Brave New World: Achieving Deep Affordability in an Age of Fewer Vouchers April 27, 2014
About NLIHC Dedicated solely to achieving socially just public policy that assures people with the lowest incomes in the United States have affordable and decent homes. www.nlihc.org
Today s Agenda Overview of Alignment Project (Sheila) The Need for Affordable Housing & Review of Existing Federal, State and Local Programs (Megan) Analysis of LIHTC Properties (Althea) Analysis of Avesta Housing s LIHTC Properties (Mindy) Break www.nlihc.org
Today s Agenda Findings from Study of Affordable Housing Developers Serving ELI (Elina) Successful Strategies for serving ELI Households (Ginger and Nancy) The Future of Affordable Housing Development (Ann) Concluding Remarks (Sheila) www.nlihc.org
About The Alignment Project Purpose: gain an understanding of how existing federal housing resources are being used How to align resources to meet the needs of ELI households? Goal: Better public policies to achieve rental housing affordability for ELI households www.nlihc.org
Alignment Project Components Assemble all available data about the degree to which housing subsidized by LIHTC, HOME, and/or the FHLB AHP serve ELI households Refine and expand NLIHC database of all federally assisted properties Create interactive database of all state funded rental programs, as well as some city-funded programs www.nlihc.org
Alignment Project Components Survey developers to find models that successfully achieve affordability for ELI hhlds without relying on federal Section 8 housing vouchers. Complete case studies on a minimum of five such projects. Undertake a development-by-development analysis of a random sample of properties in 5 states. Five states: FL, ME, OH, OR, VA www.nlihc.org
Housing Need: Key Statistics In 2012, there were 10.2 million extremely low income (ELI) renter households. However, there were only 3.1 million units affordable and available to this income group. As a result, there were only 31 units affordable and available per 100 ELI households. There is a need for over 7 million additional affordable units to serve ELI renters. www.nlihc.org
50 Rental units and renters in the US, matched by affordability and income categories (MMFI 2012) 45 40 11.1 35 15.9 30 25 20 15 10 5 0 18.9 9.7 5.7 Units (by affordability category) 8.4 7.3 10.2 Households (by income category) ELI VLI Low Income Not Low Income www.nlihc.org
Housing Need: Key Statistics The number of renters with worst case housing needs increased 43% between 2007 and 2011, reaching 8.48 million by 2011. (HUD, 2013). Over 12.8% of the nation s low cost housing supply was lost between 2001 and 2011 (JCHS, 2013). The 2014 Housing Wage is $18.92 an hour, over two and half times the federal minimum wage (NLIHC, 2014). www.nlihc.org
Current HUD Programs Program Subsidized Units % of Households with Incomes below 30% AMI Housing Choice Vouchers 2,339,198 78% Public Housing 1,156,839 73% Project Based Section 8 613,133 75% Section 202 320,423 70% Section 811 34,706 81% www.nlihc.org
HOME, AHP and LIHTC: Do They Reach ELI? HOME: At initial occupancy, 25% occupied by ELI; 26% of all HOME rental units have vouchers. AHP: In 2012 16,559 rental units funded and 24% served ELI hhlds. LIHTC: Furman Center study found that 43% of units are occupied by ELI; Nearly 70% have rental assistance. www.nlihc.org
NLIHC Reports on State and Local Housing Programs 2001: A Report on State-Funded Rental Assistance Programs: A Patchwork of Small Measures 2008: Housing Assistance for Low Income Households: State Do Not Fill the Gap 2014: NLIHC will be launching a database of state and local programs, including both rental assistance and capital/production www.nlihc.org
NLIHC s Rental Programs Database Database currently contains information on 353 programs nationwide. It can be filtered by population served, geography and classification. www.nlihc.org
NLIHC s Rental Housing Database 138 State Funded Rental Assistance Programs 66% are tenant based, 41% target the homeless or those at risk of homelessness; just 35 (25%) provide ongoing support 125 State Funded Capital Programs Just 12 include set-aside for ELI hhlds; 55% target hhlds at 60% or 80% of AMI 70 locally funded programs in 39 cities www.nlihc.org
