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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

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
  • 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, HUD requires 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

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


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
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


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