State and Local Tools to Preserve and Improve Affordable Rental Housing

1. State and Local Tools to Preserve and Improve Affordable Rental Housing

Presentation by Michael Bodaken, President NHT 2007 Enterprise Community Conference November 14, 2007

2. Background: National Housing Trust

Committed to safeguarding affordable housing; Only national nonprofit engaged in housing preservation through real estate development, lending and public policy initiatives; Four principal activities: Public Policy: Advocate for government policies that save affordable homes and apartments; Technical Assistance: Helped others preserve more than 13,000 apartments in more than 35 states and provided preservation training to nonprofits; Lending: Provide predevelopment and bridge financing to nonprofit purchasers of affordable housing. Loans helped save more than 4,400 apartments; and Real Estate Development: Partner with other nonprofits to purchase and revitalize affordable housing. Preserved 3,000 affordable homes.

3. National Issue: Local Challenge

While preservation is a national challenge, the wide variety of local conditions requires a local, special response. Intervention requires a local understanding of the market, the population being served, and often, the support for preservation at the local and state level. Many states have resources dedicated to development and/or preservation of affordable housing. Many cities/counties also have resources dedicated to development and/or preservation of affordable housing. Resources come in the form of soft loans, grants, allocation of tax credits, or tax relief (e.g., real estate tax abatement).

4. Why Preserve?

The supply of our most affordable apartment homes is decreasing: The number of apartments that rent for $400 or less declined by 1.2 million between 1993-2003 New construction will not produce enough affordable housing: The housing we produce averages $900/One bedroom. The housing we need, affordable to those who earn less than $17,500 costs about $450/One bedroom. It’s cheap: preserving an existing apartment costs 50=60% of new It’s ‘inherently green” (NRDC). It’s fast: takes about half the time of new construction. Conserves billions already invested in the rental housing supply. Improves communities and the lives of individuals already living there.  

5. States are Increasing Resources for Preservation

9% low income housing tax credits Private activity bonds and 4% credits State housing trust funds Predevelopment and bridge loans Other tax incentives For details on State and Local Preservation Initiatives, see www.nhtinc.org

6. 9% Competitive Tax Credits for Preservation

Preservation Set Aside Equal or Greater than 20% Preservation Set Aside Less than 20% Points for Preservation Non-numerical Preservation Priority Established

7. State LIHTC Preservation Set Asides

Five years ago, 6 states set aside 9% credits for preservation. Today, 46 states prioritize preservation through points or a specific preservation set-aside in their competitive tax credit program. 22 states set aside at least 10% of their 9% tax credits for rehabilitation/preservation: SD – 60% set aside MA, MI, WI – 30%-40% set aside DE, NC, OH, OR, SC – 25% set aside IN, IA, MT– 20% set aside FL, KS, PA, TX, VA, WV– 11%-19% set aside IL, NY, ND, TN– 10% set aside

9. Preservation is Cost Effective

Rehabilitation properties received less than $40,000 in tax credit equity for each rehabilitated apartment In contrast, each newly constructed apartment received almost $65,000 in tax credit equity

10. Private Activity Bonds and 4% Credits

Almost every state has a surplus of 4 percent tax credits and private activity bonds at its disposal. Almost every state uses bonds for preservation. At least two states have gone further: Maryland has preserved significant amounts of older assisted properties with private activity bonds (almost 4,000 apartments in just the last 4 years). In New York, the Governor created the “HOPES program” devoting $140 million set aside of private activity bonds and 4 percent credits for preservation.

11. State Trust Funds are Preserving Affordable Housing

30 state housing trust funds support affordable housing preservation. Some states award preference for preservation, including FL, IN, NJ, UT, VT, WA and the District of Columbia. New Jersey sets aside a portion of its trust fund money for affordable housing preservation activities. Housing trust funds provide a continuous stream of funding not dependent on annual appropriations and often represent the most flexible funds jurisdictions have available for affordable housing. “Housing trust funds now have a proven record as an invaluable resource for affordable housing preservation” Mary Brooks, Director, Housing Trust Fund Project, Center for Community Change

12. Fairfax County, Virginia has “Penny for Affordable Housing Fund” with dedicated revenue from real estate tax. Raised almost $40 million to preserve more than 1,400 affordable apartments in its first 2 years. Virginia and Washington State have developed nonprofit CDFIs (approved by U.S. Treasury) that fund predevelopment or provide bridge financing for preservation transactions. Minnesota and Montgomery County, MD use state/local tax revenue for preservation. “Acquisition Funds” ($20 million in Washington DC; $220 Million in New York City).Fairfax County, Virginia has “Penny for Affordable Housing Fund” with dedicated revenue from real estate tax. Raised almost $40 million to preserve more than 1,400 affordable apartments in its first 2 years. Virginia and Washington State have developed nonprofit CDFIs (approved by U.S. Treasury) that fund predevelopment or provide bridge financing for preservation transactions. Minnesota and Montgomery County, MD use state/local tax revenue for preservation. “Acquisition Funds” ($20 million in Washington DC; $220 Million in New York City).

