Preserving existing hud subsidized housing
This presentation is the property of its rightful owner.
Sponsored Links
1 / 36

Preserving Existing HUD Subsidized Housing PowerPoint PPT Presentation


  • 53 Views
  • Uploaded on
  • Presentation posted in: General

Preserving Existing HUD Subsidized Housing. 2014 ARHC-AHMA Joint Convention, Yakima, WA Sarah Nichols, Senior Projec t Manager Brian Lloyd, Director of Development. Who is Beacon Development Group?. Formed in 1999; To date, has developed / preserved 3,129 units valued at over $461 million

Download Presentation

Preserving Existing HUD Subsidized Housing

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Preserving existing hud subsidized housing

Preserving Existing HUD Subsidized Housing

2014 ARHC-AHMA Joint Convention, Yakima, WA

Sarah Nichols, Senior Project Manager

Brian Lloyd, Director of Development


Who is beacon development group

Who is Beacon Development Group?

  • Formed in 1999; To date, has developed / preserved 3,129 units valued at over $461 million

  • Works with non-profits and housing authorities that are committed to serving low- and moderate-income households

    • Acquisition / Rehab

    • Farmworker Family Housing

    • Green / Sustainable / LEED Certified Buildings

    • Historic Rehab

    • New Multi-story Construction

    • Senior / Special Needs Housing


Preservation experience

Preservation Experience

  • Recently completed / currently working on 8 HUD housing preservation transactions

  • HUD Section 202, Section 236 and RAD (Rental Assistance Demonstration) projects

  • All large, 125-200 unit projects

  • Refinances include FHA 223f and 221d4, LIHTC, restructuring of existing subsidy

  • Awarded Senior Preservation Rental Assistance (SPRAC) – one of twelve awards nationwide

  • Closed first RAD transaction in Washington State


Why preservation why now

Why Preservation? Why Now?

  • Many Section 236 and Section 202 buildings are 40+ years old with maturing mortgages and expiring subsidy

  • Recent HUD policies provide new subsidy options with prepayment, refinance and rehabilitation

  • Current FHA mortgage rates are low


Key preservation elements

Existing project subsidy

Potential future subsidy / available funding

Current rents and occupancy history

Project capital needs

Tenant services

Tenant income mix

Project ownership

Key Preservation Elements


1 existing project subsidy

Section 202 Direct Loan (pre or post 1974)

Section 236 loan and Interest Reduction Payments (IRP)

Multifamily HAP Contract

Flexible Subsidy Loan

Rent Supplement or RAP

Public Housing

Local PHA Project Based or Housing Choice Vouchers

1. Existing project subsidy


2 potential future subsidy funding

Rent increases / HAP contract renewal

Tenant protection vouchers (regular, enhanced or converted to project based)

SPRAC

Deferral of flexible subsidy loan

RAD PBRA or PBV

FHA loans

Tax Credits (4 or 9%)

Tax Exempt Bonds

Other local sources (CDBG, State HTF)

2. Potential future subsidy / funding


3 current rents and occupancy history

3. Current rents and occupancy history

At or below market rents?

Assisted rents compared to unassisted rents?

Local PHA FMR and payment standards

Current vacancy rate

Historic occupancy issues

Demand for unit types (studios vs. one bedrooms)


4 project capital needs

4. Project capital needs

Identify both critical and discretionary needs

HUD form of capital needs assessment (PCNA, RAD SOW) may be required

Encourage clients to complete an owner directed CNA outside of HUD requirements

Prioritize


5 tenant services

5. Tenant services

Meal program

Service coordinator

Wellness and activity programs (limitations on what can be funded by a HAP contract)

Assisted living

Additions or changes to existing services


6 tenant income mix

6. Tenant income mix

  • Current snapshot of income mix

  • # of rent burdened tenants

  • Expected or desired future income mix / demand

  • Income qualification for new funding varies

    • SPRAC eligibility <80% of MI

    • SPRAC funding preference<50% of MI

    • Tax credits <60% of MI

    • Flexible subsidy deferral <80% of MI

    • Preservation vouchers <95% of MI

    • PHA voucher eligibility <50% of MI


7 project ownership

7. Project ownership

Section 202 and 236 require single asset entities

Often only housing project associated with the sponsoring organization

Typically non-profit, volunteer boards

May not have the skill, experience or desire for a refinance transaction

Limited financial resources for predevelopment funding


Northaven apartments

Northaven Apartments

  • Located in North Seattle

  • 198 studios and one-bedroom units

  • 8 stories

  • Built in 1972


1 northaven existing project subsidy

Section 236 loan and Interest Reduction Payments (IRP) – $3MM original mortgage maturing in 2012; 8.5% interest rate written down to 1% with IRP

