Transcript RAD - The City of Ann Arbor

Housing Commission Updates
City of Ann Arbor 2013
Jennifer Hall
Executive Director
Ann Arbor Housing Commission
[email protected]
734 794-6721
Agenda
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History of public housing
AAHC role and mission
Successes
Challenges
Federal congressional funding decline impact
HUD funding solution
What is Affordable Housing?
• Rental or Owner
• Pay no more than 30% of income on housing
(includes utilities, taxes)
– Otherwise Cost-burdened
• Most HUD programs cap at 80% of Area
Median Income (AMI) or less
– Targets for 50% AMI and 30% AMI or less
• 30% AMI 1 person household = $17,500
• 50% AMI 3 person household = $37,400
History of Housing Authorities
• 1933 Michigan adopted PA 18
– Municipalities can create housing authorities
– To create safe & sanitary affordable housing
– Finance affordable housing by selling bonds
• 1937 Congress Created the National Housing Act
– Allowed for creation of housing authorities to
undertake federal housing programs and apply for
federal funds
– Targeted to out of work middle class during the
Depression
City of Ann Arbor Ordinance
• 1965 City of Ann Arbor created the AAHC
– Make use of all forms of financing or sponsorship to
provide flexible approach to solving problems
– Make programs pay for themselves as much as
practically possible
– Enter into any cooperative agreements with any
organization that promotes purpose of AAHC
– All deeds, mortgages, contracts etc. regarding real
property will be made in name of City of Ann Arbor
– City may by resolution convey any property owned by
the City and controlled by the AAHC to the AAHC
Partnership with City of Ann Arbor
• Mayor and Council appoint AAHC board
• All Housing Commission staff are City employees
• City owns all Housing Commission properties “by
and through” the Housing Commission
– Housing Commission provided funding for property
acquisition and development through HUD
– HUD Regulatory Control
• Annual Contributions Contract – terms and conditions
• Declaration of Trust – long term affordability
• Cooperation Agreement with local governing body
– To provide municipal services and tax-exemption
Ann Arbor Housing Authority
• Manage 360 units of Public Housing at 18 sites
– In Ann Arbor
• Administer 1483 Vouchers
– Includes 155 veteran’s vouchers
– Washtenaw County, Western Wayne County and Monroe
County
• Administer 202 Project Based Vouchers for Cranbrook
Towers
– AAHC floated the bonds to build Cranbrook in 1979
– Private ownership (not AAHC)
• Administer Shelter Plus Care and Supportive Housing
Program funds for local nonprofits
Baker Commons
64 units built in 1980
Packard/Main
Primarily single elderly and disabled households
Hillside Manor
Two 3-bedroom duplexes
Family Housing built in 1998
Pennsylvania Ave – behind Arbor Farms
Demographics
Public Housing
Vouchers
Minorities
63%
73%
Female Head
59%
77%
Disabled
46%
44%
Income less than $20,000
90%
91%
Age 60+
18%
15%
Housing Commission Successes
• Unit Turns Maintenance/New Occupant
– Previously 190+ days average to turn & occupy
– Currently 21 day average to turn
– Currently 45 days average to turn & occupy
• Occupancy
– Currently 99% (1-5 vacant units)
– Previously 95% (12 – 20 vacant)
• Vouchers
– 1 year ago 1298 under contract
– Goal was 1378 by December 2012
– Currently 1420 under contract in Jan 2013
Positive Impact
• No Longer in Troubled Status
– REAC Physical Inspection Score
• Increased score from a 78 to a 81 on the East side
• Increased score from a 64 to a 86 on the West side
• Increased Operating Revenue
– Able to bill HUD for more units
– Getting paid less per unit by HUD due to
congressional budget cuts
• Eligible for new HUD grants & Rental
Assistance Demonstration (RAD) project
Old Carpet Baker Commons
New Marmoleum Flooring Baker and Miller
Baker Commons
Asphalt Roof damage
Baker Commons
New Steel Roof installed in 2013
Funding provided by the Downtown Development Authority
Initial bid $246,000. Extensive rafter damage increased cost to $305,000
Federal Funding
• Historical decline in federal support for
affordable housing
• 1976 HUD’s budget was $86.8 billion
• 2012 HUD’s budget was $41.7 billion
• HUD losing 10,000-15,000 hard units/year due
to disrepair requiring demolition
Capital Needs Nationally
•Capital repair needs in excess of $25.6B across
HUD public housing portfolio, or $23,365/unit
•Capital Accrual Needs of $82,125/unit 20 years
– AAHC Capital Needs Assessment indicated
$40,337/unit average capital needs next 15 years
– At current HUD rates AAHC will get $18,000/unit
• 2012 HUD capital grant = $440,778 or $1,224/unit
– $22,000/unit shortfall in capital repair funding
Decreased Funding Public Housing
• 2012 HUD reimbursed the AAHC at 95% of the
operating fees owed
– $62,700 less than owed
• HUD is reimbursing the AAHC at 92% in 2013
– Estimated at $105,000 less than owed
• 2011 Capital Funding from HUD $557,000
• 2012 Capital Funding $440,478
• 2013 Capital Funding TBD
North Maple Estates – view from highest point on site
Twenty scattered 4 and 5 bedroom units
Poor site design – units built on lowest part of property – drainage issues
Construction problems – plumbing leaks, windows
Water Damaged Window Frame
Water damage from upstairs bathroom floor drain
Window leaking causing water damage
HUD Funding by Program
$20,000,000,000
$18,000,000,000
$16,000,000,000
Housing Choice Vouchers
$14,000,000,000
$12,000,000,000
Project Based Rental
Assistance
$10,000,000,000
Public Housing Operating
Subsidy
$8,000,000,000
$6,000,000,000
Public Housing Capital
Funding
$4,000,000,000
$2,000,000,000
$0
2010
2011
2012
Comparison of Ann Arbor Public Housing
and Vouchers – Average Rent 2012
Average
Payment
Vouchers to private
landlords
Public Housing
Tenant
$240
$183
Rent Subsidy
$567
$231
Capital funds
$0
$102
$807
$516
Total
2 Problems
• Annual Operating Subsidy
– Maintenance
– Staffing
• Capital Investment
– Replacing major systems like roof, furnaces etc.
