Soft Funds and Equity Continue to be Crucial for Funding RAD Transactions
The U.S. Department of Housing and Urban Development (HUD) Rental Assistance Demonstration (RAD) program has generated a lot of attention–and results–since it was established in 2012.
So much so that panelists on the Equity for RAD Transactions panel at the Novogradac 2021 RAD Public Housing Virtual Conference in mid-January discussed the different kinds of equity available to RAD conversions.
“Basically, any funds can be used with RAD deals and we love that,” said Eric Novak, president at Praxis Consulting Group, which works with public housing authorities (PHAs) around the country. “We love soft funding for RAD projects.”
Novak said that some of the funds available to RAD conversions include HUD HOME funds, Community Development Block Grants, the Federal Home Loan Bank Affordable Housing Program, National Housing Trust Fund financing, state housing trust fund financing, energy efficiency and solar grants, state preservation grants and more.
Novak said that soft money is critical gap financing for several reasons: PHAs’ resources are limited, RAD rents may not leverage sufficient debt, the 9% low-income housing tax credit (LIHTC) is competitive and capped, 4% LIHTCs are a shallow subsidy (although the 4% floor helps), and straight RAD conversions can be expensive.
Jennifer Erixon, senior vice president of Alliant Capital, a national tax credit syndicator active in all 50 states, said investors like RAD conversions because of all the soft money available.
“It is all the additional subsidy in the deal,” said Erixon. “It’s the fact that all of those soft funds–that are difficult to get–once you stack them into a deal, it’s pretty low-leverage from the foreclosable debt perspective.”
However, using those sources with RAD poses difficulties.
“The more layers of financing, the more complexities, the more lawyers involved,” said Novak. “That’s just the nature of these projects, they will often have five, six, seven different sources of funding.”
Novak mentioned another challenge that PHAs face.
“One of the difficulties is often that housing authorities don’t have those relationships with their entitlement communities or participating judications, so they are having to build those relationships sometimes for the first time in order to access those monies,” said Novak.
Erixon also identified challenges for PHAs doing a RAD conversion.
“Investors want PHAs to have a LIHTC track record and a balance sheet–no less than $1 million in liquid assets. For smaller housing authorities, that can be a challenge,” said Erixon. “Bringing in a partner is a way to address that hurdle and to make sure you get as many looks from investors as possible and get the best possible terms on the equity investment.”
Depending on a PHA’s experience, Erixon said there are a couple partnership options for PHAs doing a RAD conversion.
She said the first option is to partner with a turnkey developer who will get you through financing and completion, share in the guarantee risk and then turn the partnership over, making the PHA the general partner. She said the second option is to have the third-party developer partner stay in partnership as the managing general partner. The developer partner would manage the day-to-day asset while the PHA stays in as the co-general partner. Erixon said this option works well for smaller PHAs.
Despite the challenges, flexibility makes RAD conversions attractive to investors.
“When the RAD program first started, a lot of investors looked at it and said, ‘I don’t know what this is.’ It was a nontraditional structure that they had a difficulty getting their arms around,” said Erixon. “The way this has evolved over the past handful of years, it is something that is much more accepted by the investment community. And even more than accepted, it’s something that investors really like.”
While soft money is essential to RAD conversions, it’s important to bring equity into these investments as well.
“The 4% [LIHTC] floor adds a layer of equity to deals and certainly helps developments pencil out,” said Austin Divino, vice president of R4 Capital, a nationwide syndicator, lender, loan servicer and asset manager.
This means that the effective credit rate can’t fall below 4%. This permanent change applies to buildings placed in service starting in 2021.
R4 Capital has closed 19 RAD conversions, most of which were financed with 9% LIHTCs. “Most [RAD] deals we do are 9%, which allows for steeper set asides,” said Divino. He added that RAD conversions score well on 9% LIHTC qualified allocation plans.
But that’s not the only equity available to RAD conversions.
Divino added that federal and state historic tax credits (HTCs) are valuable resources for PHAs with an aging housing stock.