13. State and local resources for green development include green tax credits, rebate programs, sales and property tax exemptions, loans and grants. More than 40 states encourage sustainable building practices in their tax credit allocations, for example: Maine requires all tax credit developments to meet green threshold criteria. California pioneered the use of incentives for sustainable construction methods in their tax credit program. North Dakota is embracing the Enterprise Green Communities standards when allocating tax credits.

For additional information on programs and resources relevant to preservation developers, see www.nhtinc.org/pub_pol_green.asp. “Preservation of housing is inherently energy and resource efficient.” Eric A. Goldstein, Urban Program Co-DirectorNatural Resources Defense Council Preservation is energy efficient. It produces less waste and uses less new materials and energy than new construction. There are many ways to integrate green technology and methods into the rehabilitation process to improve energy efficiency and conserve water through the use of green design and materials. These improvements produce utility savings for owners and residents, lower maintenance costs, and provide a better living environment.Preservation is energy efficient. It produces less waste and uses less new materials and energy than new construction. There are many ways to integrate green technology and methods into the rehabilitation process to improve energy efficiency and conserve water through the use of green design and materials. These improvements produce utility savings for owners and residents, lower maintenance costs, and provide a better living environment.

14. NHT/Enterprise Preservation Corporation

NHT and the Enterprise Foundation launched venture almost six years ago. Organization to buy and hold where no local nonprofit interest lies in preserving. Has preserved more than 4,500 units in Mid-Atlantic, Midwest, South, and Southeast. Staffed by seven underwriters and asset managers employed by NHT. Often partners with nonprofit and for-profits. "Preserving Affordable Housing, Creating Community Assets"

15. Friendship Court

1st of 2 properties I’m going to talk about….. Existing affordable multifamily property housing 150 families in Charlottesville, VA – rapidly gentrifying area 2 blocks from a fairly high-end historic walking mall and vulnerable to condo conversion and market rate housing. Property in need of substantial rehabilitation. Was and remains 100% Section 8 – [more than 95% of families earn less than $30,000/year; 66% earn less than $10,000/year – mostly female headed hhs] NHT/Enterprise and our partner, Piedmont Housing Alliance (local nonprofit developer), acquired in 2002 and renovated over next 18 months to completed the renovation in Spring 2004. Property within walking distance of a variety of jobs and services and served by public transportation At the urging of our architect, Bill Edgerton (LEED Accredited architect specializing in green building) in Charlottesville, we included many green elements. Property renovation integrated energy and water efficiency improvements which reduced operating costs of the property and utility costs for residents Landscape architect (Nelson Bird Landscape Architects – Warren Bird) worked with our architect of record to significantly increase the green space and reduced amount of pavement leading to a new central mini-park and more green space (removed large sections of the parking lot and converted to green space) Residents, particularly the kids, helped with the planting. 1st of 2 properties I’m going to talk about….. Existing affordable multifamily property housing 150 families in Charlottesville, VA – rapidly gentrifying area 2 blocks from a fairly high-end historic walking mall and vulnerable to condo conversion and market rate housing. Property in need of substantial rehabilitation. Was and remains 100% Section 8 – [more than 95% of families earn less than $30,000/year; 66% earn less than $10,000/year – mostly female headed hhs] NHT/Enterprise and our partner, Piedmont Housing Alliance (local nonprofit developer), acquired in 2002 and renovated over next 18 months to completed the renovation in Spring 2004. Property within walking distance of a variety of jobs and services and served by public transportation At the urging of our architect, Bill Edgerton (LEED Accredited architect specializing in green building) in Charlottesville, we included many green elements. Property renovation integrated energy and water efficiency improvements which reduced operating costs of the property and utility costs for residents Landscape architect (Nelson Bird Landscape Architects – Warren Bird) worked with our architect of record to significantly increase the green space and reduced amount of pavement leading to a new central mini-park and more green space (removed large sections of the parking lot and converted to green space) Residents, particularly the kids, helped with the planting.

