What’s a recent challenge your agency has faced, and how did you overcome it?

Steve Auger, executive director, Florida Housing Finance Corp.
Steve Auger, executive director, Florida Housing Finance Corp.

Steve Auger, executive director, Florida Housing Finance Corp. Florida Housing has simplified the competitive application process by moving away from the application rules we have used in the past. Beginning this year, we are issuing Requests for Proposals (RFPs) and/or Requests for Applications to allocate available funding to affordable developments. This new process allows us to address the unique and diverse housing needs in our state by establishing specific competitive processes that focus on these needs. Our first two RFPs using this new process have been issued, and we anticipate issuing five more later this year.

Dianne Bolen, executive director, Mississippi Home Corp.
Dianne Bolen, executive director, Mississippi Home Corp.

Dianne Bolen, executive director, Mississippi Home Corp. One of the recent challenges MHC faced was expediting development in the Health Care Zones (HCZs). By amending the 2012 qualified allocation plan (QAP), we were able to forward-commit 2014 and 2015 credit authority to fund developments on the 2012 waiting list. By developing the amendment and reviewing the already-submitted applications that fell in the HCZs, we were able to make awards in 45 days that will yield 1,000 units of affordable housing in HCZs and help increase economic stability in otherwise underserved areas of the state.

Jay Czar, executive director, New Mexico Mortgage Finance Authority
Jay Czar, executive director, New Mexico Mortgage Finance Authority

Jay Czar, executive director, New Mexico Mortgage Finance Authority Historically low mortgage rates make it difficult to provide competitive single-family mortgage rates with tax-exempt bonds, which is the typical funding model for housing finance agencies (HFAs). MFA used the Treasury’s New Issue Bond Program (NIBP) and the To Be Announced market along with new types of bond financing structures to lower interest costs. MFA, along with many HFAs across the country, has also refunded existing debt into lower-cost debt. Also, when the Department of Housing and Urban Development (HUD) launched a competition for the Performance-Based Contract Administration (PBCA) contracts in February 2011, the future of HFAs’ Sec. 8 programs were put at risk. Not only does MFA provide more than $26 million in assistance to 90 properties through this program, but profits from the contract are used to fund other MFA programs. Because of litigation related to the contract procurement process, MFA continues to operate its PBCA program under a temporary contract.

Doug Garver, executive director, Ohio Housing Finance Agency
Doug Garver, executive director, Ohio Housing Finance Agency

Doug Garver, executive director, Ohio Housing Finance Agency Some of OHFA’s funding recipients experienced a major financial challenge late in 2012 when the local Davis-Bacon wage rates were updated. Rates in certain areas increased dramatically due to the survey methodology used by the U.S. Department of Labor. Projects funded earlier in the year have experienced a significant funding gap. Fortunately OHFA received an allocation of Ohio’s Unclaimed Funds to use in our Housing Development Loan program. Staff quickly created a streamlined application and review process, and we offered assistance to owners in need. The depth and length of the recession in Rhode Island has been a major challenge. Prudent financial practices before the crash have served us well. Improved internal information and forecasting have helped us manage our way through the challenging times.

Brian Hudson, executive director and CEO, Pennsylvania Housing Finance Agency
Brian Hudson, executive director and CEO, Pennsylvania Housing Finance Agency

Brian Hudson, executive director and CEO, Pennsylvania Housing Finance Agency The challenges that we faced as we moved to two funding cycles was to ensure that we were fulfilling the housing needs throughout the state. In order to meet these needs, we set minimum funding thresholds for specific categories in each funding cycle; for instance, we committed to provide credits for a minimum of three general occupancy; two seniors; three preservation; two supportive housing; one innovation and design; and three strategic investment developments. We further provided an opportunity to fund developments that would support a broader community revitalization effort, and contribute or complement long-term economic growth while promoting mixed-use and mixed-income housing for communities.

