Affordable Housing Finance

REGIONAL REPORT

West

Full Circle

AFFORDABLE HOUSING FINANCE • November/December 2009

Skid Row project turns to exchange funds

BY DONNA KIMURA

LOS ANGELES To the homeless, New Carver Apartments says there is hope. To the neighborhood, it says affordable housing and high design are not mutually exclusive. And, to other observers, it says this is what a solution looks like.

Nestled next to the I-10 freeway in downtown Los Angeles, it is likely the most visible supportive-housing development in the region.

Thousands of motorists pass by each day. Even from the other side of the windshield, it makes a loud statement.

Designed by Michael Maltzan Architecture, the structure is a sleek, sixstory spiral set against the city’s sharp right angles. Even in Tinseltown, the design isn’t just for the sake of drama.

The curved shape came about as a way to mitigate the noise from the nearby freeway. Like a stream that flows around a stone, sound moves around the curves of the building, lessening the impact.

Other aspects of the design aim to assist, even uplift, the residents, who are coming from nearby Skid Row. Many of them will have likely been through a hospital, a jail, or some other facility.

“We wanted to create a change from the feeling of being in an institution,” says Mike Alvidrez, executive director of Skid Row Housing Trust (SRHT), the nonprofit that developed New Carver.

The building is the latest evidence that Alvidrez’s group doesn’t do vanilla projects. Like its name suggests, the organization has focused its activities in L.A.’s Skid Row neighborhood, home to the city’s largest concentration of homeless people.

Celebrating its 20th anniversary this year, SRHT has developed approximately 1,400 apartments during its history and learned that housing needs to be more than shelter. It has to have good design and good services.

Maltzan, whose work includes Pasadena’s Kidspace Children’s Museum and other prominent projects, designed several unique spaces within New Carver, including a sky deck with views of the city and a third-floor community room with a glass wall facing the freeway. These spaces aim to encourage social in teraction and a sense of community.

“When you’re homeless, you become a faceless, anonymous person,” says Alvidrez. “We wanted people to feel as opposed to not caring about them that somebody cared enough to create this place.”

Realizing the benefits

The 97 units at New Carver are furnished efficiency apartments, each having their own bathroom and kitchen. Three apartments are reserved for patients coming out of a hospital.

This move attempts to answer a critical need that was highlighted by several highly publicized cases of “patient dumping,” where hospitals dropped off homeless individuals to wander the neighborhood.

The $33 million project will feature on-site health care and supportive services, including three case managers, a part-time nurse, a part-time psychiatrist, and others, says Cristian Ahumada, SRHT’s housing development director.

New Carver comes on the heels of a recent study by the United Way of Greater Los Angeles that shows it is less expensive to place the homeless in permanent supportive housing than it is to leave them on the streets. Researchers found a nearly 43 percent savings for taxpayers when permanent housing solutions were used.

(Photo by Eric Raptosh)

In the study, four previously homeless individuals were profiled. In the two years before moving into supportive housing, all of them had used the emergency room multiple times, and two had been hospitalized. All four had been arrested at least once. The total cost of public services over two years on the streets was $187,288.

After two years in permanent supportive housing, researchers found increased stability in the lives of the four individuals. There was just one emergency room visit versus 19 trips when the four lived on the streets. None had entered the criminal justice system. The cost for the individuals living in permanent supportive housing for two years was $107,032.

Facing financing challenges

SRHT purchased the New Carver property, which is about a mile from Skid Row, and began putting the project together in 2006. Alvidrez and Ahumada were working on the deal as the financial markets started to collapse.

The project received a 2007 reservation of low-income housing tax credits (LIHTCs), with officials and a LIHTC syndicator originally expecting to get about $0.92 per dollar of credit. However, an investor could not be pinned down as equity began to dry up and prices to developers started to fall. Construction was already under way on the project.

To help projects in these kinds of situations, the 2009 American Recovery and Reinvestment Act included a tax credit exchange program that allows affordable housing developers to return unused credits for $0.85 on the dollar.

SRHT applied for the exchange and has received approval from the California Tax Credit Allocation Committee (CTCAC), making New Carver one of the early projects completed under the exchange.

However, the $0.07 difference between $0.92 and $0.85 still left a fi- nancing gap in the budget. The group was able to make up the difference by trimming the project’s sizable operating subsidy reserve, which had been an investor requirement to mitigate the risk of annual appropriations from the projectbased vouchers, according to Ahumada. Overall, the operating subsidy reserve was reduced by about 25 percent.

Four main funding sources are being used for the project: $15 million in exchange funds from CTCAC; an $18.8 million loan during construction and a $2.6 million permanent loan from Citi Community Capital; a $7.9 million Multifamily Housing Program (MHP) loan from the state Department of Housing and Community Development; and a $6.6 million loan from the Los Angeles Housing Department (LAHD). There is also an $800,500 deferred developer fee in the mix. The MHP funds were from the supportive housing pool.

Ahumada says LAHD was an important partner in the deal. New Carver is one of the first developments to receive a loan for the construction of the building from LAHD and a second for operating subsidies from the housing authority together via the first Permanent Supportive Housing Notice of Funding Availability from the city.

Now, it’s time for the doors to open. Alvidrez expected to welcome the first residents in November.

Beyond that, he hopes that the development will serve as an inspiration. “When people see that these buildings can be attractive and well-designed, it motivates people to find a solution,” he says.