“Nine percent LIHTCs, 4% LIHTCs with HTCs can be very equity heavy, which is great,” said Divino. “[This means] less credit risk for investors and less hard debt on the project.”
Conclusion“The main purpose of the RAD program is to be a means for PHAs to incentivize investment in their existing housing stock,” said Divino. “Now is a great opportunity for the program. At this time, when the country has been put through all kinds of stress, the need for affordable housing is as great as it has ever been. RAD is an excellent vehicle for PHAs to deliver on their mission to provide quality affordable housing.”
Published by Mark O’Meara
RENO (News 4 & FOX 11) - A construction site is in the works on Marvel Way for a new facility for the Empowerment Center. The facility will be home to a new apartment complex for women who are struggling with substance abuse issues and taking their next steps in recovery.
Roxanne DeCarlo, Executive Director of the Empowerment Center, says these units will help women be surrounded by others with the same goals.
The facility will be built in two phases and will take about a year to build.
Source: FOX 11 (FOXReno)
Rochester Housing Authority One of Nine Sites Nationally to be Awarded Housing Choice Voucher (HCV) Mobility Demonstration Grant:
HUD TO INCREASE ACCESS TO OPPORTUNITY FOR 10,000 FAMILIES THROUGH NEW $50M HOUSING MOBILITY DEMONSTRATION
WASHINGTON - HUD Secretary Marcia L. Fudge on Thursday announced awards to nine lead public housing authorities (PHAs) that will participate in HUD’s new Housing Choice Voucher (HCV) Mobility Demonstration, which will receive$45.7 million in total funding. Through this Demonstration, PHAs will provide over 10,000 families with children better access to low-poverty neighborhoods with high-performing schools and other strong community resources. Participating regions represent diverse housing markets, population sizes, local laws regarding source-of-income nondiscrimination, and experiences implementing housing mobility programs.
“Studies show that place matters, and access to educational opportunities and other resources create lasting impacts on life outcomes for children,” said Dominique Blom, General Deputy Assistant Secretary for Public and Indian Housing. “The Mobility Demonstration provides families the choice to live where they want to live to raise their children.” “We are thrilled to announce this new program, which will remove barriers to opportunity-rich communities for families across the country.”
The Demonstration builds upon recent research that shows growing up in neighborhoods with lower levels of poverty improves children's academic achievement and long-term chances of success and reduces intergenerational poverty. Children who move to low-poverty neighborhoods have also been shown to experience lower rates of hospitalizations, lower hospital spending, and some changes in mental health over the long-term follow-up. Adults given the chance to move to low-poverty neighborhoods experience reductions in obesity and diabetes.
While the HCV program currently offers families with vouchers the opportunity to live in a neighborhood of their choice (including low-poverty, opportunity neighborhoods), families with HCVs may continue to encounter barriers to using their vouchers in communities with expanded opportunities. Common barriers include inability to save enough money for a security deposit, inadequate time to find a unit, landlord unwillingness to rent to voucher holders, or limited awareness of neighborhood amenities, such as the location of high-performing schools.
The Housing Choice Voucher Mobility Demonstration will support selected PHAs in addressing barriers to accessing housing choices by offering mobility-related services to increase the number of voucher families with children living in opportunity areas. In addition to offering mobility-related services, participating PHAs will work together in their regions to adopt administrative policies that further enable housing mobility, increase landlord participation, and reduce barriers for families to move across PHA jurisdictions through portability.
The Demonstration will face a rigorous, independent evaluation to determine what services are most effective at helping families move to opportunity areas. HUD also intends to make materials developed for the demonstration available to all PHAs for us in their own communities.
The following PHAs will receive funding for the HCV Mobility Demonstration:
WASHINGTON - The U.S. Department of Housing and Urban Development today announced the award of over $54.7 million in capital advance and project rental assistance grants to 15 organizations, to expand the supply of affordable rental housing for extremely low-income persons with disabilities. The capital advance awards will support integrated affordable housing by providing funding for the development of permanent supportive rental housing through HUD’s Section 811 Supportive Housing for Persons with Disabilities program, while project rental assistance awards are used to subsidize rents for extremely low-income persons with disabilities.