Mary Kenney, executive director, Illinois Housing Development Authority
Steve Matteo Mary Kenney, executive director, Illinois Housing Development Authority

Mary Kenney, executive director, Illinois Housing Development Authority The greatest challenge our agency has faced over the past few years is adapting to a changed world and finding new ways to access capital to support our partners and our mission. The NIBP from the Treasury was a real blessing, but that program was only temporary; long term, we needed to explore new methods and sources of funding. In our single-family portfolio, this has meant completely altering our loan execution from a whole loan product to a mortgage-backed security supported model. On the multifamily side, we continue to pursue new financing tools, leveraging the strength of our existing resources to support new loan products, financing methods, and relationships. While the past five years have been rough, I believe that the crisis has moved most HFAs forward, making them more limber, more efficient, and better able to adapt.

Bill Pavao, executive director, California Tax Credit Allocation Committee
Bill Pavao, executive director, California Tax Credit Allocation Committee

Bill Pavao, executive director, California Tax Credit Allocation Committee Homelessness and undersubscribed state of California low-income housing tax credits (LIHTCs) are two important challenges. CTCAC is sponsoring legislation to expand state credits into qualified census tracts and difficult development areas to be used for projects housing homeless and disabled people and others with special needs.

Mary Tingerthal, commissioner, Minnesota Housing Finance Agency
Mary Tingerthal, commissioner, Minnesota Housing Finance Agency

Mary Tingerthal, commissioner, Minnesota Housing Finance Agency With many competing priorities for scarce federal resources—preservation, supportive housing, and new construction in areas of tight rental housing supply—we faced a shortage of resources to fund projects. Working together with a broad group of housing organizations we made the case for a new program of housing infrastructure bonds to the state Legislature. The proceeds of these bonds, which function like general obligation bonds but can be used by private owners, provided us with an additional $30 million in deferred loans that were awarded to projects supporting preservation, supportive housing, foreclosure remediation, and community land trusts. We also recently received approval to begin processing loans under the FHA Multifamily Accelerated Processing program to enhance our ability to provide effectively priced first mortgage loans for projects.

Margaret Van Vliet, director, Oregon Housing and Community Services
Margaret Van Vliet, director, Oregon Housing and Community Services

Margaret Van Vliet, director, Oregon Housing and Community Services OHCS has been tasked by Oregon Gov. John Kitzhaber to consider new service delivery models for its housing finance and community services programs. We are spending intensive time this year working on a plan that would allow the state to serve greater numbers of low-income Oregonians with our limited resources, while also aligning our programs with larger reforms in government, such as health transformation. The scope of this task is daunting to those of us who work for OHCS and also to our many valuable community and business partners. But we are proceeding with a great deal of transparency and openness, finding multiple ways for stakeholders to engage. The governor and Legislature will have to approve any new organizational structure, and changes could be implemented by July 2015.

What’s the biggest change you’ve made to the 2013 QAP?

AUGER: The most significant change made to the QAP is the addition of maximum levels for total development costs. This has been done to help ensure that developments awarded housing credits will receive what is needed to construct the property, but not more than its fair share.

BOLEN: The biggest change to the 2013 QAP is the coordination with the governor’s office to develop affordable housing in Mississippi’s HCZs, which were established by the Legislature and the governor’s office in 2012. MHC has encouraged developers to focus on the HCZs by creating a set-aside and by giving those developments scoring priority.

CZAR: A new category, Locational Efficiency, was added to our 2013 QAP in an effort to incentivize the development of projects located in proximity to goods, services, jobs, and public transportation. Incorporating this incentive without creating an urban bias was a challenge—especially in a rural state like New Mexico. However, we felt it was crucial to make sure that affordable housing residents have access to the people, services, and job opportunities they need to be healthy, participating members of their community. In addition, this access lowers residents’ cost of living. It does little good to have a project with restricted rents if residents are forced to spend a significant part of their income to get to a grocery store or a doctor’s office, or for a work commute.

GARVER: OHFA made several changes to the QAP in order to clarify existing criteria and policies. The change that is having the biggest impact is leveraging other resources. This criterion is designed to encourage applicants to seek other resources for gap financing in order to preserve OHFA’s resources. Almost all the new applicants scored well in this category, which will enable OHFA to use its resources to fund additional projects in other programs. Underwriting standards developed in collaboration with our partners will be utilized in order to prevent applicants from overleveraging projects with debt. OHFA is looking for a reasonable balance of funding sources if a project can support debt.

