Financing Affordable Rental Housing

126 Pages·2017·2.17 MB·English

Financing Affordable
Rental Housing:
Defining Success
Five Case Studies
Bessy M. Kong and Derek Hsiang
Financing Affordable
Rental Housing:
Defining Success
Five Case Studies
B:es sDy Me. Kofing nandi Dneregk H sSianguccess
Five Case Studies
ACKNOWLEDGEMENTS
This report was produced with the support and collaboration of
the Korea Housing and Urban Guarantee Corporation (HUG) as a
part of a joint research initiative with the Urban Sustainability Lab-
oratory of the Wilson Center to examine public finance programs
to increase the supply of affordable rental housing in the United
States and Korea.
The authors would like to thank HUG leadership and research
partners, including Sung Woo Kim, author of the Korean report,
and Dongsik Cho, for his support of the HUG-Wilson Center part-
nership. We would also like to thank Michael Liu, Director of the
Miami-Dade County Department of Public Housing and Commu-
nity Development, for sharing his knowledge and expertise to in-
form this research and for presenting the work in a research sem-
inar and exchange in Seoul in November 2016. We are grateful to
Alven Lam, Director of International Markets, Office of Capital
Market at GinnieMae, for providing critical guidance for this joint
research initiative and for his contribution to the Seoul seminar.
Thanks to those who provided information for the case studies:
Jorge Cibran and José A. Rodriguez (Collins Park); Andrew Gross
and Michael Miller (Skyline Village); and, Robert Bernardin and
Marianne McDermott (Pond View Village). A special acknowl-
edgement to Allison Garland who read all the drafts; to Marina
Kurokawa who helped with the initial research; and to Wallah
Elshekh and Carly Giddings who assisted in proof reading and
the formatting of the bibliography, footnotes and appendices.
Table of Contents
I. Introduction…………………………..….....………….....................……..........….1
II. Public Housing Authorities…….....................................................................….5

Alexandria Redevelopment and Housing Authority
Chatham Square and the Use of HOPE VI / 5

Miami-Dade Public Housing and Community Development
and the Related Urban Development Group
Collins Park: Private-Public Cooperation / 25
III. Non-Profit Housing Developers……......………....…...........……..........……….43

Los Angeles, Thomas Safran and Associates / 43
Skyline Village: Using Low Income Housing Tax Credits and Tax Exempt Bonds

Gloucester, Massachusetts / 61
Pond View Village: Mixed-Income Development on an Historic Site
Failure and Success in the Same Project
IV. Private For-Profit Developers……….........…….........……..........................……79

