Special Needs Housing COSCDA Annual Conference Des Moines Iowa

1. Special Needs HousingCOSCDA Annual ConferenceDes Moines Iowa Housing for Individuals with Disabilities and Special Needs (IDSN) Maryland Department of Housing and Community Development

2. The Problem • From 2010 - 2015, Maryland faces an overall shortage of 130,315 affordable rental housing units • 28,993 units for persons with disabilities • DHCD finances ~ 2,600 rental units annually serving households at 30 – 60% AMI • Lowest rents range from $365 in rural areas to $543 in DC. Areas; Baltimore area is $432 (1 person) • Annual SSI income is $8,088 per year (14% AMI for 1 person) • 30% shelter cost = $202/month • SSI HOUSEHOLDS CANNOT AFFORD RENTS IN PROPERTIES FINANCED WITH EXISTING RENTAL FINANCING PROGRAMS

3. Development Facts • Housing costs the same to build regardless of who lives in the units. • Rent must cover the cost of building and operating the building – • The money borrowed to build the building (debt service) • Ongoing costs for maintenance, insurance, staff, water, utilities, etc. • Private Lender – Market rate terms • LIHTC and other State and Federal financing programs • Provide below market interest rates and terms • Required to restrict rents and only rent to income qualified households • Significant paperwork and compliance requirements • Competitive – Demand Exceeds Available Resources

4. How Do We Provide Financing? DHCD Competitive Funding Rounds Non Competitive 1st Come, 1st Serve State Loans RHF, HOME Tax Exempt Bonds State Loans PRHP, MHRP LIHTC

5. Major Tools for IDSN Housing Qualified Allocation Plan (QAP) Incentives • Bonus Points if 10% of Units targeted and marketed for disability households at 50% AMI. Marketing must occur on turnover for 60 days until 10% is met. Requirement memorialized in loan documents • FY 2010: 266 units • Over 1,500 units since QAP changed in 2007. • Bonus Points for 10% of Units at 30% AMI Partnership Rental Housing Program • Opened program to for-profit and non-profit developers who agree to restrict occupancy to persons with disabilities • Seven Projects Closed with 386 units, including 52 Disabled Units and 34 IDSN Units • Units must be held open for IDSN population

6. IDSN Housing • The purpose of the Partnership Rental Housing Program (PRHP) is to expand the supply of affordable housing • Up until 2006, the program was restricted to local governments. Local governments provided the land for the project, while the State provided the financing. • The PRHP Statute was amended in 2006 to permit non-governmental entities to create housing for households including one or more individuals with disabilities or special needs (“IDSN” units)

7. IDSN Housing • Shiloh House (previous page and this page) in Dorchester County, Maryland was funded under the new PRHP rules in September, 2007. It contains 30 total units, including 3 disabled units and 2 IDSN units • The total project cost was $5,144,946, including 150,000 in Partnership funds, $1.5 million in State funds, and about $3.4 million in equity raise up from the federal Low-Income Housing Tax Credit Program.

8. IDSN Housing • The Greens at Rolling Road project in Baltimore County is another example of a Partnership Rental Housing Program that was undertaken under the new statutory changes to the program. • The project closed in June, 2008 and includes 83 units of affordable housing, including 9 disabled units and 4 IDSN units • The project was financed with $300,000 in Partnership Funds, $2 million in State funds,, and about $7.6 million in equity raise up from an allocation of federal Low-Income Housing Tax Credits (LIHTC)

9. IDSN Housing • Ednor Gardens, Phase II in Baltimore City is another successful example of a Partnership Rental Housing Project undertaken under the program’s new rules. • The project closed in September 2007, and contains 85 units, including 10 disabled units and 5 IDSN units. • It was financed with $375,000 in Partnership funds, $1.5 million in State funds,, $1.6 million in developer equity, a $1.2 million convention loan, and about $7.4 in LIHTC equity.

10. IDSN Housing • Gateway Townhomes in Allegany County, Maryland is another example of a project undertaken under the new Partnership rules. • The project was closed in November of 2008, and contains 30 units, including 4 disabled units and 3 IDSN units • It was financed using $225,000 in Partnership Funds, $764,820 in State Funds, and about $6.6 million in LIHTC.