GODFREY: Our QAP has been relatively static. This year we identified family and special-needs housing as a top priority along with activities consistent with Opening Doors Rhode Island, our state’s interagency plan to end homelessness. With increasing competition for credits, we wanted to make certain that this critical need was not lost.

HUDSON: The most significant change that we made was to have two separate funding cycles, an urban and a suburban/rural cycle. This process was implemented to level the competitive “playing field” for developments. In previous cycles, urban developments competing against suburban or rural developments could have a scoring advantage because of location and population being served. We believe ranking developments against “like” developments provides a better opportunity for developers to secure funding.

KENNEY: IHDA continues to place great emphasis on integrated supportive housing, the preservation of rental housing subsidy, and green initiatives. However, this year we expanded the QAP to address the glut of abandoned and foreclosed single-family properties in Illinois by adding incentives for developers who seek to redevelop these properties utilizing 9 percent LIHTCs. Given the limited resources available to deal with this issue, we felt compelled to find a way to attract private capital to the problem. We are optimistic and are considering several applications that specifically respond to this initiative. We also revamped our scoring to consolidate similar policy initiatives into single scoring categories and make the overall scoring system simpler and easier to understand.

PAVAO: CTCAC updated the geographic apportionment of tax credits to reflect the 2010 U.S. Census data and the American Communities Survey data, and to make sure the credits continue to be allocated fairly.

TINGERTHAL: We added criteria for preservation of federally assisted housing with a very strong differentiation in points between imminent risk of loss and high risk of loss. This tiered approach to preservation was necessitated by the reduction in resources available and the growing needs of the state’s aging portfolio. These priorities focus on selecting those units that are best suited and situated for long-term preservation, with priority going to projects with deep rental subsidy, real risk of leaving federal programs, and acquisition costs well supported by an appraisal. We also added cost containment scoring criteria.

VAN VLIET: OHCS is making significant changes to our QAP this year to reflect changes in our overall funding processes. We found that after nearly 20 years of allocating credits in a competitive process that combined all of our multifamily development resources that we’d lost focus on achieving the best possible use of public funds. For the first time, underwriting and capacity-related issues will be treated as “threshold” items, and Oregon will use a scoring system that focuses on need for the proposed housing, as well as the ways in which projects help achieve long-term public policy goals, such as family stability and health outcomes for vulnerable people. We are also streamlining the application process so that it is less burdensome.

What is concerning you most about recent deals?

AUGER: Generally speaking, we continue to contemplate a couple of issues.

Rehabilitation is vitally important to maintaining and sustaining affordable units in our state. Florida Housing encourages rehabilitation projects, specifically those that meet the corporation’s policy objectives, which include incorporating green and universal design elements into the rehab. We understand there are significant costs associated with this type of rehab and are hopeful that the corporation is appropriately balancing appropriate rehab with cost factors to get the best benefit for the people we serve. However, we acknowledge that the learning curve on this issue is substantial for both Florida Housing and our stakeholders.

Additionally, there is the issue of reasonably limiting total development costs at a time when growth in income continues to be slow. There was a time when it was safe to estimate a 2 or 3 percent annual increase in revenues and operating expenses, respectively; in today’s economic climate, it is no longer safe to make this assumption. While it is important to keep equity investors and lenders interested in supporting affordable developments, we also must not provide more resources than is needed to complete any specific development. By establishing maximum total development cost levels, we believe we may have struck a balance that works for all parties involved.

BOLEN: MHC isn’t concerned about deals that have recently been funded and are moving forward, but we are concerned with credit pricing and the ability to underwrite quality affordable housing in Mississippi in the next few years.

CZAR: Our concern about recent deals is the same concern we have about some of the deals that were done a decade ago: projects and owner/developers being overleveraged. When you combine overleveraged projects with owner/developers that were themselves overleveraged and dependent on a constant stream of developer fee revenue, you have a sure recipe for disaster. Fortunately, our organization—and the affordable housing industry as a whole—did a good job of maintaining rigorous underwriting and due diligence standards even through the prosperous years, resulting in very few failures. However, some owner/developers are using their own funds to keep projects out of default, in good repair, and in compliance. How long they can continue to do that is unknown.