New York City: The Effectiveness of 421-a in Midtown West, Manhattan / 79

Introduction
Financing Affordable Rental
Housing in the United States:
Defining Success
Five Case Studies
T
he challenges facing the of housing providers: public hous-
development of affordable ing authorities, non-profit housing
housing across the United States developers, and private for-profit
are growing as rent burdens in- developers. For each case we an-
crease, as existing affordable alyze the circumstances that led
housing ages and is in need of to the development of the partic-
repair, and as neighborhoods ular project and the financial pic-
gentrify and citizens compete for ture that made the project work.
prime real estate. The five case
Details of the projects vary great-
studies that follow examine a
ly, whether it is a project for the
particular aspect of the develop-
elderly in Los Angeles, California
ment process and showcase the
or a mixed income development
different ways affordable housing
in Alexandria, Virginia. Howev-
eventually gets built. In particular,
er, though the reasons for the
we will take a look at the financial
development differ, the actual
incentives used and how differ-
financing structure for construc-
ent players are positioned to take
tion and completion of the proj-
advantage of the tools that are
ect is limited to a narrow range
available.
of financial options. Therefore,
The following case studies exam- we see the federal low income
ine affordable rental housing proj- housing tax credit being used
ects used by three different types time and again in projects across
1
the United States, as detailed in the loans from the city and coun-
the cases studies from Califor- ty. Similarly, Chatham Square in
nia, Massachusetts, Florida, and Alexandria, Virginia relied on the
Virginia that are presented in this mutually beneficial arrangement
report. When local governments between a private developer and
get involved in building afford- the city that held title to the prop-
able housing, they can also use erty being developed.
the power of the local tax code to
In all our case studies, we see
incentivize the development that
that the success of the project
is most suited to their communi-
depends on the developer being
ties. Therefore, in New York, a tax
able to piece together various
abatement program spurs target-
parts of the financial arrange-
ed affordable housing develop-
ment. This involves using the
ment in communities in need of
ubiquitous low income housing
investment.
tax credits for affordable housing,
In addition, the primary actors in but it also involves using federal
affordable housing--government and local grants, loans from mul-
agencies, non-profit housing or- tiple sources, bond financing and
ganizations and private develop- deferred fees. The exact com-
ers--often work closely together bination will depend on funding
on a single project. In fact, with- that is available locally as well as
out a certain amount of public/pri- at the federal level but it is almost
vate cooperation, many projects always true that not just one
would be infeasible. There can source will provide all the funding
be overt partnerships to develop necessary.
a project such as the one at Col-
Finally, the case studies have cer-
lins Park in Miami-Dade, Florida.
tain “soft” qualities in common.
More often than not, however,
These are not generally evident
partnerships provide the neces-
when a project is first being de-
sary financial contribution at a
veloped and financed but it be-
crucial time in the life of a proj-
comes more apparent as the
ect. Thomas Safran would prob-
project proceeds and begins to
ably not have developed Skyline
take shape. These commonalities
Village in Los Angeles without
2
include the importance of design tory of successful housing devel-
in any project. Each of the de- opment. When private, for-profit
velopers highlighted in the case developers are enticed to enter
studies emphasizes the impor- the affordable housing realm, it is
tance of good design to enhance usually to ensure that the more
the lives of their tenants wheth- profitable market rate apartments
er it is the addition of thoughtful are built. Sometimes we see un-
open space or the inclusion of intended consequences such as
common amenities. Good design the use of a “poor door” (Navar-
helps generate interest in the ro 2014) which separates afford-
project and ensures tenant inter- able tenants from market-rate
est in living in and caring for the tenants, and the use of early tax
property. abatements for market rate hous-
ing, illustrated in this report by
Given the intersection of pub-
the New York City cases.
lic and private interest, it is also
important that the developers of The case studies that follow are
affordable housing are trusted not intended to provide a defin-
partners in the process. Usual- itive answer to the question of
ly the developers are known to how we can foster the produc-
the city or county in which they tion of more affordable housing.
work and often they have a track Instead, they can only show how
record of similar housing proj- some projects succeeded and
ects in the area. While there are what was important in making
large for-profit firms that have af- that success possible. If they of-
fordable housing divisions, such fer an overarching argument, it is
as Related Urban Development this: 1) there must be a firm com-
Group in Florida, many players mitment to creating affordable
in this arena are non-profits or housing that benefits low-income
were first established as faith- households by the government;
based organizations such as Ca- and, 2) government cannot do it
leb Foundation in Massachusetts. alone and needs the assistance
In either case, effective devel- of players in the private and
opers tend to have a good local non-profit sectors in order to suc-
knowledge base and a solid his- ceed.
3

Alexandria
Redevelopment and
Housing Authority
Chatham Square and the Use of
HOPE VI
INTRODUCTION THE COMMUNITY
In this case study, we examine The City of Alexandria lies within
the use of a federal grant pro- sight of the U.S. Capitol Building
gram and how it can be used in in downtown Washington. Its
conjunction with other financing proximity to the larger city has al-
to redevelop and construct both ways made it attractive for people
affordable and market rate hous- who work in Washington and its
ing. Here the Public Housing history as a bedroom community
Authority (PHA) and developer dates to the advent of commuter
unite to create both affordable rail lines in the region. However,
and market rate housing to real- the historical roots of Alexandria
ize profit for the developer and to predate those of Washington,
provide revenue for the housing having been established in 1749
authority. The Chatham Square as a “tobacco trading post and
case study also shows us how site of the largest slave-trading
affordable housing can be built firm in the country” (City of Al-
when market conditions are ex- exandria 2016). But it was also
actly right and the location of the home to a large free African
public housing asset is desirable. American population who contin-
ued to settle in the city after the
Civil War. From its beginnings as a
thriving town of about 2,700 peo-
5