“HUD is committed to helping very low-income persons with disabilities with housing options that provide meaningful choices about housing, health care, and long-term services and support so they can participate fully in community life,” said HUD Secretary Ben Carson. “The Trump Administration has strongly supported our efforts to serve this population, including supporting the almost $150 million in HUD grants, and making $15 million in supplemental funds available under the CARES Act to help prevent, prepare for, and respond to COVID-19.”
The grants were awarded to organizations who will create permanent supportive housing models that will be at the forefront of design, service delivery and efficient use of federal resources. Awardees must promote long-term housing security and facilitate community integration of persons with disabilities.
“These awards reinforce our dedication to expanding the supply of affordable rental housing for persons with disabilities,” said Assistant Secretary for Housing and Federal Housing Commissioner Dana Wade. “The development of new rental housing, and subsidies for residents will expand their options to live with independence within the community in a more integrated environment.”
HUD provides rental assistance to more than 35,000 households through its Section 811 program. The program supports:
The following grantees received awards for Capital Advance Awards:
Category: 2020 Development that Best Preserves Rural Community Impact
Developer and Owner: Nevada Rural Housing Authority
Location: Tonopah, NV
Located in Tonopah, Nevada, Desert Properties was built in 1982 and had extreme deferred maintenance prior to rehabilitation. The development serves households with incomes at or below 50 percent of the area median income. Nevada Rural Housing Authority aimed to address capital items to bring the development up to modern standards, increase the energy efficiency and preserve and extend the affordability.
According to the American Community Survey, up to 42 percent of Northern Nye County are rent overburdened. The rehabilitation of The Desert Properties will prolong the life of these valuable apartments and will renew the USDA-RD subsidy to allow the developments to serve the most at-risk and lowest income residents in Tonopah for an additional 50 years. Financing for the rehabilitation included nine sources and was challenged by a ticking clock and a government shutdown.
“Mission-led is an attribute our organization takes to heart,” said Bill Brewer, executive director at Nevada Rural Housing Authority, the developer for Desert Properties. “Everyone deserves the opportunity to live in safe, clean and affordable housing, and the Desert Properties rehab project in Tonopah allowed us to put our mission into action and deliver a beautiful and refreshed community. We faced and overcame some truly unprecedented challenges, all in the name of those we serve.”
RENO, Nev. (KOLO) - Dozens of the area’s seniors in need are about to upgrade their housing.
The Reno Housing Authority has unveiled its latest completed project - the Willie J. Wynn Apartments - which will house low-income seniors in the Reno/Sparks region.
”We’re seeing them price out of the market,” said Amy Jones, executive director of the Reno Housing Authority. “They don’t have the opportunity to gain more income.”
The building features 44 units, comprised of one and two bedroom apartments. There’s community laundry areas, as well as a library, fitness room, computer workspace, a wellness center and more.
Outside, a large patio-area includes a barbecue grill, horseshoe pit and there’s also a small dog park.
“We wanted to provide them a facility they could age in place, with many amenities to continue living here and enjoy living here,” said Jones.
The building is named after Willie J. Wynn, a pioneer in the Reno/Sparks community who was the first African American to be part of the Governor’s cabinet in the Silver State.
Wynn, a longtime pastor, was also an early commissioner of the Reno Housing Authority. The place where his church once stood is now the home of the new senior-living facility in his name.
“My dad made room for anybody,” said Patricia Wynn Tau, Willie’s daughter. “Looking at this complex, I say ‘Gosh, dad, there’s room!’”
“To be remembered 35 years later says a lot about this community,” said Bishop John Wynn, Willie’s son. “Not forgetting what he did for the people.”
The Willie J. Wynn Apartments are currently accepting applications, though Jones says the demand is high. Tenants will be selected based on income and situation. The rents range from around $430 to $730 per month.
The complex also has a partnership with Washoe County. 12 of the 44 units will be reserved for seniors getting back on their feet, with case management services included.