GARVER: Total development costs and the amount of housing tax credits needed per project are the most concerning aspects of the current group of applications. There are a greater number of projects with credits requests exceeding $1 million, and the average credit request per project is more than $800,000. However, the overall number of applications submitted has not decreased, and therefore OHFA will likely fund a smaller percentage of the applications.

GODFREY: I am very excited about our recent transactions. We continue to provide good quality affordable homes, open new affordable housing opportunities in communities where there previously were very few, and have used housing credits to rebuild neighborhoods hit hard by the foreclosure crisis.

HUDSON: We are concerned about the rising costs of providing affordable housing in certain urban areas throughout the state. In addition, the available resources are shrinking, typically there are multiple funding sources with the tax credit being the most significant, some of these sources are decreasing the amount available to support a development which increases the tax credit request.

KENNEY: The cost of deals is moving in the wrong direction. Our board of directors has been very vocal in expressing their concern over escalating costs given that we are all trying to do more with less.

TINGERTHAL: The high cost of developing affordable units; the long-term viability of project sponsors with small portfolios and heavy reliance on developer fees; and low vacancy rates, with resultant increase in market rents, accompanied by stagnant income growth among lower-income renters, with resulting increases in the affordability gap.

VAN VLIET: This state has made preservation of federally assisted properties a priority for many years, and the industry has done a fantastic job structuring transactions that rehabilitate aging properties while preserving vouchers and other forms of rent assistance. I worry about trends we’re seeing in underfunding of vouchers by HUD and rent assistance from the U.S. Department of Agriculture Rural Development (USDA-RD), not just for what it might mean for transactions and their ability to service debt, but for the vulnerable tenants whose housing may be compromised with federal and state cuts to safety-net services including rent.

What steps have your agency taken to control development costs?

AUGER: As detailed above, Florida Housing has implemented maximum development cost levels that cannot be exceeded in either credit underwriting or at final cost certification. If the costs levels are exceeded, the requested housing credit allocation will be either reduced or declined. We have identified three unique development types that each deserves its own limit considerations, along with three geographic influences, two building material categories, two development categories, and two demographic categories that can offer variances due to market influences. Each proposed development may be subject to as few as two, but as many as five, of these factors. Florida Housing has used reasonable per-unit costs to set the standard maximum levels. Also, we have chosen not to address limits based on the number of bedrooms for fear of creating an incentive for larger units, especially when our experience shows us that the number of larger units in any development should be very limited.

BOLEN: MHC limits maximum construction costs per development based on a formula, which gives consideration for development type and size. Base cost limits have been established by considering an average of certified construction costs for developments recently placed in service. Additionally, MHC awards points for developments whose cost per unit is less than the maximum allowed cost and deducts points for developments that exceed the maximum. Excessive construction costs are subject to MHC’s approval based on adequate third-party justification of the increase.

CZAR: Most funded projects will remain in MFA’s portfolio for at least 45 years and, in comparison to their market-rate counterparts, will have fewer opportunities to renovate through recapitalization and have very limited access to operating subsidies. Therefore, while it might be expedient in the short term, we are cautions about drastic cost containment steps and a heavy-handed approach to directing the market, which could risk the long-term viability of the projects.

For more than a decade, MFA has employed a floating cost limit based on the average per-unit cost of all of new construction projects submitted in each year’s competitive allocation round. Since developers do not know the cost of their competitors’ projects, they do not know what the cost limit will ultimately be in any given round, which we believe helps incentivize lower development costs.

GARVER: First, OHFA has required more transparency from our applicants and funding recipients by asking for more detailed cost estimates in the application and then a more rigorous cost certification, including a certification from the contractor and related subcontractors. Second, we are summarizing the data that is collected to develop cost standards and a database that applicants can use as a guide and our staff can use in underwriting and evaluating costs. Finally, for projects with extremely high costs per unit or costs per square foot, we have removed these outliers from the competition for funding.

OHFA intends to continue monitoring our efforts and making adjustments as necessary. Controlling development costs is a continuing issue for our board and state Legislature.

GODFREY: We have always monitored and controlled development costs very closely. The housing credit and other federal resources are valuable and scarce and must be prudently managed to meet the most critical housing needs within our state. We are strong supporters of nonprofit developers and get much more public benefit per dollar spent in doing so.

HUDSON: In 2012 we implemented a cost-per-unit limit of $250,000 to control development costs. In some cases a higher cost per unit may be justified, but we want developers or sponsors to provide that justification. We certainly realize that there are requirements that impact overall development costs, such as environmental remediation, wage requirements, or location constraints.

KENNEY: IHDA has maintained per-unit cost limitations for quite some time, but recent events have forced us to re-examine this entire issue. In response to the concerns raised by our board, staff is working to identify the costs associated with each policy initiative we include in our programs so that we can make informed decisions about the cost/benefits of these initiatives. In addition, staff is engaged in a robust dialogue with the development community to look for ways to improve efficiency and reduce costs. I think we also need to engage the local communities in this conversation as many of the increased costs are directly attributable to local requirements.

PAVAO: CTCAC has implemented a QAP provision requiring high-cost 9 percent credit projects to be considered only if project sponsors successfully petition the voting committee. Since implementing the policy in 2012, no projects have hit the cost limit established by CTCAC. We believe this policy is one reason California saw average per-unit costs decline in 2012.

In addition, California is undertaking a study of the costs of low-income housing we hope to release this fall.

TINGERTHAL: We have taken a two-pronged approach:

1. We introduced a process in our recent QAP where 50 percent of the 9 percent tax credit applications with the lowest total development cost per unit (controlling for development type and location) receive cost containment points in the selection process.

2. We also assess the cost reasonableness of all applications using a predictive cost model. The model uses historical cost data and 21 explanatory variables (such as location, building type, unit size, etc.) to predict the expected total development cost per unit. We then compare the expected total development cost per unit to the proposed costs to assess cost reasonableness. Projects with costs outside of the band of reasonableness can be funded only by a waiver vote by our board.

VAN VLIET: After a few different attempts to tackle this question, we’ve decided to put cost containment on next year’s list of policy issues to address. We know it is a very real concern nationally. It is similarly a concern here in Oregon.

One promising approach which our development partners seem to appreciate is to consider project costs against some measure of public benefit. Obviously this kind of analysis would entail subjectivity in trying to weigh and measure public benefits. But we intend to pursue a deeper analysis of what’s possible here in the coming months.

What industry issue is keeping you up at night?

AUGER: In the near future, we are concerned about the impact that expiration of the minimum 9 percent credit rate will have on housing credit equity. If this occurs, available housing credit equity could decrease by nearly 20 percent, which would reduce overall resources available to a developer by 12 to 15 percent. This means developers will have to access additional private-sector financing, which could be difficult in the current financial climate and result in developers possibly bringing us transactions that are financially more risky. Another concern here is that developers may simply lower per-unit costs to meet agency requirements to keep costs down and end up producing lower-quality units.

BOLEN: Two industry issues keep me up at night: the uncertainty surrounding the future of the housing tax credit program at the federal level and how the change in the credit rate will affect the program after 2013. The LIHTC program is the leading producer of quality affordable housing in all 50 states, and ensuring its continuance and fighting for added stability to increase investor confidence are some of our highest priorities at MHC.

CZAR: There are a number of issues that cultivate insomnia among staff at our agency. The uncertainty about PBCA, the TBA lending program, floating tax credit rates, proposed caps on tax-exempt bond interest, and unfunded oversight and administrative mandates from the state are all significant issues that cause uncertainty and discomfort for us.

In addition, the decline in federal funding for affordable housing in recent years is a trend that began well before sequestration and will continue for the foreseeable future. At MFA, we are developing partnerships with non-federal entities, state, local, and tribal governments and seeking designations that will open up new funding opportunities.

GARVER: OHFA has a terrific team in place, and we have been able to overcome a variety of challenges over the past few years.

We are also fortunate to have a strong development community and funders in Ohio and have access to other state funds, including a Housing Trust Fund and Unclaimed Funds to assist with financing projects.

