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Housing Commission FY 13/14 Annual Plan & RAD WWW.hud.gov/RAD. City of Ann Arbor February 11, 2013 Jennifer Hall Executive Director Ann Arbor Housing Commission [email protected] 734 794-6721. Agenda. Recent AAHC Improvements AAHC Funding Challenges

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Housing Commission FY 13/14 Annual Plan & RAD WWW.hud.gov/RAD

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Housing commission fy 13 14 annual plan rad www hud gov rad

Housing Commission FY 13/14 Annual Plan & RADWWW.hud.gov/RAD

City of Ann Arbor February 11, 2013

Jennifer Hall

Executive Director

Ann Arbor Housing Commission

[email protected]

734 794-6721



  • Recent AAHC Improvements

  • AAHC Funding Challenges

  • HUD funding solution through the Rental Assistance Demonstration (RAD) Program

  • Annual Plan

  • Family Self Sufficiency program

Improvements in 2012

Improvements in 2012

  • Unit Turns Maintenance/New Occupant

    • Previously 190+ days average to turn & occupy

    • Currently 21 day average to turn

    • Currently 45 days average to turn & occupy

  • Occupancy

    • Currently 99% (1-5 vacant units)

    • Previously 95% (12 – 20 vacant units)

  • Hired Facility and Maintenance Manager

  • Received Family Self Sufficiency Grant

Policies and procedures

Policies and Procedures

  • Hired Consultant

    • Every policy and procedure for public housing and voucher program reviewed and revised

    • Ensure compliance with HUD, Fair Housing, landlord/tenant laws etc.

    • Maximize efficiency and standardization

  • Updated Lease

  • Created Preventive Maintenance Plan

  • Updated Maintenance Policy

  • Working on Tenant and Staff Manuals for Public Housing Units

  • Working on Disaster Response and Emergency Response Plan



  • Implemented Mobile Maintenance

    • Maintenance Techs use mobile devices to access work orders and enter completions

  • Implemented On-line Waitlist for Vouchers

    • Open for 48 hours

    • Over 15,000 applications

    • Pulled 500 names by random lottery to be on the waitlist

  • Laptops for public housing management staff so that they can hold office hours at remote sites

  • Working on option of on-line payments for tenants and electronic payments for vendors

Positive impact

Positive Impact

  • No Longer in Troubled Status

    • REAC Physical Inspection Score

      • Increased score from a 78 to a 81 on the East side

      • Increased score from a 64 to a 86 on the West side

  • Eligible for new HUD grants



  • Duct cleaning all sites

  • Gutters cleaned and fixed

  • Retaining walls and landscaping

  • Sidewalk grinding and concrete replacement

  • Fire Stops above stoves to prevent stove fires

  • Footing drain disconnects

  • Roof replacement

  • Marmoleumflooring (similar to linoleum)

  • Tuck pointing (brick exterior of buildings)

  • Jetting sewer lines

  • Boiler and A/C maintenance

Replace carpet with marmoleum

Replace Carpet with Marmoleum

Baker Lounge

Tenants voted for color scheme

Replace carpets with marmoleum

Replace Carpets with Marmoleum

  • Installed in 2012/2013

  • Funding through HUD Capital Funds

  • $96,000 all common areas at Baker and Miller

Replaced asphalt roof with steel

Replaced Asphalt Roof with Steel

  • New Steel Roof installed in 2013

  • Funding provided by the Downtown Development Authority

  • Initial bid $246,000. Extensive rafter damage increased cost to $305,000

Green energy efficiency

Green & Energy Efficiency

  • LED and photocell exterior lights

  • Energy Star appliances

  • Water sense bath fixtures and toilets

  • Wrapping duct work and water pipes

  • DTE direct install program for units

    • CFL lighting, aerators and showerheads

  • DTE rebate program

    • Common area energy improvements

  • Low VOC paint

  • Tank-less water heater (pilot) at N. Maple

  • Demand circulating hot water pump

  • Boiler control valve to sequence boilers at Miller

  • Started insulating attic spaces

  • Started replacing windows

Additional needs

Additional Needs

  • Air Conditioning all units

    • Health as well as security ($300,000 - $375,000)

  • Roofs and Windows

  • Security Cameras ($200,000 - $300,000)

  • Security Guards ($80,000 - $300,000/year)

  • Energy Efficiency ($900,000 +)

  • Some sites need to be demolished and rebuilt

    • Age, functionally obsolete, flooding

Two funding problems

Two Funding Problems

  • Annual Operating Subsidy

    • Maintenance

    • Staffing

  • Capital Re-investment

    • Replacing major systems like roof, furnaces etc.

