Q What trends are you seeing in your low-income housing tax credit program in your state? And how is your agency responding to any changes?
AAuger: Syndication rates have gone down, with the current average about 91 cents on the dollar. However, the number of units per development seems to be slowly climbing. There has been renewed interest in the Florida tax credit program from developers both in and out of the state. In addition, there is a growing interest in development in areas of the state, such as north Florida, that have not seen new housing credit properties in some time. The preservation of existing properties in need of some rehabilitation has become essential to the Florida market. In order to facilitate this need, Florida Housing set aside nearly 10 percent of the 2007 credit authority to be utilized specifically for this purpose.
In the next few years, we expect to see some development in the area of multi-use properties so that residents have easy access to a variety of services. For example, a high-rise with shops or a small grocery store at street level.
Bolen: We’ve seen increased per-unit development costs and growing interest in using credits for 15-year lease-to-own developments. MHC is looking for ways to promote mixed-income developments and units with greater energy efficiency.
DeVos: We have seen an increase in total development cost, resulting in an increase in the amount of credit requested per project. We have imposed a limit on the amount of credit a project can receive, and a tax credit limit that any one geographic location can receive, based on the amount of annual credit in each holdback. As the amount of credit the authority receives increases, the limits increase accordingly.
We are seeing more projects in our preservation holdback. This is the result of tax credit projects completing their compliance period and preservation of older subsidized and market-rate projects. The amount of credit that is being allocated to the preservation holdback has increased from 20 percent in 2004 to 30 percent for 2005-2006.
Dewey: The siting of affordable housing in areas—whether urban, suburban, or rural—has increasingly become more difficult due to NIMBY issues. The challenges are to educate the public about affordable housing—that it is in everyone’s best interest to provide housing for the workforce so that there isn’t a continuing transportation issue that drains funding resources that could be used for other important reasons. In addition, we are developing enhanced property management standards for VHDA-financed properties as well as our tax credit properties. These stronger incentives will ensure that these properties are well-managed to help offset NIMBYism.
Garver: Developing a QAP that allows the agency to allocate resources even more effectively has been a priority. One change this year is how we evaluate project sites. Our staff reviewed over 150 potential sites and awarded scores based on the quality of the site and the proposed building design. By conducting site visits to each property, we ensure the appropriateness and potential viability for the housing development. Site selection is critical because although the rental market is improving, there are areas that remain weak. Developers will have the option to submit a full application after we provided them with the results of our evaluation.
We also created a “maximizing outcomes” pool this year. This pool of credits will give staff more flexibility to ensure that important goals of the program, including, but not limited to, geographic distribution, diversity of project types, and linkages to housing authority efforts, are met.
In terms of trends, we continue to see a strong demand for seniors communities, single-family lease purchase homes, and preservation projects. There is also a growing need for more accessible and energy-efficient housing. We have addressed these issues with through incentives, such as visitability requirements and points for universal design and green housing in the QAP.
Herman: This year we saw a major increase in demand for tax credits to finance the acquisition and preservation of U.S. Department of Agriculture Rural Development (USDA-RD) portfolios. About 17 applicants are involved in this type of development. This has caused some interesting challenges in an already high-demand program. We are doing our best to work with USDA-RD to make sure they can process the transfers on their side of the table before we commit tax credits to projects that won’t be able to proceed in a timely manner.
Markowski: The demand for credits far exceeds the supply and we are dealing with it by trying to expand the use of 4 percent credits generated by the tax-exempt bonds.
Q Are you seeing more demand for tax-exempt bond financing, and what’s new in your multifamily bond program?
AAuger: Yes. We have just received applications for our Universal Cycle, which includes requests for tax-exempt bonds, tax credits, SAIL (State Apartment Incentive Loan) funds, and HOME funds. For tax-exempt bond allocation requests, we received 47 applications totaling more than $500 million in requests, which is more than four times the requests we received in 2006.