Source: KOLO 8 News
The Mesilla Valley Public Housing Authority marked a new beginning with the rehabilitation of the Pecos Apartments’ existing 20 units. The groundbreaking ceremony was limited and only available virtually on Facebook Live to the media and public to prevent the spread of COVID-19.
The Mesilla Valley Public Housing Authority is converting the existing 1310 Pecos Street Apartments into a Permanent Supported Housing Facility called Desert Hope Apartments. This project is designed to serve a population with incomes at or below 30% Area Median Income (AMI) that are residents of the City of Las Cruces and Doña Ana County who have extremely low or very low incomes.
“We wanted to create a living space that would not only be long-lasting for our residents but comfortable for their families,” said Marcos Montes, Board Chairman of Mesilla Valley Public Housing Authority. “Our goal is to provide safe and affordable housing to our community and this apartment rehabilitation development is providing just that.”
Despite the safety precautions to prevent the spread of COVID-19, the Mesilla Valley Public Housing Authority was able to invite the Community and key stakeholders to participate virtually. They decided to work innovatively and hosted the virtual event on Facebook Live. Mayor Ken Miyagishima, officials from Mesilla Valley Public Housing Authority, and other affordable housing advocates participated in the Facebook Live groundbreaking event.
For more information on the Mesilla Valley Public Housing Authority, log onto their website at https://www.mvpha.org. Members of the City of Las Cruces and Doña Ana County communities are invited to watch the groundbreaking ceremony in its entirety www.facebook.com/MVPHA.
Facebook Live Groundbreaking Link:
Steamboat by Vintage is finally opening after breaking ground a little over a year ago. City officials are hoping this new housing development will provide some relief, to working families struggling to keep up with rising rent costs.
Steamboat by Vintage is finally opening after breaking ground a little over a year ago.
City officials are hoping this new housing development will provide some relief to working families struggling to keep up with rising rent costs.
The complex is just off of Virginia Street near the Summit Mall... Past the roundabout at Geiger Grade and Veterans Parkway.
Rents top out at a little over $1,100 a month for a three bedroom, and they go down from there.
To qualify tenants need to make at or below 60 percent of the median income for the area.
Residents will have access to a large range of amenities once the property is done being built.
"We have a 24 hour fitness center, a playground, a walking trail throughout the property, a basketball court. So really amenities spread throughout the property," says Jim Zaccheo one of the property developers.
He says they plan to have a new building up and running each month, and residents have already started to move in.
"A lot of these families have been living two to three families to an apartment, and now they can afford something of their own. We had a lady come in the other day with tears in her eyes, saying this is the nicest place she has ever lived," says Zaccheo.
City officials say they know affordable housing in Reno is a problem. They want to hear from individuals that face this struggle every month when rent is due.
"We also just set up a tenants rights ward at the City of Reno. We're all making appointments to that ward and that's a place where people can go and come and discuss challenges that they are having," says Vice Mayor Naomi Duerr.
For more information click on the link below:
2019 MFE Awards, Affordable Senior, Grand: Vintage at the Crossings
High-tech companies moving into Reno, Nev., have boosted job growth and made it one of the fastest-growing cities in the United States. But it has also caused housing and rental prices to double in the past several years, affecting seniors on limited fixed incomes.
Humphreys and Partners Architects designed the development and its amenities to cater to the senior residents, including those with disabilities. All of the units are either ADA and Fair Housing Act compliant or adaptable, with three large elevators, wide hallways, and roll-in showers designed to allow aging in place.
The four-story building features a gathering room with a community kitchen and dining area, a fitness facility, a computer center, an arts and crafts room, a cinema room, a library, and a private event space that residents can use for family gatherings. Outdoor spaces include accessible paths that connect to the community barbecue area, a large community garden area with planting beds and irrigation, outdoor seating areas, and a bocce court.
The development team also prioritized energy efficiency and went above and beyond what is required by state and local standards for market-rate housing, providing utility savings for the senior residents. It has an overall energy-efficient rating equivalent to Energy Star 3.1 or greater, with Energy Star appliances and windows, auto-motion sensors throughout, and a highly efficient heating and cooling system.