Federal funding

Federal Funding

  • Historical decline in Congressional support for HUD

    • 1976 HUD’s budget was $86.8 billion

    • 2012 HUD’s budget was $41.7 billion

  • HUD losing 10,000-15,000 public housing units/year due to disrepair requiring demolition

Aahc capital needs

AAHC Capital Needs

• National HUD study

  • Immediate capital repair needs in excess of $25.6B across HUD public housing portfolio, or $23,365/unit

  • Capital Accrual 20–year projection of $82,125/unit

  • AAHC Capital Needs Assessment

    • A 2009 AAHC Capital Needs Assessment indicated $40,337/unit in capital needs over next 15 years

      • At current HUD rates, AAHC will get $18,000/unit

      • Which is $22,000/unit shortfall in capital repair funding

  • Decreased funding public housing

    Decreased Funding Public Housing

    • Operating Fees (rent subsidy)

      • In 2012 HUD reimbursed the AAHC at 95% of the operating fees owed

        • $62,700 less than owed

      • In 2013 HUD is reimbursing the AAHC at 81% due to sequestration

        • Estimated at $262,000 less than owed

    • Capital Funds (building improvements)

      • 2010 Capital Funding from HUD $557,000

      • 2012 Capital Funding $440,478

      • 2013 Capital Funding TBD (sequestration)

    Three options to fund aahc properties

    Three Options to Fund AAHC Properties

    • No Change

      Negative impact on units, tenants & neighborhood due to lack of funding, continued deterioration of units

    • City of Ann Arbor provide annual gap funding

      Cover the gap between HUD funding and shortfall

      Approximately $500,000/year for capital needs

      If Sequestration permanent, much greater problem

    • Convert Public Housing to Project-Based Vouchers with private funding reinvestment

      Immediate rehabilitation of all properties

      Long-term operating subsidy from different HUD program that has more stable funding by Congress

    Rental assistance demonstration rad

    Rental Assistance Demonstration (RAD)

    HUD’s goal is to convert 60,000 public housing units to Project Based Vouchers

    • NEW rent subsidy with vouchers (Operations)

    • NEW access to capital funding

      • Reinvest in physical structures

      • Leverage private capital to preserve assets

    How rad rent operating subsidy will be determined

    How RAD rent/operating subsidy will be determined

    At conversion, PHAs will convert funding to a Section 8 rent subsidy (HAP)

    Public Housing


    Aahc rad rents

    AAHC RAD Rents

    • First year limited to current per unit funding

    • Annually re-evaluated by HUD and increased (based on operating adjustment factor)

      • Will never be less than first year

      • No longer subject to public housing decreases



    • Physical Condition Assessment must be completed

      • 20 year schedule

      • all replacement costs in replacement reserve

    • Rehab budget determined by architect/engineer and actual bid

      • Minimum 10% rehab contingency

    • Market competitive upgrades (a/c) must be included

    • Must use energy efficient products as finances allow

    • Must use general contractor

    Pre development work

    Pre-Development Work

    • Issued Request for Proposal

      • Co-Developer and Development Consultants Selected

    • Surveys

    • Environmental Reviews

      • Radon, Lead, Asbestos

    • Physical Needs Assessment

      • Energy Audit

    • Title Search

    • Appraisals

    • Architectural Analysis and Scope of Work

    Development team

    Development Team

    • Dykema Gossett

      • Legal Counsel

    • Recap Real Estate Advisors

      • RAD Consultant

    • Avalon Housing

      • Supportive Housing Consultant

    • Norstar Development

      • Co-developer

    • O’Brien Construction

      • General Contractor

    • Mitchell and Mouat

      • Architect

    • Equity Investor/Equity Partner

      • TBD

    How will construction be financed

    How will Construction be financed?