Bolen: Historically, MHC served as conduit issuer on 4 percent tax-exempt bond deals. Developers have been highly focused on GO Zone credits interest in bond-financed deals declined slightly in 2006, compared to prior years. At this time, MHC is not making any changes in our multifamily bond procedures. MHC was, and continues to be, instrumental in the development of a Financial Institution Housing Opportunity Pool which is for the funding of permanent loans on multifamily developments, mostly tax credits, throughout the state.
DeVos: From a program standpoint, the authority has seen a tremendous amount of growth in our various preservation programs. It began financing multifamily developments in the 1970s. Part of the financing included a restriction on the borrower from pre-paying the mortgage for a 20-year period of time. Many of these developments are beyond the 20-year restriction and have the ability to pre-pay and convert to market-rate rents. The authority has developed a program that not only preserves the development for low to moderate-income families for at least 35 years, but also provides a substantial amount of capital for renovation and rehabilitation.
From a financing standpoint, the authority has developed sophisticated financing tools to achieve lower interest rates that enable more developments to qualify for financing. The authority has integrated interest rate swap contracts and unhedged variable rate debt to reduce the authority’s cost of capital. This savings can be passed on to the borrower or used to fund very low rate mortgages that otherwise wouldn’t be feasible.
Dewey: We have experienced extremely high demand in our single-family tax-exempt bond programs. Unfortunately, demand for multifamily tax-exempt bonds has not been as high—and proposed developments are typically applying for the 9 percent tax credits first. This is due mainly to a lack of building sites and NIMBYism. Extremely high demand for single-family mortgage revenue bond funds is causing a strain on tax-exempt bond resources for state HFAs. This could impact resources for multifamily lending going forward.
Garver: We are leveraging our volume cap with a blended model that includes both tax exempt and taxable components. This model allows the agency to extend the First-Time Homebuyer Program to even more families.
For the multifamily bond program, we are continuing to see a strong demand for volume cap. Most bonds are issued locally but come through our agency for the 4 percent LIHTC. We have averaged over 25 projects the past three years and expect the same this year. There is $125 million in volume cap set-aside for multifamily projects. Almost all of the projects involve the acquisition and rehabilitation of existing federally subsidized projects. With a large portfolio of these projects in Ohio, there will continue to be a steady pipeline of these projects in the foreseeable future.
Herman: Our seniors housing demand is down a little from the past two or three years but our garden apartment demand is about the same as in recent years. The problem we see developing will be having sufficient bond cap to meet demand. The over-supply days of bond cap are gone.
Markowski: Yes, in both single and multifamily. With multifamily, the demand is increasing because bonds are used in the preservation of expiring uses; also, we are seeing production of rental housing that is predominately market rate but relies on bonds to lower the interest rates on the loans. The use of the bonds yields 20 percent affordable units in these market-rate developments.
Q What is the best move that your agency has made in the last 12 months?
AAuger: In our effort to serve extremely low income households, Florida Housing advocated successfully to get state legislation adopted that provides more flexibility for us to finance housing for these poorest households. In concert with that, we hired a supportive housing coordinator with a strong services background to work full time with stakeholder groups.
Bolen: MHC has worked closely with our Governor’s office and federal congressional delegation to make full use of the increased GO Zone housing tax credits and GO Zone mortgage revenue bond authority.
DeVos: There are two “best moves” that have had a positive impact, and they go hand in hand. It was nearly two years ago that MSHDA engaged the entire affordable housing community in Michigan in a highly participatory planning process to create a statewide five-year action plan for affordable housing, community development, and homelessness. About a year and a half ago MSHDA took over another state agency’s community development activities and resources, making the authority the lead agency in the state for having a positive impact on not only our mission but also on the revitalization of the state’s economic picture. It has paid off during the past 12 months and the value of the powerful partnerships it has created is incalculable. The idea was to create a five-year plan that would bring together affordable housing advocates, funders, practitioners, and recipients into one community that speaks with one voice and one voice only.
Even though the “moves” we made occurred more than 12 months ago, the results have become particularly evident in the past year as the implementation process for the five-year plan unfolds and the recently acquired Community Assistance Team revitalizes downtowns, stimulates the economy, and creates jobs.