Multifamily HAP Contract – 61 units

Flexible Subsidy Loan - $2.9MM, 1%

1. Northaven existing project subsidy


2 northaven potential future subsidy funding

  • HAP Contract rent increases/renewal

    • Increase HAP rents to support new debt service(HAP Renewal Guide Ch. 15, Option 2)

    • 20 year HAP contract with rents reset to market at Yr. 6, 11 and 16

    • Allowable 10% across the board increase prior to refinance

  • Deferral of flexible subsidy loan – Requested; payments from surplus cash

  • Tenant protection vouchers triggered by prepayment

    • All tenants <95% of MI eligible for enhanced vouchers

    • Potential to project base enhanced vouchers

  • FHA loans – 223f; 35 year amortization

2. Northaven potential future subsidy/funding


3 northaven current rents and occupancy history

3. Northaven current rents and occupancy history

Section 236 basic and HAP contract rents 45-60% of market rents

Section 236 “market rents” – 50-70% of true market rents

50-80% of Seattle Housing Authority Voucher Payment Standards (which are slightly below market)

No vacancy issues

Occupancy at or above 97% for past three years

Content with current mix of 70% studios; 30% one bedroom units


4 northaven project capital needs

4. Northaven project capital needs

  • $3MM ($15K per unit) in hard cost repairs identified (223f limit $17.6K per unit)

  • Additional $450K in hard cost contingency and $300K in soft costs

  • Unit cabinetry, roof, call system and standard GFCI and ADA improvements considered HUD critical and non-critical repairs – approximately $400K

  • $2.6MM of discretionary repairs


  • 5 northaven tenant services

    5. Northaven tenant services

    • Meal program

      • Requested waiver under FHA program; mandatory program, self sustaining

      • Considered an important element to promote tenant well being and independence

      • Commercial kitchen upgrades included in refinance

    • Service coordinator

      • Continuing eligibility

      • Funding subject to annual appropriations


    6 northaven tenant income mix

    6. Northaven tenant income mix

    70% of tenants below 50% of MI

    40% of tenants below 30% of MI

    11 non-HAP tenants rent burdened even at the severely depressed Section 236 rent levels

    Owner declined opportunity to pursue project based vouchers to preserve income mix of tenants (not all low or extremely low)


    7 northaven project ownership

    7. Northaven project ownership

    Founded by Olympic View Community Church of the Brethren

    Board committed to remain involved with project

    Constructed an adjacent, related 40 unit assisted living project in 1993

    Separate non-profit, Northaven Foundation able to advance predevelopment funds

    Strong administrator and maintenance staff in support of the refinance transaction


    Northaven outcomes

    Northaven Outcomes

    • $4.8MM; 35 year loan; all-in rate <4%

    • Over $500K funded into replacement reserves

    • Deferral of flex sub loan with repayment from surplus cash

    • 20 year HAP contract for 61 units; rents still well below market; reset to market in Yr. 6

    • 64 tenants with preservation vouchers

    • Non-HAP / non-voucher tenant rents fixed at closing based on flex sub deferral


    Northaven outcomes cont

    Northaven Outcomes (cont.)

    • No tenant relocation, only displaced during work hours

    • Rehab scope included-

      • New roof

      • Electrical panels

      • Emergency call system

      • New storefront/entry

      • Unit kitchens, heaters and closet doors

      • Commercial kitchen upgrades

      • Elevator modernization

        • Corridor carpets and maintenance

        • building added out of contingency

        • funds


    Garden terrace apartments

    Garden Terrace Apartments

    • Located in Wenatchee

    • 146 studios and one-bedroom units

    • 6 stories

    • Built in two phases

      • 1970

      • 1981


    1 garden terrace existing project subsidy

    1. Garden Terrace - existing project subsidy

    Section 202 loan – $3.5MM original mortgages maturing in 2021 & 2023; 3% and 7.6% interest rates

    Two Multifamily HAP Contracts – 16+70 units

    Flexible Subsidy Loan - $154K, 1%


    2 garden terrace potential future subsidy funding

    2. Garden Terrace - potential future subsidy/funding

    • HAP Contract rent increases/renewal

      • Increased HAP rents to support new debt service(HAP Renewal Guide Ch. 15, Option 2)

