Poway Villas is a model for how to preserve and rehab aging federally assisted properties. The 60-unit project was built in 1974 using a Department of Housing and Urban Development (HUD) Sec. 236 subsidized mortgage and the Sec. 8 Loan Management Set-Aside program. By the 1990s, the property was at risk to convert to market-rate apartments.

A nonprofit purchased the Poway, Calif., project using HUD’s Low Income Housing Preservation and Resident Homeownership Act (LIHPRHA) grant, which came with a use agreement that made it difficult to layer new financing.

In 2011, Community HousingWorks (CHW) acquired the property and set out to recapitalize it, knowing that the long-lasting LIHPRHA restrictions are difficult for lenders and investors.

CHW obtained approval to mark up the Sec. 8 rents to comparable market and received a 20-year renewal. The team layered tax-exempt bonds and low-income housing tax credits (LIHTCs), with Union Bank, the bond lender and LIHTC investor, accepting the ongoing LIHPRHA restrictions. To fill a gap in the $18.3 million deal, CHW arranged a portion of the acquisition cost to be financed with residual receipts.

“There is a large stock of HUD-subsidized properties of this vintage,” says Mary Jane Jagodzinski, senior project manager. “Without the capitalization of tax credits there is little way to do renovations.”

Major improvements have been made, including renovating apartments, replacing a failing roof, and increasing energy efficiency by 40 percent.

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