Issues that OHFA is monitoring include: effects of the reductions to federal rental subsidy programs that are important sources of operating income for many housing tax credit properties; growing needs for housing for persons with disabilities and extremely low incomes; and impacts of vacant housing and poverty in large cities and Appalachian areas of the state. The demands for our resources, especially the housing tax credit program, to address many needs continue to grow while the supply remains the same.

GODFREY: This is an easy answer—federal cutbacks in housing production and preservation. The loss of the Secs. 202 and 811 production funds, the 40 percent cut in HOME, the huge capital needs of the housing authorities, and the need to preserve existing affordable housing are new burdens being loaded onto the housing credit program. Our tax credit applications this year were more than 10 times our allotted funds. The federal government needs to rededicate itself to addressing the housing needs of all Americans.

HUDSON: That is a very good question, there are a few, the LIHTC continues to be the single largest source of equity to fund affordable housing, in Pennsylvania it is a very competitive process. We moved to two funding cycles to improve that competition, but we are still funding one out of every four applications submitted. In 2013, we received 121 applications requesting $123 million in tax credits, we have $28.7 million available. The Bipartisan Commission recommended a 50 percent increase in LIHTC as a result of the increase in rental demand across the nation. Additionally, the resources for affordable housing continue to decrease, the federal HOME funding was reduced significantly, and there is no agreed upon funding source for the National Housing Trust Fund. Last but certainly not least, the applicable rate for LIHTCs needs to be permanently fixed at 9 percent taxable and 4 percent tax exempt.

KENNEY: Two words: tax reform.

PAVAO: The loss of local, state, and federal public subsidy sources. Many projects are becoming more reliant on LIHTCs. The result is fewer projects receiving 9 percent credits statewide.

TINGERTHAL: The potential for the LIHTC to be adversely impacted by tax reform, as a consequence of lower tax rates, other adjustments, or outright discontinuation of the credit. As the affordability gap grows for lower-income renters and as the existing affordable housing continues to age, the housing tax credit as the primary tool for both preservation and new production of affordable housing is crucial to future production.

VAN VLIET: I worry that the industry cannot keep pace with the needs of low-income people. In Oregon we know that homelessness is on the rise in some communities, especially among veterans, families, and people with disabilities. We also know that almost a quarter of Oregon’s children are living in poverty.

Affordable housing finance tools are one part of the answer to these societal problems, but unless they are deployed as part of a larger strategy to move people to economic prosperity, we will not be able to build our way out of the affordable housing crisis. It’s time for housing policy to become much more aligned and integrated with reforms elsewhere in government, so that the public systems work better for people who need a safety net, and our communities overall are stronger.

What trends are you seeing on Year 15 projects, and what steps have you taken to address aging properties?

AUGER: For many years, Florida Housing has obtained 50-year affordability periods from developers in extended-use agreements on competitive housing credit allocations. We have traditionally promoted rehabilitation using tax-exempt bonds and noncompetitive housing credits. There have been only a small number of developers submitting requests for qualified contracts. The majority of them simply notify Florida Housing of a change in the general partner owner interest to mostly nonrelated entities.We are in the process of reviewing a number of capital needs assessments (CNAs) on a variety of existing properties to learn what can be reasonably expected in rehabilitation needs in an older property. This process will help us determine how we should change our application requirements in the future. In addition, we now require CNAs to be completed up-front on all rehabilitation developments that are awarded competitive housing credits. This helps us to determine financial feasibility of the project and what should be included in the scope of the rehab, as well as an appropriate amount of replacement reserves. We now require CNAs to be completed by the 10th year to re-establish the replacement reserve commitment.

BOLEN: 1. We see an increasing interest in the qualified contract provisions available to properties after Year 15 that allow owners to request MHC find a buyer for their property. MHC has received about 10 such requests in the past 12 months, and all are still in the process of gathering information for review.

2. A number of USDA-RD Sec. 515 tax credit properties now in their extended-use period have applied for a subsequent allocation of tax credits to address physical needs that cannot be addressed with RD reserve funds. MHC set up a Preservation Revolving Loan fund that pairs an allocation of tax credits with a below-market rate loan to help improve the properties.