      • 20 year HAP contract with rents reset to market at Yr. 6, 11 and 16

      • Allowable 10% increase prior to refinance

    • Deferral of flexible subsidy loan – payments from surplus cash

    • Tenant protection vouchers triggered by flex sub deferral

      • All tenants <80% of MI eligible for enhanced vouchers

      • Potential to project base vouchers – HA declined

      • EV’s had no impact because no rent increase

    • FHA loans – 223f; 35 year amortization


    3 garden terrace current rents and occupancy history

    3. Garden Terrace -- current rents and occupancy history

    Section 202 rents (assisted and non-assisted) were 50-70% of market rents

    Low vacancy history

    Occupancy at or above 90% for past three years

    Some challenge renting unassisted studios

    Current mix of 35% studios; 65% one bedroom units


    4 garden terrace project capital needs

    4. Garden Terrace - project capital needs

    • $2.4MM repairs identified in PCNA

    • Initial contractor estimate: $3.8MM

    • VE process and scope reduction

  • Final contract: $2.3MM (15,700/unit)

  • 223(f) limit in this region: 17,500/unit

  • Limited by loan amount (rate blip prior to close)

  • 230K contingency + 356K soft costs


  • 4 garden terrace project capital needs cont d

    4. Garden Terrace - project capital needs (cont’d)

    • Safety: fire sprinkler and alarm systems

    • New windows

    • Low flow toilets and bath faucets (all)

    • Kitchen cabinets, counters, sinks (GT)

    • PTAC heat/AC units (GT)

    • Accessibility changes

    • Add backs: GT boiler, corridor changes, entry improvements


    5 garden terrace tenant services

    5. Garden Terrace - tenant services

    • Meal program

      • Requested waiver under FHA program; mandatory program, self sustaining

      • Considered an important element to promote tenant well being and independence

      • No commercial kitchen upgrades included in refinance; planned for future phase

    • Service coordinator

      • Continuing eligibility

      • Funding subject to annual appropriations


    6 garden terrace tenant income mix

    6. Garden Terrace - tenant income mix

    • Tenant incomes

      • 65% below 30% AMI

      • 20% below 50% AMI

      • 15% below 80% AMI

    • Housing Authority declined opportunity to pursue project based vouchers

    • HA screened for households eligible for enhanced vouchers; no rent increase post closing, so no households eligible


    7 garden terrace project ownership

    7. Garden Terrace - project ownership

    • Founded by Brethren Baptist Church of Wenatchee

    • Board committed to remain involved with project; very engaged in re-fi process

    • Motivated by safety concerns; long-term preservation; needed upgrades and improvements

    • Important community asset; largest low income senior housing project in the area

    • Administrator and staff critical in making the transaction work:

      • Tenant communication

      • Budgeting and HUD processing

      • Tenant relocation


    Garden terrace outcomes

    Garden Terrace Outcomes

    • $5MM; 35 year loan; all-in rate = 4.57% (4.12% plus .45% MIP)

    • Consolidated loan structure – single budget going forward

    • Deferral of flex sub loan with repayment from surplus cash

    • 20 year HAP contracts for 86 units

    • Unassisted rents still well below market


    Garden terrace outcomes cont

    Garden Terrace Outcomes (cont.)

    • Internal tenant relocation for GT units; day-work for GTW

    • Significant building improvements

      • Safety

      • Accessibility

      • Sustainability

      • Comfort

    • Replenished the Replacement Reserve

    • Resident concern turned to satisfaction and relief

    • 20 Year reset


    Preservation challenges

    Sorting out potential funding opportunities based on multiple layers of existing subsidy and conflicting programs

    FHA and Asset Management rules are often not in sync

    Resolving all HUD asset management issues ahead of new FHA loan (chicken before the egg)

    Securing a source of predevelopment funding (est. $75K-$100K for 223f program; $400K plus for 221d4 program)

    Tenant relocation to accommodate rehab

    Preservation Challenges


    Preservation opportunities

    Preservation Opportunities

    • Increasing HUD flexibility and new policies to address preservation

    • Without preservation, wave of mortgage and subsidy expirations will result in loss of affordable units

    • Low interest rates

      • <3.75% for 223f

      • <5% for 221d4


    Questions

    Questions?

    Sarah Nichols

    [email protected]

    206-914-3023

    Brian Lloyd

    [email protected]

    206-860-2491 Ext. 210


  • Login