NLIHC Development Analysis Background Methodology 5% Random Sample of LIHTC Properties in Florida, Maine, Ohio, Oregon, & Virginia Data from HFAs & Developers Tenant & Property Analysis Data on rents paid, rental assistance & incomes 104 properties 8,758 units Developer Survey Data on funding sources, operating reserves and terms of affordability 25% response rate www.nlihc.org
NLIHC Development Analysis Key Finding: Average Household Income Significantly Lower than Unit Income Limit 100% 90% 80% 70% 60% 50% 50% 60% 40% 30% 30% 40% 20% 10% 24% 30% 31% 42% 0% Income Limt Average AMI www.nlihc.org
NLIHC Development Analysis Key Finding: Majority of ELI Households without Rental Assistance Severely Cost Burdened in LIHTC Properties ELI (0-30% AMI) 17% 26% 57% VLI (31-50% AMI) 17% 73% 10% LI (51-80%) 47% 53% No Cost Burden (0-30%) Moderate Cost Burden (31-50%) Severe Cost Burden (>50%) www.nlihc.org
NLIHC Development Analysis Key Finding: More than 7 in 10 ELI Households with Rental Assistance Live in Units Limited to 60% AMI or Without Limits 3% 3% 2% 22% 69% 30% 40% 50% 60% No Income Limit www.nlihc.org
NLIHC Development Analysis Key Finding: Rental Assistance provides $2.4 million above LIHTC max rents per year ALL UNITS Total $ Average $ (Unit) Gross Rent $5,393,062 $631 Rental Assistance Total Rent Received LIHTC Max Rent $1,599,062 $556 $6,992,124 $819 $7,010,926 $845 Difference -$18,802 -$27 Units with Rental Assistance Total $ Average $ (Unit) Gross Rent $847,365 $295 Rental Assistance $1,599,062 $556 Total Rent Received $2,446,427 $851 LIHTC Max Rent $2,250,087 $820 Difference $196,340 $31 Units without Rental Assistance Total $ Average $ (Unit) Gross Rent $4,545,697 $802 Total Rent Received $4,545,697 $802 LIHTC Max Rent $4,760,839 $858 Difference -$215,142 -$56 www.nlihc.org
Development Analysis KEY FINDINGS Average Household Income Significantly Lower than Unit Income Limit. 83% of ELI Households without Rental Assistance are Cost Burdened in LIHTC Properties. More than 7 in 10 ELI Households with Rental Assistance Live in Units Limited to 60% AMI or Without Limits Rental Assistance provides $2.4 million per year above LIHTC max rents. Diverse funding streams, presence of operating reserves, and low debt-ratio positively correlated with serving lower income households. www.nlihc.org
Avesta Housing s LIHTC portfolio: An analysis A presentation for the National Low Income Housing Coalition conference April 2014
Why did Avesta undertake this analysis? 1. To understand how the housing voucher program interacts with the LIHTC program 2. To understand the rent burdens our residents have 3. To ensure the financial feasibility of future developments 4. To better advocate for housing programs that would address the real need
What did we find? o889 units in our LIHTC portfolio o Average AMI of residents: 33% Units Average AMI 30% units 22% 40% units 28% 50% units 30% 60% units 36% TOTAL 33%
The impact of Rental Assistance o 57% of LIHTC residents have Rental assistance o Half of them have Housing Choice Vouchers Without RA Average AMI With RA Average AMI 30% units 22% 40% units 33% 50% units 43% 60% units 46% TOTAL 43% 30% units 19% 40% units 21% 50% units 23% 60% units 26% TOTAL 24%
Resident cost burden o Average cost burden: 33% o Households with rental assistance: 28% o Households without rental assistance: 39%
Revenue from Rental Assistance programs Units without RA Total $ Total rent received $275,533 LIHTC maximum rent $316,875 Difference -$41,342 Units with RA Total $ Total rent received $440,498 LIHTC maximum rent $405,178 Difference $35,855 othe revenue Avesta receives through state and federal rental assistance programs offsets rent concessions provided to fill units othese programs allow Avesta to serve households with low AMIs
Our takeaways othe market for 60% units in our region is virtually non-existent othe voucher program makes our LIHTC projects financially feasible ochanges in the voucher program directly impact the LIHTC program