Dewey: One of VHDA’s best recent moves was revising our strategic plan to increase its focus on building strong, viable communities. In partnership with local stakeholders, we plan on increasing investments in revitalization areas and taking additional steps to ensure that the rental housing we finance meets high-quality standards and is managed in a manner that ensures that it will provide a long-term community asset.
Garver: OHFA made the decision late last year to explore the use of stand-alone taxable mortgage revenue bonds to address niche needs and expand the scope of our traditional FTHB Program. The first initiative we have rolled out via the use of taxable MRBs is the Opportunity Loan Refinance Program, which has enabled us to offer a 30-year, fixed-rate financing option to borrowers who are in a mortgage product not suited to their financial or personal situation. Ohio residents and communities have suffered greatly during this housing crisis, and supporting the initiative to provide solutions is imperative for the agency. This refinance initiative complements the ongoing work of Gov. Ted Strickland’s Foreclosure Prevention Taskforce.
Herman: We have expanded our homeownership programs significantly by adding new loan options, including a 40-year mortgage that is very popular, and a nonvariable interest-only product. We have also partnered with the city of Seattle to jointly provide downpayment assistance to over one hundred low-income buyers in this high-cost market. Our problem now is lack of bond cap to meet future demand in our programs.
Markowski: Creation of the Chicago Community Land Trust and the Statewide Rental Subsidy Program. The land trust is a citywide program to ensure long-term affordability.
Q What are your goals for the agency this year?
AAuger: Continue to develop our capacity to serve extremely low income households, especially those with supportive-service needs; develop green building standards for our rental and homeownership programs; work with our sister agency, the Department of Community Affairs, to encourage relationships between local planning and housing departments to develop thoughtful land use strategies to support affordable housing.
Bolen: a) Maintain single-family lending at a level that approaches MHC’s record 2006 origination level; b) Fully commit remaining GO Zone housing tax credits; c) Work closely with developers and communities to ensure high-quality rental developments result from the tax credit awards; d) Strengthen relations with single-family lenders and real estate professionals in promoting MHC’s single-family products.
DeVos: In addition to the Cities of Promise and ending homelessness strategies, we expect to begin or complete several strategies outlined in the five-year action plan for affordable housing, community development, and homelessness. These efforts will be extremely important in helping Michigan become more competitive in attracting people who want to live and work in Michigan cities, towns and villages, which is critical to transforming the state’s economy. Major initiatives include:
- Targeting investment in areas of highest need and the preservation of federally assisted housing.
- Funding the Michigan Housing and Community Development Fund in the amount of $100 million a year. It has been identified as the number one priority of the housing and community development industry in Michigan.
- Working closely with the Detroit Mayor Kwame Kilpatrick to implement his Next Detroit Neighborhood Initiative. The mayor has targeted six neighborhoods that are important to the revitalization of the city and key to attracting new residents.
- Collaborating with the Rural Caucus that is identifying the needs of rural communities.
Dewey: VHDA enhanced its strategic planning efforts this year to focus on clearly stated, quantitative outcomes and key performance metrics with measurable targets. Another refinement to our process is our emphasis on looking at our affordable housing needs and strategies both geographically and demographically to assure a proper balance among our efforts. Our goals for the organization this year are to:
1. Increase affordable housing opportunities for:
- Low- and moderate-income households
- Under-served minority populations
- People with disabilities and frail elderly
2. Ensure an ongoing inventory of affordable housing that supports strong, viable communities
3. Strengthen VHDA’s ability to provide affordable housing
Garver: To improve efficiency as we implement new technologies such as an electronic mortgage processing system, a Web-based program qualification platform, and a Web-based income certification system.
Herman: We are focusing more on workforce housing and making sure we are serving the most important markets that need help in the state.
Markowski: Our goal overall is to assist in the creation and preservation of all types of affordable housing. For 2007, the Department of Housing (DOH) is projecting it will assist 12,309 units of housing utilizing $537 million in resources. In the category of creating and preserving affordable rental units, DOH projects it will assist 7,930 units using nearly $300 million in resources. To promote and support homeownership, DOH projects committing nearly $215 million to assist 2,014 units. Under improving and preserving homes, DOH expects to commit over $21 million to assist 2,365 units.