    • Equity from Low Income Housing Tax Credits

    • Grants


    Community Development Block Grant

    Federal Home Loan Bank



    Private Foundations

    MSHDA Community Development Funds

    Corporation for Supportive Housing

    • Debt

    Low income housing tax credits lihtc

    Low Income Housing Tax Credits (LIHTC)

    • Created in 1986 pursuant to the Internal Revenue Code Section 42

      • Incentivize private sector to invest in housing

      • Single largest funding source for affordable rental housing development

    • Tax Credits allocated to States

      • Developers compete for 9% tax credits

    • Developer sells tax credits to private sector

      • Creates Cash (Equity) for affordable property

      • 10 years of tax credits to Equity Investor

    Lihtc continued

    LIHTC Continued

    • Credit is a dollar for dollar credit -10 years

    • Compliance Period of Affordability is minimally 15 years under Section 42

      • Extended Low-Income Use Period can be greater time period … up to 99 years

    • Limited Partner or Equity Investor will remain partner for that initial compliance period

    • Governed by a MSHDA Regulatory Agreement – a recorded document

    Legal structure

    Legal Structure

    • IRS requires Equity Investor to be part of the ownership structure

      • known as equity limited partner or equity member

    • Create a limited partnership or limited liability company with developer/owner

      • known as general partner or co-general partners/ co-members

    • Must be single purpose entity

      • Purpose is to utilize tax credits to invest in a specific property (or group of properties)

      • No cross collateralization & liability with other properties/businesses

    • Under RAD, HUDrequires permanent affordability

    How does current structure work

    How does current structure work?

    City of Ann Arbor




    HUD funding & regs

    Public Housing

    How will new structure work

    How will new structure work?

    City of Ann Arbor


    Co-General Partner/



    General Partner/

    Managing Partner

    Equity Partner/

    Limited Partner

    HUD funds & regs

    Limited Dividend Housing Association, LP or LLC

    15 year limited partnership

    Affordable Housing

    Phase i properties

    Phase I Properties

    • Convert under RAD and rehabilitate using Low Income Housing Tax Credits (LIHTC) if awarded in December 2013

      • Baker Commons

      • Miller Manor

      • Green/Baxter

      • Hikone

      • S. Maple

    Phase i properties1

    Phase I Properties

    • Convert under RAD and rehabilitate using existing AAHC funds in 2014

      • Mallets Creek

      • Hillside Manor

      • S. Seventh

      • Upper Platt (Colonial)

    Phase i properties2

    Phase I Properties

    • De minimis or Section 18 disposition

      • Evelyn Court

        • one 3-bedroom single family home

      • W. Washington

        • 1 bedroom units - duplex

      • Oakwood

        • three 5-bedroom single family homes

          Continuing analysis on whether to dispose of by selling or converting to project based vouchers using AAHC existing vouchers, not RAD vouchers

    Phase ii properties

    Phase II Properties

    • Demolition and new construction LIHTC

      • N. Maple Estates and Duplexes

      • Lower Platt

    • Evaluating whether demolition and new construction or rehabilitation LIHTC

      • Broadway

      • White/State/Henry

        LIHTC application in 2014



    • Reinvestment in properties

      • Increased energy efficiency

      • Remedy structural problems

      • Higher quality living conditions for residents

    • $25 - $45 Million economic impact

      • Construction, professional services, tenant jobs

    • Diversifies & Stabilizes AAHC revenue

      • More stable source of rent (operating) subsidy

    • AAHC staff continue to manage properties

    Impact on tenants

    Impact on Tenants

    • Improved units

    • AAHC pays for any short-term or long-term relocation if needed to fix up unit

    • Lower utility costs (unless rates increase significantly)

    • Tenants still pay 30% of income on rent

    • Still permanently affordable, cant turn into market rate units

    Impact on tenants1

    Impact on Tenants

    • AAHC cannot re-screen tenants, must allow current tenants who are compliant with lease to stay in units

    • Public Housing type grievance policies which are more favorable to tenants

    • Continue to receive services

      • Peace, CSTS, ROSS, CAN etc.