What are we doing with this information? oengaging the tax credit community to fight for the voucher program oeducating MaineHousing o How do we change underwriting and get creative with financing to more deeply target? oexamining how we reach 50%- and 60%-unit market
Affordable Housing Activity Report See the report at avestahousing.org/news
Thank you! www.avestahousing.org mwoerter@avestahousing.org
NLIHC Survey of Developers 241 affordable housing developers. Focus on projects developed between 2010 and 2012. Questions: Who are the developers? What funding sources did they use? What are tenant income levels? How are ELI tenants served? www.nlihc.org
Survey Findings: Income of Tenants % of Developers 45 40 35 30 25 20 15 10 5 0 33% 18% 18% 16% 9% 6% 0% 1%-25% 26%-50% 51%-75% 76%-99% 100% % of units affordable to ELI tenants www.nlihc.org
Survey Findings: Funding HOME funds Private funding 9% LIHTC CDBG funds AHP funds 4% LIHTC Other (including federal, state or local programs) State Housing Trust Fund Tax-Exempt Bond Financing City or County Housing Trust Fund Federal Historic Tax Credits USDA Rural Development Rental Housing Section 202 Capital Advance Program State Historic Tax Credits Section 811 Capital Advance Program 57% 57% 50% 45% 37% 37% 34% 32% 29% 23% 17% 17% 16% 15% 75% www.nlihc.org
NLIHC Interview Findings Challenges faced by developers: Operating expenses Uncertain funding environment Budget cuts Accessing funding, particularly LIHTC Solutions Mixing incomes Reducing mortgage debt Partnerships with local government officials State and local programs Establishing QAP Preferences www.nlihc.org
NLIHC Project Case Studies Project Name Developer Location Quixote Village Community Frameworks Olympia, WA Hudson Townhomes Homes for America Cambridge, MD Mayfair Village Apartments Ford Road Family Housing Ability Housing Eden Housing Jacksonville, FL San Jose, CA Places at Page Places for People St. Louis, MO www.nlihc.org
May 2014
Community Frameworks Fee for Service T/A Provider & Developer Owner of Low-Income Housing in our Home Community of Spokane, WA
Quixote Village
30 units
Community Building Shower Exterior Kitchen
$1,550,000 State Housing Trust Fund $699,002 CDBG (thru State and City) $333,000 Value of Donated Land $170,000 Thurston County $215,082 Tribe & Individual Donations $80,321 In Kind Design & Legal Services $3,047,405 Total ($101,580 per unit) $2,634,084 Total Less In Kind ($87,803 PU) Capital Budget
$50,000 State O & M Trust Fund $80,000 Thurston County $40,500 City CDBG for Services $49,500 Private Donations (Not Sustainable!!) $220,000 Total ($7,333 PUPY, includes services) Operations and Service Budget
Quixote Village Residents
Quixote Village Residents
15 vouchers would generate $72K/yr, replacing unstable operating funding and decreasing the fundraising burden. Capitalized $150K in reserves to buffer against future uncertainties. All PSH projects need stable source of operating funding support the NHTF! Can QV Be Sustainable?
Rockwell Apartments
$1,649,692 County HOME, debt service contingent on cash flow $167,921 County Recording Fee Revenue, loan, 2% interest, 20 yr term $208,107 Neighborworks America, through CF, 40 yr term, no interest $2,025,720 Total ($72,347 per unit) Capital Budget
$4,020 Annual Average Operating Cost PUPY ($355 per unit per month) $6,672 50% Rent @ $556/m PUPY $3,780 30% Rent @ $315/m PUPY $48,467 NOI $18,600 Reserve Contributions $29,867 Cash Flow for Debt Service Operating Budget
Cheaper PSH/ELI Housing is Possible Alternative Models Need Flexible Funding Can t Use LIHTC s for Tiny Houses Operating Subsidies are Too Scarce 30% Units Almost Pay Their Operating Costs Cross Subsidies Work Trend to Repayment of HOME and Other Public Funding is Devastating for ELI Housing! Lessons Learned/Current Challenges
Ginger Segel Community Frameworks gingers@communityframeworks.org 206-271-7664 *
Homes for America, Inc.
Homes for America, Inc. Nonprofit Developer, Owner and Service Provider in the Mid-Atlantic states of Delaware, Maryland, Pennsylvania and Virginia 5,500 units in 70 communities Portfolio of family, senior and special needs housing
Long Term Affordability without Rent Subsidies It takes more than soft debt.
