“Fill out the applications, make sure the plans meet spec, and pray like hell.”
Fans of the acclaimed HBO series “The Wire” might recognize this quote as the advice attorney Maury Levy gave to drug kingpin turned wannabe real estate developer, Stringer Bell, on how to obtain federal grant money for his real estate project. The harsh truth of this quote probably brings a knowing smile to the face of every affordable housing developer who has applied for local, state, or federal funds.
Levy’s message to Bell in this scene is that there are no shortcuts you can take to obtain publicly administered funds. This is especially true in the increasingly competitive environment of securing funding for affordable housing projects.
In California, the tax-exempt bond program has recently adopted a scoring system, meaning that now even 4% low-income housing tax credits (LIHTCs) are competitive. Every round of every program seems to be over-subscribed, and developers should expect this trend to continue. It appears that the state is starting to see success with their enforcement of RHNA (Regional Housing Needs Allocation) numbers, and more municipalities seem to be taking seriously their need to build affordable housing. But the state has not yet proportionally allocated more funds to housing, which means developers should assume that they will increasingly be operating in an environment where there is a growing demand for funds with no equal increase in supply.
There are no shortcuts to winning funding today, and there definitely will be no shortcuts in the future. However, there are strategies developers should be mindful of that can decrease their reliance on the “pray like hell” part of Levy’s advice.
- Emphasize financing during site selection—When it comes to evaluating sites for affordable housing, the viability of attaining financing should be at the top alongside traditional considerations such as community support, design context, planning and zoning, environmental factors, and more. In particular, being located in areas of “high resource” continues to take on greater significance. Sites that don’t meet these locational requirements will struggle to win financing. Developers tend to be dreamers who use their wild imaginations to envision what they could build—the dream must also vividly include winning financing.
- Build flexibility into your plan—Your strategy should include the flexibility to pursue multiple pathways to win financing. A large family project could be able to pivot to senior or special needs. Can you collaborate with the local municipality on their infrastructure plan if necessary? Does your site control document give you time to submit applications in multiple rounds? As much as possible, early on this flexibility should trickle down to your conversations with local community leaders and into your design – don’t over-promise or design your way into a corner that leaves you with only 1 pathway to winning financing.
- Pay attention to public policy and academic conversations—The California Tax Credit Allocation Committee’s emphasis on building within highest/high resource areas reflects the academic conversations started years ago about the need to “de-concentrate poverty” through housing. California has finally turned its attention toward the extreme number of people experiencing homelessness and many programs now prioritize projects that address this issue. Today’s conversations that might be tomorrow’s public policy priority are things like a middle-income tax credit program, repurposing commercial space, using surplus public land, and prioritizing BIPOC communities. Developers must be mindful of the conversations taking place in academic and public policy circles, because it is likely that they will eventually trickle down to the scoring systems that govern how public funds are awarded.
- Ask questions because “I didn’t know” doesn’t work—When you find something in a program’s NOFA or regulations that might be problematic or requires clarity, don’t hesitate to reach out to agency staff and ask your questions. While the agencies as a monolith might be frustrating to work with, the individuals who staff the agencies are generally helpful and want to help you make your project a reality. They will do their best to try to answer your questions so that you can submit a successful application. Pick up the phone, build relationships with staff, and get clarity on the front end because “It’s easier to ask for forgiveness than for permission” is not a maxim that can be relied upon in affordable housing financing.
- Use the latest software to get organized and stay organized—Okay, so you nailed tips one through four and your project is in perfect position to win financing. All that’s left to do is submit the application—which means filling out a labyrinth of an Excel spreadsheet and uploading a never-ending list of required attachments, without making a single mistake. Thankfully, there is project management software that can help make this task easier. There is a seemingly infinite amount of PM software options so take the time to find the one that works best for your team. The best programs will at a minimum allow you to assign someone to each task, prioritize long lead items, flag issues for clarification/follow up, and track what still needs to be done. Taking the time to get organized on the front end can help you get your arms around this mountain of a task.
Securing financing awards will never be easy but these tips can put you in the best position for success. Following these strategies, a smaller nonprofit like Community Housing Opportunities Corp. over the last two years has secured over $60 million worth of LIHTCs, tax-exempt bonds, HOME funds, project-based vouchers, and various streams of local funds. And while “praying like hell” is something you’ll probably always have to do, staying mindful of these five strategies will help increase your chances of success.