16. Friendship Court

Project Details: Charlottesville, VA Family property 150 units 2-4 bedrooms 100% Section 8 $20,000/unit in rehab NHT/Enterprise,& Piedmont Housing Alliance Architect: Bill Edgerton

17. Green Rehab at Friendship Court

Improved insulation: windows, exterior doors & roof Fluorescent exterior light fixtures New roofs with lighter colored shingles Higher efficiency heating & cooling equipment Water-conserving kitchen and bathroom fixtures and low-flow toilets Longer-lasting fiber cement siding Energy efficient, water-saving front loading washers and dryers No VOC interior paint and low VOC exterior paint Mature trees kept and additional trees and shrubs added Improved erosion control and drainage Created an energy efficient building envelop by properly sealing windows, exterior doors and roofing. Proper insulation was one of the easiest ways we found to increase efficiency and save money. Purchased energy star appliances, front loaded washers and dryers, Energy efficient heating and cooling equipment, ductwork/air hander, etc. In addition to the property improvements, a new resident handbook as well as a class each new resident is required to attend provides all residents with details about how to use and maintain appliances and provides energy and water conservation tips to keep costs down. Residents have reported that these improvements have resulted in reduced utility and maintenance costs and created an improved and safer living environment and cost savings for property residents. We have found that, even in the apartments where we added washers & dryers, surprisingly, there was no increase in water consumption. We attribute this to the more efficient HVAC and water heaters that were installed. We have also found residents are reporting a decrease in their utility bills by at least 20%. So much so that VHDA actually decreased the utility allowance for some of the units. Our property manager told me that she has been doing this for 18 years and she has never seen a decrease in utility allowance.Created an energy efficient building envelop by properly sealing windows, exterior doors and roofing. Proper insulation was one of the easiest ways we found to increase efficiency and save money. Purchased energy star appliances, front loaded washers and dryers, Energy efficient heating and cooling equipment, ductwork/air hander, etc. In addition to the property improvements, a new resident handbook as well as a class each new resident is required to attend provides all residents with details about how to use and maintain appliances and provides energy and water conservation tips to keep costs down. Residents have reported that these improvements have resulted in reduced utility and maintenance costs and created an improved and safer living environment and cost savings for property residents. We have found that, even in the apartments where we added washers & dryers, surprisingly, there was no increase in water consumption. We attribute this to the more efficient HVAC and water heaters that were installed. We have also found residents are reporting a decrease in their utility bills by at least 20%. So much so that VHDA actually decreased the utility allowance for some of the units. Our property manager told me that she has been doing this for 18 years and she has never seen a decrease in utility allowance.

18. Galen Terrace

Project Details: Washington, DC Family property 84 units, 3 buildings 1-4 bedrooms 100% Section 8 $60,000/unit in rehab NHT/Enterprise, Somerset & Resident Association Architect: EDG Architects – EDG- Environmental Design Group local green architects - principal is LEED certified architect Leadership of NHT President and staff commitment Applied and met Enterprise’s Green Communities criteria Now in DC: bonus points for green for any city funding Green building legislation working way thru process – Enterprise Green Communities criteria in building code – EDG- Environmental Design Group local green architects - principal is LEED certified architect Leadership of NHT President and staff commitment Applied and met Enterprise’s Green Communities criteria Now in DC: bonus points for green for any city funding Green building legislation working way thru process – Enterprise Green Communities criteria in building code

19. Green Rehab at Galen Terrace

Additional before and after photos You can see the dramatic improvementAdditional before and after photos You can see the dramatic improvement

20. The Greening of Galen Terrace

Renovation includes full unit renovations, all new systems, windows, doors (keeping walls & ceilings) Energy auditor completed a blower door test and infrared scans of building Creating a more walkable community Downspouts will feed into rain barrels Low-flow fixtures- shower, toilet, faucets Native Plants Energy Star refrigerators Individual meters in all units

21. The Greening of Galen Terrace (cont.)

Common area laundry rooms (6) with new ductwork & venting Solar reflective roof material Low VOC paints, primers, sealants, adhesives, caulk Composite wood free of added urea formaldehyde or sealed with low VOC sealant or laminate Green label certified carpets Insulate cold water pipes Green Home Guide is being developed and will be distributed to residents Management provides an orientation to each new renter

22. Michael Bodaken

E-mail: mbodaken@nhtinc.org Address: 1101 30th St, NW, Suite 400 Washington, DC 20007 Phone: (202) 333-8931 Web: www.nhtinc.org National Housing Trust For more information: