Making the numbers work on a workforce housing project can be like threading a needle.
Just ask Evan Voight, director of finance at affordable housing developer TWG Development. “Workforce housing projects are challenging. There’s not a lot of financing space to work with. Private institutional investors are looking at market-rate projects with cash flow and appreciation.”
Voight’s observation makes even more humbling his company’s lead role in a 216-unit multifamily community now under construction on tribal lands about 10 miles west of Spokane, Wash.
The project is called Salish Flats, a $27.5 million workforce housing community adjacent to the area’s top employer, the Northern Quest Resort & Casino, owned and operated by the Kalispel Indian Tribe. The entertainment facility employs about 1,400.
Acute Workforce Housing Need
“The area is a little remote,” Voight says about the entertainment complex. “There’s a real need for housing, and the tribe has made it their duty to find ways to help. A military base just west of the Indian lands puts even more pressure on the area’s housing supply.”
TWG officials learned of the Kalispel Tribe’s housing need from a broker. A meeting was arranged with TWG and the tribal leaders, and the two sides agreed to work together on the tribe’s master development plan, which included workforce housing in the initial phase.
Committed Partners
Voight immediately turned to Dallas-based KeyBank Real Estate Capital. “Evan told us about the Kalispel Tribe’s need for workforce housing,” recounts Jeff Rodman, the bank’s senior mortgage banker for the affordable housing group.
“Evan knew we’re looking to expand our financing opportunities, tribal lands included. I called our Freddie Mac national account manager. Freddie immediately responded with great interest,” Rodman says.
The Salish Flats apartment project is part of Freddie Mac’s commitment to preserving affordable housing and helping underserved communities through Duty to Serve, a three-year program that has identified eight underserved multifamily housing markets, including Indian areas. Freddie Mac recently released a 21-page white paper detailing the depth of the housing challenges and a way forward.
Innovative Financing Solution
“Freddie Mac’s involvement was critical to making this project happen. What Freddie provided, that a lot of other capital sources don’t, is a forward commitment on a non-LIHTC [low-income housing tax credit] rate-locked permanent loan. We knew up front what the permanent-loan interest rate was. There were no surprises. That’s important in a rising-rate environment,” says Rodman.
Freddie Mac’s Non-LIHTC Forward offering provides unfunded forward commitments for rent- or income-restricted affordable housing that has a workforce housing component.
“By forward committing and locking a rate, Non-LIHTC forwards eliminate interest rate risk,” said David Leopold, vice president for targeted affordable sales and investments at Freddie Mac Multifamily. “These commitments are unique and they allow our customers the certainty of execution they need to leverage a variety of public and non-profit subsidies to create much-needed affordable housing for low-and moderate- income tenants.”
The Salish Flats apartments will operate with a self-imposed income restriction. Twenty percent of the units will be reserved for tenants earning 80% or less of the area median income. The remainder will be offered at market rate. The community features one-, two-, and three-bedroom units on a 10.5-acre site.
“I wasn’t surprised that Freddie Mac showed such great interest. They’re very innovative with how they use their capital. They also had to get involved from a legal standpoint right out of the gate, which they did without hesitation. They were extremely supportive,” Rodman explains.
Learn more about how Freddie Mac stands ready to assist in workforce housing development.