3. Some post-Year 15 developments are at disadvantage from a marketing perspective when competing against newer tax credit developments that have been built within their proximity. We are examining ways to use the QAP to encourage development in underserved areas of the state in order to avoid saturation.

CZAR: Being a rural state, New Mexico has a significant number of older low-income properties that were funded through mechanisms other than the tax credit program, particularly projects that were developed under the USDA-RD programs in the late 1960s and early 1970s. Our QAP contains scoring incentives for rehabilitating these properties as well as properties previously subsidized through the tax credit program or HUD. In addition, we have begun a process of risk rating older properties so that we can reach out to owners of more distressed properties and properties most in need of rehabilitation.

GARVER: OHFA has not identified any specific trends with our growing portfolio. Some properties have fared better than others. The strength of the sponsor, the property manager, and the investor; the economic vitality of the surrounding neighborhood; and the original scope of work and structure of financing are all important factors that contribute to the success or failure of property at Year 15. The majority of OHFA’s properties remain safe, decent, affordable housing after Year 15. Since incomes and rents have remained relatively flat for many years, we have not seen many properties flip to market rate.

However, there are properties that struggle for one reason or another. OHFA has dedicated more staff to focus on asset management and analysis of the portfolio in order to address problems early and help owners work out problems as needed. In addition we have adjusted rent and income restrictions for struggling projects and reduced as many compliance burdens as possible to make running projects more efficient. In regards to providing more financial resources, we are including more incentives in existing programs and using recycled Tax Credit Assistance Program funds to help with the preservation of existing properties. However, it is difficult to provide additional funding since the demand for new housing remains high.

GODFREY: During the past 18 months, we have undertaken a detailed review of our entire portfolio and developed a long-term plan for reinvestment. However, there may be some developments where the balance between cost and public benefit yields a result that argues against preservation. In these cases, we need to make the tough decision to put our resources elsewhere.

HUDSON: We are observing various exit strategies related to aging developments such as:

1. Resyndication utilizing LIHTCs.

2. Pooling developments and refinancing with taxable or tax-exempt bonds.

3. Some combination of private capital and bond financing.

We have encouraged developers and sponsors to explore options, as well as providing assistance regarding maintenance of reserves and energy-efficient programs. We have committed to provide funds to a minimum of six preservation developments yearly.

KENNEY: Overall, we have been pleased with how well our properties have held up over the 15-year compliance period. We attribute that to our conservative underwriting, which includes fairly significant replacement reserve funding. IHDA has had incentives for the preservation of existing regulated housing for some time, but in 2013 we have enhanced our emphasis on this issue across multiple program areas. We recently launched a new program, Preservation Now, which seeks to couple tax-exempt bonds, 4 percent LIHTCs, and soft funds to encourage the preservation of older properties, particularly those with project-based rental assistance. The initial reaction to this program has been very favorable, and we expect to preserve in excess of 1,000 units with this program.

PAVAO: CTCAC has seen an increase in resyndications of older tax credit projects, including using 9 percent credits. CTCAC will monitor this trend and may limit the extent to which scarce 9 percent credits are used for this purpose.

TINGERTHAL: We added stratified our preservation criteria to award the most points to projects at imminent risk of loss, an intermediate level of points to projects at high risk of loss, and the lowest level of points for projects needing some level of stabilization. Previously, projects not at risk of loss received no additional points for stabilization. With this change we hope to encourage owners to take a proactive approach with aging projects with only moderate physical needs.

VAN VLIET: OHCS is working to clarify construction standards when we finance rehab projects, especially Year 15 properties. In Oregon we’ve experienced a couple of dynamics in this arena. On the one hand, we’ve learned as industry that we originally under-capitalized many properties—and had underestimated operating costs on them. As a result, some owners have not had resources to do all the ongoing maintenance work that would have been ideal. So we know we have catch-up work to do. Additionally, we see that in some areas, construction standards in the 1990s weren’t as tight as they could have been, so buildings are showing their age more than we might have expected. OHCS is working with the development community as well as the financial sector to consider how—together—we can address property needs and keep as many of them as possible in service.