11. Next Steps • How Do Identify Other Resources to help meet the need for affordable housing for Households with SSI/SSDI ? • Especially Those without rental assistance? • A new initiative that began May, 2011

12. DHCD and the Weinberg Foundation • DHCD and The Harry and Jeanette Weinberg Foundation bring together complementary skills and resources to ensure affordable long-term independent housing for non-elderly Persons with Disabilities. • The Weinberg Foundation has a history of supporting independence for persons with disabilities

13. DHCD and the Weinberg Foundation • DHCD has a history of providing capital funding for projects funded with federal Low Income Housing Tax Credits and Rental Housing Funds to Weinberg projects • Weinberg Manor East and West • Weinberg Village I-V • Dayspring

14. DHCD Grant with the Weinberg Foundation • Weinberg Foundation made a $1 million grant to DHCD to finance units serving non-elderly disabled households earning between 15% -30% of median income • DHCD • Makes Reservation of its Resources in accordance with existing processes • After Reservation, DHCD shares with Owner “Weinberg Apartment” capital funding opportunity and requirements • If Applicant is interested, DHCD forwards necessary paperwork to Weinberg Foundation • Weinberg Foundation • Completes its due diligence and notifies DHCD and applicant of decision – including amount of funding and number of units • DHCD • Maintains its existing funding levels and underwrites financing in cooperation with other lenders to ensure “Weinberg Apartments” are income, rent, and occupancy-restricted for disabled Households receiving SSI/SSDI. Weinberg funding fills “gap” created by lowering rent levels to “Weinberg Apartment” levels

15. DHCD Grant with the Weinberg Foundation (continued) • DHCD, MDOD, DHMH • Property is registered on www.MDhousingsearch.org and DHCD, MDOD, and DHMH work with management companies to ensure residents are referred and units are occupied in accordance with requirements • DHCD • Handles ongoing compliance monitoring using existing procedures, updated to reflect “Weinberg Apartment” restrictions • Regulatory agreements that run with the land for 40 years • Annual MDHCD monitoring for financial and physical health, as well as regulatory compliance with disability and income restrictions • Additional compliance monitoring in accordance with IRC federal Low Income Housing Tax Credit Program requirements • Penalties ranging from reporting to IRS to MDHCD “report cards” resulting in bans or restrictions on future business with MDHCD.

16. Sample Project • 36 units for families in a 3-story newly constructed building in “Jones” County with good access to community services, amenities and public transit. • 2 of the 36 units are one bedroom units already targeted for extremely low-income households (30% AMI) with monthly rent of $462, which includes an allowance for utilities of $93 per month. • Reducing the rent on these two units to $202 per month would reduce the project income available to service the first mortgage by $6,240 per year • Reduction in annual income translates to a reduction in the first mortgage of about $65,000 ($32,500 per unit) and a reduction in income available to cover operating expenses for the units - $65,000 is amount of Weinberg Funding

17. Other Considerations • The per unit “capital gap” to create “Weinberg” units can vary dramatically based on unit type, existing income restrictions, location, and the terms of other financing • Identification of the first Weinberg units is in process. Following underwriting and construction review, construction is likely to begin in late Spring 2012

18. Questions? • For more information on IDSN units, or on the Weinberg Foundation grant contact: Patricia Rynn Sylvester John R. Maneval Director, Deputy Director, Multifamily Housing Multifamily Housingsylvester@mdhousing.orgmaneval@mdhousing.org 410-514-7481 410-514-7451

19. The Complexity of Supportive Housing Carla B. Pope Director, Affordable Rental Production

20. Benefits of the LIHTC • Combines both private sector and public funding partnerships • Provides a significant amount of equity in the project (approximately 65% of total project costs) • Is the primary federal housing programs created • Can be used with other Federal and private funding sources