3 Options
• No Change
– Negative impact on units and tenants due to lack of
funding
• City of Ann Arbor provide annual gap funding
– Cover the gap between HUD funding and need
– Approximately $500,000/year
• Convert Public Housing to Project-Based
Vouchers with private funding reinvestment
– Immediate rehabilitation all properties
– Long-term operating subsidy from different HUD
program that is better funded by Congress
Rental Assistance Demonstration
(RAD)
HUD’s goal is to convert 60,000 public housing
units to Project Based Vouchers
• NEW rent subsidy with vouchers (Operations)
– project based vouchers (PBV)
– OR project based rental assistance vouchers (PBRA)
• NEW access to capital funding
– Reinvest in physical structures
– Leverage private capital to preserve assets
How RAD rent/operating subsidy will be determined
At conversion,
PHAs will
convert
funding to a
Section 8 rent
subsidy (HAP)
Public Housing
29
Voucher
AAHC RAD Rents
• First year limited to current PHA funding
• Annually re-evaluated by HUD and increased
(based on operating adjustment factor)
– Will never be less than first year
Bedrooms
EAST
WEST
1
$466
$470
2
$567
$572
3
$713
$719
4
$734
$741
5
$844
$852
How will Rehabilitation be financed?
• Equity from Low Income Housing Tax Credits
• Grants
• Debt
Low Income Housing Tax Credits
(LIHTC)
• Created in 1986 IRS Code Section 42
– Incentivize private sector to invest in affordable
housing
– Single largest funding source for affordable
housing development
• Tax Credits allocated to States
– Developers compete for tax credits
• Developer sells tax credits to private sector
– Creates Cash (Equity) for affordable property
– 10 years of tax credits to Equity Investor
Legal Structure
• IRS requires Equity Investor to be part of the ownership
structure
– known as equity partner
• Create a limited partnership with developer/owner
– known as general partner
• Must be single purpose entity
– Purpose is to utilize tax credits to invest in a specific
property (or group of properties)
– No cross collateralization & liability with other
properties/businesses
• 15 year tax credit compliance period & 30 year
affordability period
• Under RAD, HUD requires permanent affordability
Development Team
• Dykema Gossett
– Legal Counsel
• Recap Real Estate Advisors
– RAD Consultant
• Avalon Housing
– Supportive Housing Consultant
• Norstar Development
– Co-developer and Co-general partner
• O’Brian Construction
– General Contractor
• Mitchell and Mouat
– Architect
How does current structure work?
City of Ann Arbor
d
e
e
d
AAHC
HUD
funding
Public Housing
P
r
o
p
e
r
t
y
m
a
n
a
g
e
r
How will new structure work?
City of Ann Arbor
AAHC
Co-General
Partner/
Co-Developer
HUD
regs
Affordable
Housing
Nonprofit
General Partner
Equity
partner
(passive
partner)
Limited Dividend Housing
Authority, LP
15 year limited partnership
then AAHC sole owner
Rehabilitation
• Physical Condition Assessment must be completed
– 20 year schedule
– all replacement costs in replacement reserve
• Rehab budget determined by architect/engineer and
actual bid
– Minimum 10% rehab contingency
• Market competitive upgrades (a/c) must be included
• Must use energy efficient products as finances allow
• Must use general contractor
Initial Budget
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LIHTC
FHA Loan
City of Ann Arbor
(AAHTF & CDBG)
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DDA
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Seller’s Note
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TOTAL
$10,600,000
$6,650,000
$500,000
$300,000
$3,500,000
$21,550,000
Impact on AAHC & Residents
• Reinvestment in properties
– Increased energy efficiency
– Remedy structural problems
• More stable source of rent (operating) subsidy
• AAHC staff continue to manage properties
• New regulations to be learned by staff
– Voucher regulations less cumbersome than public
housing regulations
• Tenant protections & choice mobility
Impact on AAHC Finances
• Diversifies Portfolio
– Not single source of funding
• Developer Fee
– To pay AAHC staff, consultants and co-developer for
redevelopment work
• Seller’s Note
– AAHC holds Note on property from sale to LDHA, LLC
– Paid partially upon sale, rest paid through cash-flow
• Use to pay for support services to tenants
• Operating reserves
• Rehabilitation of properties that will not be LIHTC
Risks
• Unable to secure capital funds to make project work
– Continues as public housing
• Co-developer and AAHC disagree on …
– AAHC has final say on all issues
• Equity Investor wants to remove AAHC from partnership
– AAHC cannot be removed unless fail to perform per contract
– Same as current situation with HUD. HUD can remove if fail to
perform
• Co-developer or Equity Investor want to convert to market
rate units
– Cannot be done. HUD has affordable housing use agreement
that precedes all other agreements and financing
Next Steps
• Feasibility Analysis every property
– Rehab or demo & new construction
• Resident Input
• Apply for financing
• Council approval of PILOT & Transfer of
properties to AAHC