PRESERVING AFFORDABLE RENTAL HOUSING -- part 10

PRESERVING AFFORDABLE RENTAL HOUSING

As National Church Residences continues to expand beyond its traditional portfolio of affordable housing for elderly and disabled people and tackles more diversified projects for all ages and populations, Senior Vice President of Acquisitions and Development Michelle Norris sees a need for more flexibility from HUD.

“HUD headquarters must help steer the deal through the complicated old regulations that seem to want to trip up every deal and expedite the timing. Preservation often takes longer to do than new construction which means we aren't reaching as many communities as we should quick enough.” Norris said.

“Preservation is complicated, often frustrating and hard to execute with excellence,” she continued. “However, when it is done right, it is absolutely the right thing to do. It is more economical than building new, it is inherently green, it allows residents to stay in their communities and it creates partnership and great pride in all who are involved in saving the housing.”

Wright frequently writes about smart growth and sustainable communities. He and his wife live in a restored historic home in the heart of Miami’s Little Havana. Contact him at: stevewright64@yahoo.com

PRESERVING AFFORDABLE RENTAL HOUSING -- part 9

PRESERVING AFFORDABLE RENTAL HOUSING

Julie Bornstein, president of the Campaign for Affordable Housing, can easily tick off a list of the consequences of not preserving a healthy inventory of safe, well-located and affordable housing:
• Workers are pushed farther away from jobs and must endure long commutes that pollute the air, congest the roads, lower productivity and increase absenteeism.
• There is a negative impact on community life because people don’t identify with either their work community or their home community and are on the freeway when they could be coaching Little League or volunteering at the hospital.
• The incidence of substandard housing increases as tenants don’t have decent choices, so they accept whatever dwelling they can find.
• Overcrowding results in both apartments and homes. When housing is unaffordable, two families will double-up to rent housing.
• Illegal conversions---usually garages but structures not intended to be housing—create an unsafe supply of rental housing to meet demand in the underground economy.
• Employers cannot find workers to fill essential, but lower paying jobs.
• Many young families leave the area and most others can’t afford to move in, so an expensive area’s population becomes older very quickly. School population declines and perfectly good schools close for lack of students.

PRESERVING AFFORDABLE RENTAL HOUSING -- part 8

PRESERVING AFFORDABLE RENTAL HOUSING

Muha said more affordable rental housing can be preserved by providing tax relief to owners of aging Section 8 (low income housing) portfolios in exchange for selling the properties to new owners that will recapitalize them to remain affordable for years to come.

She notes that current tax laws act as a disincentive for investors in certain properties to consent to a sale to a new entity that would rehabilitate and extend the life of affordable apartment complexes.

“It is shameful that in the richest country in the world, a worker earning two times the minimum wage is living in substandard housing or doing without sufficient food, medicine, etc. to pay the rent.” Muha said. “Americans have lost interest and as a result, so has our federal government, in ensuring that our citizens have a decent and safe place to live. Until housing becomes a priority on the national agenda, there will be families and elderly and disabled folks living in substandard housing.”

PRESERVING AFFORDABLE RENTAL HOUSING -- part 7

Crowley also called on HUD to provide help to maintain the aging housing stock that was created with its dollars.

“The federal government needs to put more money into this. A national housing trust fund would be a tool for reinvesting in affordable housing preservation,” Crowley said.

PRESERVING AFFORDABLE RENTAL HOUSING

The obstacles preventing affordable rental housing preservation could be further removed by: states and counties matching the dollars that come from HUD, affordable developers creating good community relations programs that erase neighborhood opposition and some sort of incentive or device that would assist developers in overcoming regulatory barriers at the local level.

Denise Muha, executive director or the National Leased Housing Association, said a lack of affordable housing rentals can result in problems ranging from an insufficient amount of service workers to keep an economy going to dangerous situations where 10 or more people are crammed into a tiny housing unit.

“Owners' decisions to renew the contracts or terminate their low income use are generally market based, but can be attributed to something we call ‘HUD fatigue,’ which she defined as owners “just getting tired of dealing with the HUD layers of rules and changing policies and recently HUD's inability to pay its bills - specifically, subsidy on Section 8 contracts.

Many owners have waited one or more months for their funds leaving them late in paying mortgages, etc.”

PRESERVING AFFORDABLE RENTAL HOUSING - part 6

“Communities are incomplete,” said Sheila Crowley, President of the National Low Income Housing Coalition. People who do jobs that the community needs -- hospital aids, cashiers -- these folks must work more than one job and are left with fewer hours for family time. There are health and education consequences.”

“Kids who are in families who don’t have affordable housing move from school to school,” she added. With these increased rates of school mobility – churning through school system to school system – they don’t learn and are trying to catch up. Teachers in the classroom must devote extra time to them which has a negative effect on the quality of schools.”

Crowley said for owners who want to get out of HUD’s rule, there should be incentives to encourage them to sell to nonprofits that will maintain the apartments as affordable rentals.

“If you have a property that is in a declining neighborhood, you tolerate it,” she said of HUD hurdles. “But if the neighborhood is improving, then you’re motivated to get out of affordable housing. HUD needs to preserve the stock it has to remain competitive in the market. At the end of the day, the problem is budgetary – (the federal) domestic discretionary budget is low.”

PRESERVING AFFORDABLE RENTAL HOUSING - part 5

PRESERVING AFFORDABLE RENTAL HOUSING

A case study provided by the Preservation Compact explains that the pre-development financing was provided by a nonprofit lender specializing in emerging markets. Crucial financing was provided by both the State of Illinois through tax credits and a housing trust fund and the City of Chicago via bonds and Community Development Block Grant funds.

In August, Chicago Mayor Richard Daley announced that the city will help will create nearly 2,700 affordable rental units for low- and moderate-income households in 29 developments in neighborhoods across the city.

The city’s $277 million contribution to the multiyear project includes $175 million low-income housing tax credits and bonds, $63 million in loans and $39 million in tax-increment financing.

Additional money will come from the Illinois Housing Development Authority, the Federal Home Loan Bank and private investors and lenders.

Without such aggressive programs the nation’s lack of affordable rental housing will continue to create dire consequences, according to Sheila Crowley, President of the National Low Income Housing Coalition.

PRESERVING AFFORDABLE RENTAL HOUSING -- part 4

PRESERVING AFFORDABLE RENTAL HOUSING

In the Chicago region, the MacArthur Foundation is breaking barriers by funding the Preservation Compact, an Urban Land Institute project that will save at least 75,000 existing affordable homes in Cook County by the year 2020.

The compact is working to create more responsive and flexible financing from investors, expedited approvals or tax incentives from the public sector and creative development strategies both from for-profit and nonprofit developers.

One recent victory involved the Lorrington Apartments in Chicago’s Logan Square neighborhood, which has been affordable since 1985. The building owner’s Section 8 contract was expiring, and he was ready to sell.

With housing costs steadily rising in the popular neighborhood, the classic building’s 54 units could have easily been sold to a for-profit condo conversion developer.

But a combination of public, private and nonprofit agencies preserved them as affordable. The nation’s largest nonprofit developer, bought, rehabilitated and now manages the building – with a contract ensuring affordable rental prices through 2027.

PRESERVING AFFORDABLE RENTAL HOUSING -- part 3

PRESERVING AFFORDABLE RENTAL HOUSING
Schwartz, sharing observations she and MacArthur colleague Erika Poethig delivered at a HUD symposium, identified three barriers to affordable housing preservation that must be overcome:

• Properties. Current resources, incentives and requirements tied to affordable rental properties do not adequately encourage or require owners to preserve long term affordability or to sell to other owners committed to that objective.
• Ownership. Current policies also limit the ability of owners to recapitalize, earn sufficient cash flow and build a sustainable capital base from which to successfully maintain, manage and operate properties that are affordable to low- and moderate-income renters.
• Transactions. Current housing programs and regulations are fragmented, cumbersome, often unpredictable and inconsistently applied. Transactions that would transfer properties to new owners committed to preserving affordability and providing good long-term stewardship are difficult, costly and slow.

PRESERVING AFFORDABLE RENTAL HOUSING -- part 2

PRESERVING AFFORDABLE RENTAL HOUSING

The foundation’s “Window of Opportunity: Preserving Affordable Rental Housing” goal is to directly support the preservation and improvement of 100,000 affordable rental homes and to significantly improve the regulatory and funding environment for preservation through policy reforms at local, state and federal levels.

“Harvard University’s Joint Center for Housing Studies reports that over the past 10 years two existing units were lost for every affordable rental newly built,” said Debra Schwartz, Director of Program-Related Investments for the MacArthur Foundation. “Without concerted action, our nation’s stock of affordable rental housing is projected to fall by another million units or more in the decade ahead.”

“It is expected that by the end of 2007, over $3.5 billion in new long-term subsidy and financing will have been invested in `Window of Opportunity’ projects at an average cost of roughly $80,000 per home,” she added. “This is significantly less than the cost to build a new affordable rental unit anywhere in the country today.”

PRESERVING AFFORDABLE RENTAL HOUSING

PRESERVING AFFORDABLE RENTAL HOUSING
By Steve Wright

If homeownership is the American Dream, then lack of affordable rental housing is the American Nightmare.

For a huge percentage of Americans – those who are part of the increasing low-wage workforce, elderly, disabled, entry level professionals, even mid-level wage earners in expensive big cities – renting makes more sense that home ownership.

While the need for affordable rental housing has never been greater, the uphill battle to preserve existing affordable housing has never been steeper.

A number of factors – an endless maze of U.S. Housing and Urban Development (HUD) regulations, the lure of market rate rent earnings, high land values, perplexing local building codes – threaten to diminish an affordable rental housing inventory that already fails to meet the rising demand for it.

The John D. and Catherine T. MacArthur Foundation is supporting a 10-year, $75 million initiative to preserve and improve affordable rental housing across the country.