21. LIHTC Process

22. Compliance Process

23. General LIHTC Requirements • Available for use by the General Public • Must follow Fair Housing Laws • Must follow Landlord-Tenant Laws • Good cause evictions

24. General Public Use • Does not fail to meet general public use solely because of occupancy restrictions or preferences that favor: • Tenants with special needs • Who are members of a specified group under a Federal program or state program or policy that supports housing for such a specified group

25. Marketing of Units to General Public • Owners must make reasonable attempts to make vacant low-income units available to the public for rent • Should advertise the availability of vacant units using advertising methods designed to be accessible to all prospective tenants

26. Fair Housing Act • Unlawful to discriminate in any aspect relating to the sale or rental of dwellings, or in the provision of services and facilities in connection with because of race, color, religion, sex, disability, familial status, or national origin (may be other state or local protected classes, such as marital status) • May affirmatively market to a protected class; must serve all within that protected class • Can maintain separate waiting lists

27. Example • Can develop an SRO that provides supportive services to treat mental health conditions • Cannot require a tenant to accept services • If services are mandatory, the maximum allowed rent must include the cost of services • Can preference residency for people with disabilities, but must allow residency to anyone with a disability (cannot restrict to those with mental illness only) • Can select from a waiting list for people with disabilities prior to serving general public

28. Layering Tax Credits with Other Programs • Need to gain compliance knowledge for all programs involved in the project. • Use most restrictive rules from each program to meet compliance of all programs involved. • Identify conflicts in program rules.

29. Non-Transient Tenancy • Tax credit program was not designed to house the homeless on a transient basis (not a homeless shelter) • All Leases must be 6 month in length, the only exceptions: • Transitional Housing for the Homeless • Exclusively to facilitate transition of homeless persons. Which a non-profit or governmental programs provides support assisting such individuals in locating and retaining permanent independent housing within 24 months. • Single Room Occupancy (SRO) • Which permit the sharing of kitchen, bathroom, and dining facilities and at least a month-to-month lease is acceptable.

30. YMCA Supportive Housing • Existing SRO no longer met fire codes and could not retain property insurance • Location was not congruent with city’s community development efforts • Transitional housing served men only; dormitory style with shared bathrooms; cafeteria provided meals onsite; tenants using alcohol or drugs were turned away on a daily basis

31. YMCA Supportive Housing • Agency concerns • Syndication of credits • Fair Housing issues • Covering ongoing operational costs

32. How YMCA Addresses Issues • Found local investors to purchase tax credits • Sought opinion from Fair Housing office • Must serve both men and women • Can be a dry campus, but must follow landlord-tenant laws • Give appropriate notice if tenant fails to follow “dry” policies (30 days notice, unless poses a risk to the safety of others)

33. How YMCA Addresses Issues • Creates a privately funded rent subsidy program so that tenants do not have to pay more than 30% income towards rent • VASH vouchers • Shelter plus care vouchers • Supportive housing program funds • Project-based Section 8 vouchers

34. YMCA Supportive Housing • 140 efficiency apartments with kitchenette and bathroom in each apartment; high speed internet access is each room • Exercise room • Laundry room • Library • Computer room • Cafeteria/Dining Room

36. Sources of Funds • Private mortgage: $1,916,801 • Section 1602 grant: $5,734,458 • Local housing trust fund: $50,000 • Enterprise Zone Tax Credits: $145,000 • Owner equity: $800,000 • Investor equity (LIHTC): $5,735,000

37. Use of funds • Total costs: $14,381,259 • Hard construction costs: $9,531,219 • Professional fees: $669,862 • Interim costs: $234,000 • Financing fees: $26,000 • Soft costs: $169,551 • Syndication costs: $75,000 • Developer’s fees: $1,845,000 • Operating reserve: $525,000

38. Debt Service • Year One: 1.636 • Year Five: 1.634 • Year Ten: 1.632 • Year 15: 1.331

39. Occupancy to Date • As of September 1, 2011, project is 84% occupied • Challenges: transitioning tenants from existing property to new one; students; meeting requirements of multiple subsidies while maintaining tax credit compliance • Keys to success: Communication & Cooperation