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Housing Commission Updates

Housing Commission Updates . City of Ann Arbor 2013 Jennifer Hall Executive Director Ann Arbor Housing Commission jhall@a2gov.org 734 794-6721. Agenda. History of public housing AAHC role and mission Successes Challenges Federal congressional funding decline impact

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Housing Commission Updates

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  1. Housing Commission Updates City of Ann Arbor 2013 Jennifer Hall Executive Director Ann Arbor Housing Commission jhall@a2gov.org 734 794-6721

  2. Agenda • History of public housing • AAHC role and mission • Successes • Challenges • Federal congressional funding decline impact • HUD funding solution

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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 CranbrookTowers • 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

  8. Baker Commons 64 units built in 1980 Packard/Main Primarily single elderly and disabled households

  9. Hillside Manor Two 3-bedroom duplexes Family Housing built in 1998 Pennsylvania Ave – behind Arbor Farms

  10. Demographics

  11. 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

  12. 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

  13. Old Carpet Baker Commons

  14. New Marmoleum Flooring Baker and Miller

  15. Baker Commons Asphalt Roof damage

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

  21. Water Damaged Window Frame

  22. Water damage from upstairs bathroom floor drain

  23. Window leaking causing water damage

  24. HUD Funding by Program

  25. Comparison of Ann Arbor Public Housing and Vouchers – Average Rent 2012

  26. 2 Problems • Annual Operating Subsidy • Maintenance • Staffing • Capital Investment • Replacing major systems like roof, furnaces etc.

  27. 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

  28. 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

  29. How RAD rent/operating subsidy will be determined At conversion, PHAs will convert funding to a Section 8 rent subsidy (HAP) Public Housing Voucher

  30. 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

  31. How will Rehabilitation be financed? • Equity from Low Income Housing Tax Credits • Grants • Debt

  32. 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

  33. 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

  34. 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

  35. How does current structure work? City of Ann Arbor AAHC Property manager deed HUD funding Public Housing

  36. How will new structure work? City of Ann Arbor AAHC Co-General Partner/ Co-Developer Nonprofit General Partner Equity partner (passive partner) HUD regs Limited Dividend Housing Authority, LP 15 year limited partnership then AAHC sole owner Affordable Housing

  37. 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

  38. Initial Budget • LIHTC $10,600,000 • FHA Loan $6,650,000 • City of Ann Arbor $500,000 (AAHTF & CDBG) • DDA $300,000 • Seller’s Note $3,500,000 • TOTAL $21,550,000

  39. 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

  40. 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

  41. 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

  42. 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

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