Key approaches: Maximize equity and minimize debt - identify sites in Difficult Development Areas (DDA) or Qualified Census Tracts (QCT) or opportunity areas if the State basis boost is provided Work in jurisdictions that provide deep payments in lieu of real estate taxes (PILOTS) Maximize green / energy conserving features to realize long term operating efficiencies Create nonprofit controlled (not partnership controlled) reserves as a long term resource to hedge rising operating costs
Our Key Principles Not all units will be affordable to ELI households The benefits from our key approaches will not necessarily be spread equally among all units Goal of 20% of units in every property affordable to ELI households with 10% of the ELI units very deeply affordable (15% of AMI) Where possible 30-50% of units affordable to households with income between 31%-40% AMI, with balance some mix of affordable up to 60% of AMI
More Key Principles In strong markets include some market rate (up to 25% of units) to provide more subsidy to lower income households. Must be true high market, not market rents at or near 60% AMI rents. Tenants with vouchers are rented the 50-60% AMI or market rate units and units internally subsidized through the deal structure are reserved for those without vouchers or other rent subsidies
Hudson Townhomes 48 two, three & four bedroom homes; placed in service summer 2013
Example of PILOT Impact at Hudson PILOT payment $200 per unit per year credit/reduction of real estate tax based on assessment Impact if credit applied equally to all units: $200 / 12 months = $17 per month less rent on every unit Impact if benefit applied to the 10 ELI units: $200 x 48 units = $9,600 annual subsidy / 10 ELI units / 12 months = $80 per month less rent
Hudson TH Results Tenant Income ranges: 2 Below $10,000 6 $10,000 - $14,999 AMI for County: 13 $15,000 - $19,999 $60,100 12 $20,000 - $24,999 9 $25,000 - $35,600 Zero Residents with HC Vouchers HH demographics: 88% single female headed household 3 persons average HH size (compares to portfolio average of 2.2 persons for all general occupancy properties
Glenburn House - 15 Years Later
Glenburn House The Platform 24 one and two bedroom apartments for seniors Maximum income / rent levels - 50% AMI, set asides 50% of units for ELI PILOT total County tax $50 per unit per year Location QCT (same QCT as Hudson TH) Financing LIHTC Equity, HOME funds with $100,000 amortizing, $600,000 balance payable from surplus cash Placed in service 1999
The Results 15 years later Tenant Income Ranges: 4 Below $10,000 8 $10,000 to $14,999 AMI for County 4 $15,000 to $19,999 $60,100 8 $ 20,000 to $27,646 6 Residents with HC Vouchers Today s Rents: No Voucher HC Voucher 1 Bedroom $430 $600 2 Bedroom $499 $609
National Housing Trust Fund: An ELI Vision for the Future Presented by: Ann O Hara and Jim Yates Technical Assistance Collaborative, Inc.
Critical Shortage of Capital and Subsidies Low Income Housing Tax Credits HOME and CDBG as gap financing 4% credits Decline in project-based subsidies: HUD s Homeless programs Section 8 Project-Based Vouchers Only VASH and new Section 811 PRA providing some supply
State Housing Agency Innovation: Integrated Permanent Supportive Housing Permanent Supportive Housing (PSH): Evidence-based housing approach for people with most significant and long term disabilities Deep subsidies Voluntary long-term services PSH is ELI: Most PSH tenants have SSI = 19% of AMI State Housing Agency innovation/partnerships to create integrated PSH units through LIHTC TAC testing 3 State PSH financing models Illustrate potential for replication with NHTF Increase buy in from states DRAFT Findings only Final Report later in 2014
North Carolina Housing Finance Agency Integrated PSH program using LIHTC since 2002 Cost-based operating subsidy approach State appropriated Key program finances 10 year subsidy commitments (2,200+ units) Payment standard approach based on actual operating costs Tenants pay 30% of income Current payment standard for 1 BR = $490 Historical average subsidy payment of $205 monthly (2006-2013). Recently raised to an average of $270 for 1 BR Adds approximately 200 PSH units to state supply each year
Pennsylvania Housing Finance Agency Ten year initiative targeted primarily to people with disabilities Uses capitalized development funding from increased developers fee (generally from 15% to 20%) through QAP Fills gap between 50% of AMI unit and 20% of AMI through internal rent subsidy reserve Tenants pay the 20% AMI rent PHFA approves escrow agreement between developer and third party (typically a bank) Examples: 1 BR is $297 in Philadelphia and $244 in Pittsburgh
Massachusetts Department of Housing and Community Development Piloting a Value Voucher subsidy Non-FMR approach to close gap between 30% of SSI and 50% of AMI rent Uses MA Rental Voucher Program (MRVP) for subsidy Less expensive than FMR approach in high cost MA market
Replication Using NHTF See 2 page of handout for more detailed TAC analysis Models assume NHTF allocation of $3 billion Assumes 20% of state allocation used for PSH Operating subsidy is capitalized for 15 years Capital subsidy of $50,000 per unit National estimate of new PSH units based on average per unit operating cost capitalized over 15 years = 4,800
Annual PSH Production North Carolina: 126 new PSH units per year Pennsylvania: 332 new PSH units per year Massachusetts: 86 new PSH units per year National: 4,800 new PSH units per year
QUESTIONS
Contact Us Technical Assistance Collaborative, Inc. TAC @TACIncBoston Visit us on the web: www.tacinc.org 73
Brave New World: Achieving Deep Affordability in an Age of Fewer Vouchers Questions? Contact Megan Bolton, Research Director megan@nlihc.org