    • Can continue to have Resident Councils

      • $25/unit stipend if follow HUD rules

    Pbv project based vouchers

    PBV – Project Based Vouchers

    • Tenant can voluntarily request a tenant-based voucher after 1 year of residency

    • 100% of units will be designated as receiving services

    • HQS inspections – focus on inside of units

    • Termination notification consistent with public housing requirements

    Next steps

    Next Steps

    • Feasibility Analysis of every property

      • Phase I projects - Scope of work

      • Phase II - Rehab or demo & new construction

    • Resident Meetings

    • Council approval of PILOT

    • Council approval of a Resolution to transfer the properties to AAHC, with contingencies

    • Apply for financing

    Examples of norstar o brien and avalon affordable housing projects

    Examples of Norstar, O’Brien, and Avalon Affordable Housing Projects

    Partnerships with Public Housing Authority & non-profits using

    Low Income Housing Tax Credits

    Housing commission fy 13

    Carrot Way Apartments

    30 units & Community Center

    $5.5 million Total Cost

    • Tax credit syndication: Great Lakes Capital Fund, limited partner equity

    • MSHDA HOME Funds

    • City of Ann Arbor HOME Funds

    • Religious Action for Affordable Housing

    • Federal Home Loan Bank Affordable Housing Program

    • General Partner Equity

    • Avalon Housing Developer, Owner, Property Manager

    Housing commission fy 13



    39 units

    $4.6 million Total Cost

    • Tax credit syndication: National Equity Fund, limited partner

    • MSHDA HOME Funds

    • City of Ann Arbor HOME Funds

    • Ann Arbor Housing Trust Funds

    • General Partner Equity

    • Federal Home Loan Bank Affordable Housing Program

    • Washtenaw County General Funds

    • Avalon Housing Developer, Owner, Property Manager

    Before herman gardens public housing detroit mi

    BEFORE: Herman Gardens Public Housing – Detroit MI

    Housing commission fy 13

    AFTER: Garden View


    490 Rental Units

    $109.5 million Total Cost

    • Tax credit syndication: Great Lakes Capital Fund & Bank of America, limited partner equity

    • HUD Hope VI Funds

    • Neighborhood Stabilization Funds

    • MSHDA Tax Exempt Loan

    • Brownfield Tax Credits

    • MSHDA HOME loan

    • NORSTAR Developer hired by Detroit Public Housing Commission

    • O’Brien Construction

    Before 1630 dewey ave rochester ny

    BEFORE: 1630 Dewey Ave – Rochester NY

    Former Dry Cleaning Factory – view from the front

    Housing commission fy 13


    1630 Dewey

    80 Rental Units

    $16 million Total Cost

    • Tax credit syndication: Goldman Sachs, limited partner equity

    • NYS Homes and Community Renewal Urban Initiative

    • NYS Housing Trust Fund Corporation

    • NYS Homeless Housing Assistance Program

    • City of Rochester HOME Funds

    • HUD Continuum of Care Grant

    • Federal Home Loan Bank

    • JP Morgan Chase Bank

    • NORSTAR Developer hired by Common Ground Nonprofit

    Risks faq s


    • Unable to secure capital funds to make project work

      • Continues as public housing instead of converting to Project Based Vouchers

      • Cost of pre-development activities absorbed by AAHC

    • Co-developer and AAHC disagree on …

      • Master Developer Agreement executed regarding roles & responsibilities

    • Equity Partner wants to remove AAHC from partnership

      • AAHC cannot be removed unless egregiously fail to perform per contract

      • Same as current situation with HUD. HUD can remove if egregiously fail to perform

    Risks faq s continued

    Risks/FAQ’s Continued

    • Co-developer or Equity Partner want to convert to market rate

      • Cannot be done. HUD has regulatory agreement that precedes all other agreements and financing. MSHDA also has LIHTC regulatory agreement

    • Construction costs exceed budget

      • Use contingency, secure additional funds, change scope of work, or costs paid for from developer fee

    • Construction problems cause delay

      • Norstar provides construction and LIHTC completion guarantees

      • Liquidated damages in general contractor agreement to share in costs

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