housing 180 units on 3.86 acres (46.6 units per acre) 548-space MBTA garage (100 space increase over current conditions) Taking Action II: ArborPoint at Woodland Station

16 Taking Action II: ArborPoint at Woodland Station New Rental Housing Development 180 rental units w. 1-3 brs each 36 affordable units (20%) $711-1,186 avg. rent/mo 141 market rate units $1,987-3,200 avg. rent/mo 295 spaces of parking underneath Amenities: business center, lounge,fitness center, Pool, patio, picnic area and tot lot. MBTA Parking Facility 3-level, 548-space commuter parking facility Handicap accessibility improvements, shared access drive and utilities connections.

17 Taking Action II: ArborPoint at Woodland Station $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 4,821,147 4,300,000 8,727,072 Uses 3,321,147 5,934,969 3,450,000 40,861,500 Residential Housing TDC of $293,549/unit; somewhat high due to garage; typical cost components for high-end suburban product. High Rental Market Area, supports large first mortgage loan $10,000,000 $- Uses Sources Sources Direct Construction Soft Costs Acquisition Devel Fee/Overhead Higher than typical cash equity, since owner s return comes from substantial cash flow MassHousing Loan PDF Loans Cash Equity Deferred Developer Fee

18 Taking Action II: ArborPoint at Woodland Station $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000, , ,000 1,035,000 5,990,000 4,300,000 MBTA Garage TDC of $13,788/space; Parking revenue available to support ~ 45% of TDC Rental Development up front ground lease provides equity to support ~55% of TDC $2,000,000 3,300,000 $1,000,000 $- Uses Sources Direct Construction Soft Costs Reserves Devel Fee/Overhead MassHousing Loan Cash Equity

19 Taking Action II: ArborPoint at Woodland Station Impact of Increased Affordability on Net Operating Income $4,000,000 $3,500,000 $3,000,000 $2,500,000 NOI $2,000,000 $1,500,000 $1,000,000 $500,000 $- All Market 10% Affordable 20% Affordable 1st Year NOI $3,680,799 $3,370,859 $3,072,986

20 Try, Try Again: Ashmont Station Dorchester, Massachusetts Population: 92,862 Median household income ~$38,590 Inner city urban neighborhood in process of revitalization Ashmont Station Total property < 1 acre currently used as surface parking for MBTA employees Re-utilizes an existing underutilized and poorly maintained parcel directly adjacent to a MBTA Transit Station Promotes the ongoing revitalization of the Ashmont Peabody Square neighborhood

21 Try, Try Again: Ashmont Station New Rental Housing Development 105 rental units w. 1-2 brs 74 affordable units (25%) $938-1,124 avg. rent/mo 26 market rate units $1,245 -$1,402 avg. rent/mo 80 spaces of parking underneath 20,000 square feet of neighborhood retail MBTA Ashmont Peabody Station Provides intermodal bus, trolley and rapid transit services to nearly 17,000 daily commuters. MBTA is currently constructing a complete replacement of the station as part of a modernization program focused on the four Dorchester Red Line stations.

22 Try, Try Again: Ashmont Station $60,000,000 $50,000,000 $40,000,000 $30,000,000 1,425,000 3,273,000 7,682, ,000 1,500,000 1,000,000 2,500,000 4,000,000 13,466,803 TDC of $458,614/unit Uncharacteristically high costs (even for Boston) due to commercial space, underground parking, difficult site conditions and steel frame construction. $20,000,000 $10,000,000 $- 35,774,092 Uses 12,979,700 4,314,400 7,493,600 Sources } Direct Construction Soft Costs Devel Fee/Overhead Acquisition MassHousing Loan (Res) MassHousing Loan (Retail) State Tax Credits Fed. Tax Credits PDF Loans City Funds State TOD Funds State Home Funds Deferred Developer Fee Substantial amount of subsidy required to support TDC (eight separate subsidy sources totaling 73% of TDC) Low Rental Market Area, with limited demand for market rate units results in relatively small first mortgage loan

23 What Have We Learned, Dorothy? Amory: High affordability, lots of subsidy sources can solve relatively high TDC (Amory) ($288,755/unit) Arbor Point: High finish, mixed-income approach will allow you to tackle special obstacles (parking) in a high-cost, high-rent area ($293,549/unit) Ashmont: High affordability/special obstacles mixture may be too much to tackle ($458,614/unit) * Possible solution: Market-based, partial condominium project on top two floors?

24 Words to the Wise Find your HFA, marry it. Expect the unexpected. Transit agencies reach can exceed grasp: Requirements for success are (1) focus (remember, development is not their primary responsibility), and (2) realistic market expectations. Political pressure can come into play to counter-balance. Organizational synergies are as yet unrealized Rail~Volution NCSHA

25 MBTA Garage Flow of Funds Garage Revenue Operating Fund (Funds Operations and Maintenance of Garage) Debt Service Debt Service Reserve Fund Operating Reserve (May not be Necessary) MassHousing Cash Flow Repayment Surplus Revenue (To MBTA for systemwide O&M)