The economic downturn is taking a toll on some of the people who need resources and housing the most. Funds and investors are taking to the sidelines, and special-needs projects are being put on hold, in some cases for an unknown amount of time.
“It's definitely harder to move public supportive-housing deals along in some parts of the country,” says Michelle Hoereth, associate director at the Corporation for Supportive Housing (CSH), a nonprofit organization helping to end homelessness. “It's easier in places with coordinated financing systems and where real estate values are holding—such as New Jersey and New York City. It's even easier where the development of supportive housing doesn't rely on the low-income housing tax credit (LIHTC), for example in New Jersey.”
But in other parts of the nation, special-needs projects have been hit hard. “It's very hard in tough real estate markets like Michigan, Ohio, Indiana, and so many more markets, as it's hard to attract investors,” Hoereth says. “Things are much slower in the Midwest right now because of the tax credit market.”
Projects on the West Coast, while they are showing signs of picking up, are not at the development or financing rates they used to have. “In California, things have slowed down a bit because of the fact that the state couldn't sell bonds for months due to its inability to come up with a budget,” Hoereth explains. “This now seems like it's resolved, but they're still in the process of selling bonds to work through a backlog of capital projects. Advocates are pushing for housing to be prioritized.”
And in the Northeast, which usually is somewhat immune to financial downturns, projects are feeling the smoldering of the economic crisis.
“In New England, in both Connecticut and Rhode Island, key funding programs were cut at the state level, and problems have been exacerbated by difficulties securing LIHTC investors there as well,” says Hoereth. “Though our sense is that the situation's not quite so bad as in the Midwest. Overall, there seems to be a lot of optimism about the new stimulus funds though.”
Detroit deal pushes forward
An unlikely market where CSH is making strides is Detroit. Although with some hitches, the company's Piquette Square project is moving forward with construction of a multi-purpose development that will have 150 single-room occupancy (SRO) units for the area's chronically homeless veterans, who make up 4,000 of the city's 18,000 homeless population, and 5,000 square feet of retail space.
All units are at or less than 30 percent of the area median income and can utilize Sec. 8 vouchers.
On top of environmental site issues, with the development sitting on a former Studebaker factory, Lindsey Bishop, program manager in CSH's Michigan office, says financing had to be an innovative process.
“It was not easy because we had to get many sources of financing, and it was a 4 percent tax credit deal.”
CSH staff worked with the Michigan State Housing Development Authority (MSHDA), Great Lakes Capital Fund, and Southwest Housing Solutions, to name a few, to get this project up and running.
“MSHDA gave a really great interest rate and were the ones who really brought the project forward,” says Bishop.
CSH partnered with developer Southwest Housing Solutions, a managing and development firm. Together they are working to accomplish Moving Forward Together, a 10-year plan to end homelessness in Detroit.
Southwest Counseling Solutions, Southwest Housing's sister organization; Veterans Affairs; Michigan Veterans Foundation; Focus; HOPE; Jewish Vocational Services, Salvation Army; Michigan Department of Labor and Economic Growth; and many more have signed on to be service providers for Piquette Square, which will sit a quarter mile from Detroit's Veterans Center.
Upon completion, Piquette Square will be Michigan's largest supportive-housing project. That is, until CSH's next project—a 155-unit SRO development for chronically homeless—gets off the ground. The sponsor is Neighborhood Service Organization, which plans on utilizing the bottom two levels of the development as headquarter space, giving residents on-site services.
“The syndicator of the project has not yet been finalized,” Bishop says, “but it will be a 9 percent deal, and we are hoping to have notification of funding by late summer.”