This story was updated Aug. 22, 2019, with a new estimate on the backlog of capital needs for public housing nationwide.
Public housing is undergoing a sweeping change in Austin, Texas.
For the past three years, the 82-year-old Housing Authority of the City of Austin (HACA) has been converting its public housing developments one by one to project-based rental assistance through the federal Rental Assistance Demonstration (RAD) program.
“As one of the first housing authorities in the United States, we thought it would be good for us to be one of the first to do a full portfolio conversion,” says Ann Gass, HACA director of strategic housing initiatives.
The agency has taken approximately 80% of its portfolio of 1,839 public housing units through the RAD process, with the help of various development and finance partners. HACA is on track to convert the last few hundred units in the next year and a half.
“RAD was used as a tool to essentially make meaningful and significant improvements for the residents that we serve,” says Sylvia Blanco, COO at HACA. “Under the traditional public housing resource and capital fund program, it would have taken decades to make the improvements. We’ve been able to do it in a fraction of the time.”
RAD is the centerpiece of the Department of Housing and Urban Development’s (HUD’s) strategy to preserve at-risk public housing and address a backlog of deferred maintenance estimated to be as high as $70 billion nationwide. The seven-year-old program allows PHAs to convert their public housing units to Sec. 8 rental assistance contracts.
This is important because when a development has long-term rental assistance it has a more stable funding platform, which puts the property in position to leverage additional financing to perform capital improvements.
Each year, roughly 10,000 units of public housing are lost due to disrepair. Without RAD, it would have taken 46 years for housing authorities to complete the same level of unit repairs and renewals, according to federal officials.
Nationally, public housing authorities have preserved 100,000 homes through RAD and are working on preserving or redeveloping another 250,000 homes across the country. In response to the high demand from PHAs, Congress increased the program to 455,000 units last year.
“It’s about improving the quality of life for the families we serve,” Blanco says. “We serve some of the most vulnerable residents in Austin—seniors, persons with disabilities, and families with young children.”
Each property conversion has been different, with some using 9% low-income housing tax credits (LIHTCs) and others using 4% LIHTCs combined with other financing. Fannie Mae has been a key finance partner, providing loans to 13 of HACA’s 16 RAD conversions, including the recent rehabilitation of Gaston Place.
Built in 1978, the 100-unit property serves seniors and people with disabilities. HACA partnered with the ITEX Group to rehabilitate the community with new plumbing, kitchens, bathrooms, flooring, paint, exterior improvements, and improved accessibility. Financing for the $8 million effort included 4% LIHTCs and a nearly $2 million Fannie Mae loan through Bellwether Enterprise.
The work done at each property has been unique, depending on the improvements required. Some projects are undergoing a complete transformation.
Pathways at Goodrich Place marks HACA’s first full demolition and new construction redevelopment. The housing authority is working with Atlantic Pacific Communities and Madhouse Development Services to replace 40 public housing units that had no air conditioning and few modern amenities while adding another 80 affordable housing units for families that will open this fall. The team received a $14.3 million LIHTC award from the Texas Department of Housing and Community Affairs for the approximately $24 million project. Wells Fargo is the investor and Community Bank of Texas is a lender in the project.
HACA, along with partner Carleton Development, is also about to replace the 80-year-old Chalmers Court development with a brand-new community. The agency owned property adjacent to Chalmers that used to house its administration offices. HACA decided to demolish the two administration buildings and develop an 86-unit LIHTC property, known as Chalmers South, which will serve as relocation units for Chalmers families during that project’s redevelopment.
The first families will move into the new Chalmers South later this summer while HACA rebuilds half of Chalmers Court over the next 14 months. When construction is done, those families will move back to the Chalmers site and the other half of the residents will relocate into Chalmers South while the second half of the community is built. The three phases have a development cost of about $80 million. National Equity Fund is the investor for Chalmers South.
The property will go from having 158 public housing units to 392 mixed-income apartments on essentially the same site with the addition of Chalmers South.
It will be a new start for the families.