The Georgia Department of Community Affairs (DCA) has created a program to assist small public housing authorities (PHAs) finance their federal Rental Assistance Demonstration (RAD) deals.
The new RAD Multi-Site Bond Program seeks to match housing authorities with an experienced developer partner in order to implement a 4% low-income housing tax credit (LIHTC) and private-activity bond transaction.
The initiative would help PHAs that have a small portfolio of properties or lack the experience needed to complete a complicated bond transaction on their own.
“We’re trying to remove some of the barriers,” says Philip Gilman, affordable housing program specialist at DCA.
RAD allows PHAs to convert their public housing developments into Sec. 8 properties that can then be recapitalized using debt and LIHTCs. DCA leaders recognized that 4% LIHTCs and bonds are a potential funding source for these projects and are generally more available than the competitive 9% LIHTCs.
However, 4% LIHTC transactions need to be pretty sizable to warrant the transaction costs of issuing a bond.
“We recognize that for mid-size and large-size PHAs, they may be able to bring it in on their own, but for small- to mid-size PHAs who have a smaller inventory, may not have a development arm, and don’t necessarily have the capacity to come into the 4% tax credit program, we wanted to find a way to help facilitate that,” Gilman says.
DCA had recently worked on a transaction that pooled a number of smaller rural properties into a single bond deal, so that sparked the idea of trying a similar approach with the small PHAs.
Under the Georgia program, the participating PHAs would be able to associate themselves with a developer partner to implement a multi-site bond transaction.
“The beauty or hope of this program would be that we would result in cost efficiencies and time efficiencies and make deals that otherwise couldn’t work financially work if you can bring in the 4% equity,” says Shelly Patton, principal at Tapestry Development Group in Decatur, Ga., who has been involved in the effort. She is serving as a Department of Housing and Urban Development–designated facilitator working with the PHAs.
DCA recently sought requests from interested developers and received responses from about 15 companies. The agency will evaluate the proposals and prequalify a pool of developers to take part in the program.
Later on, there will be a second request for proposals from the prequalified developers to select a development partner to work with the participating PHAs.
The deal underwriting would focus primarily on the developer’s financials and capacity. It’s uncertain how many units will be involved in the first transaction, but officials say it will likely be no more than 800.
“The hope is this may serve as a model nationally,” Patton says. “Every state has its own infrastructure and system for allocating bonds and 4% credits. However, the infrastructure of the program we’re creating can be modeled and fine-tuned for an individual state.”