The project received support from the city, county, and state. The city of Reno expedited the approval and permit process and allocated bond cap, while Washoe County allocated HOME funds, and the Nevada Housing Division allocated 4% low-income housing tax credits, bond cap, and gap funding.
Rep. Dina Titus and FHLBank San Francisco Announce $1.25 Million in Funding for Affordable Housing in Las Vegas
Funding Will Preserve 125 Homes Affordable to Lower-Income Households
SAN FRANCISCO, June 26, 2019 (GLOBE NEWSWIRE) -- The Federal Home Loan Bank of San Francisco (FHLBank San Francisco) and Congresswoman Dina Titus (NV-1) announced that the representative’s Las Vegas District will receive $1.25 million in Affordable Housing Program (AHP) funding to rehabilitate Archie Grant Park, a 125-unit public housing complex that serves seniors and people with disabilities.
“Access to affordable housing remains a serious problem for the most vulnerable in our community, and this initiative will help those struggling to make ends meet,” said Congresswoman Dina Titus (NV-1). “Every other concern in life looks trivial if you are worried about having a roof over your head.”
The Las Vegas grant is part of a total $51.2 million in AHP grants to 60 projects that will construct or rehabilitate 5,134 units of housing affordable for lower-income families and individuals in six states – Arizona, California, Maryland, Michigan, Nevada, and Texas.
Twenty-one FHLBank San Francisco member financial institutions, working in partnership with community-based housing developers, submitted successful applications for AHP funds in the 2019 competition, with grants ranging from $96,000 to $1.5 million. This funding will help provide targeted housing solutions for low-income seniors, people who’ve experienced homelessness, veterans and their families, at-risk youth, autistic adults, and individuals with other special needs, including addiction, developmental disabilities, mental illness, or long-term chronic illnesses.
“The AHP is central to our mission of expanding access to quality housing for people of all income levels,” said Greg Seibly, President and CEO, FHLBank San Francisco. “The grants are delivered through our members to nonprofit development partners to address local needs. As so many families and individuals struggle to afford a place to call home, we are pleased that our AHP dollars can help address an affordable housing crisis that hits the regions our members serve especially hard.”
In Rep. Titus’ District, the Southern Nevada Regional Housing Authority partnered with Bank member Charles Schwab Bank to secure a $1.25 million AHP grant to assist in the acquisition and rehabilitation of the Archie Grant Park public housing development, which will provide residents with a range of supportive case management services.
The AHP is a flexible source of gap funding for affordable housing projects for very low-, low-, and moderate-income households. Details about the 2019 AHP grant winners are available on fhlbsf.com.
Affordable Housing Program
The Bank sets aside 10% of its earnings each year to fund the AHP, with a portion of that funding allocated to two first-time homebuyer downpayment assistance programs. Since 1990, the Bank has awarded over $1.1 billion in AHP funds to support the construction, rehabilitation, or purchase of nearly 142,000 units of quality affordable housing for lower-income households. The Bank’s member financial institutions, working in partnership with community-based housing sponsors or developers, compete for AHP grants by submitting applications for specific projects. AHP-funded projects represent a wide range of strategies and solutions, from historic preservation and adaptive reuse to new construction and rehabilitation. Where AHP projects are developed, local economies also get a boost, as these projects create jobs, increase construction and consumer spending, and generate new tax revenues.
Federal Home Loan Bank of San Francisco
The Federal Home Loan Bank of San Francisco is a member-driven cooperative helping local lenders in Arizona, California, and Nevada build strong communities, create opportunity, and change lives for the better. The tools and resources we provide to our member financial institutions–commercial banks, credit unions, industrial loan companies, savings institutions, insurance companies, and community development financial institutions–foster homeownership, expand access to quality housing, seed or sustain small businesses, and revitalize whole neighborhoods. Together with our members and other partners, we are making the communities we serve more vibrant and resilient.
Kevin Blackburn 510-377-8999
Mary Long 415-616-2556