AFFORDABLE HOUSING 101 Brian Lloyd, Vice President Beacon - PowerPoint PPT Presentation

EASTSIDE HUMAN SERVICES FORUM June 20, 2019 AFFORDABLE HOUSING 101 Brian Lloyd, Vice President Beacon Development Group

Session Outline Session Outline 1. What is affordable housing? ▪ How is it defined? ▪ Who does it serve? ▪ Who provides it and why? What’s the process? 2. 3. How is it funded? ▪ Local, state, federal ▪ Capital and operating 4. How do you make it pencil? ▪ Development sources & uses ▪ Operating pro forma 5. How does the future look? Financial 2 Introduction What is it? Process Funding The Future Conclusion Feasibility

Our Experience Project Types Project Experience Projects Units Value Family 46 projects Agricultural Workers 24 projects Completed 83 4,567 $730M Sustainable Building 30 projects Under 3 505 $147M Construction Historic 8 projects Fully Funded 3 186 $71M Senior 20 projects Special Needs 26 projects In 5 1,198 $64M Development Acquisition/Rehab 16 projects Total 95 6,456 $1.10B Urban/Mixed Use 25 projects Financial 3 3 Introduction What is it? Process Funding The Future Conclusion Feasibility

What is Affordable Housing? Agricultural worker family housing Varney Court Housing Authority of the City of Pasco and Franklin County Financial 4 Introduction What is it? Process Funding The Future Conclusion Feasibility

What is Affordable Housing? Senior Housing Pearl at Oyster Bay American Baptist Homes of the West Financial 5 Introduction What is it? Process Funding The Future Conclusion Feasibility

What is Affordable Housing? TOD / Mixed Use Plaza Roberto Maestas El Centro de la Raza Financial 6 Introduction What is it? Process Funding The Future Conclusion Feasibility

What is Affordable Housing? Historic Buildings Agnes Kehoe Place Spokane Housing Authority Financial 7 Introduction What is it? Process Funding The Future Conclusion Feasibility

What is Affordable Housing? Senior Housing MarketFront Pike Place Market PDA Financial 8 Introduction What is it? Process Funding The Future Conclusion Feasibility

HopeWorks Station Phase 2 Special Needs HopeWorks Station Phase 2 HopeWorks / Housing Hope Financial 9 Introduction What is it? Process Funding The Future Conclusion Feasibility

Colby Avenue Youth Center – Cocoon House Special Needs Colby Avenue Youth Center Cocoon House Financial 10 Introduction What is it? Process Funding The Future Conclusion Feasibility

What is Affordable Housing? 1. Residents pay at most 30% of their income in housing costs ▪ Rental Housing Cost = Rent + Utilities ▪ Ownership Housing Cost = Principal + Interest + Taxes + Insurance 2. Includes a wide range of housing types ▪ Shelter – night to night or permanent beds ▪ Special Needs – homeless, disabled, etc ▪ Veterans ▪ Farm worker ▪ Working “poor” minimum wage, 30% to 50% ▪ Workforce 60% to 100% ▪ Ownership – Single Family, Townhouse, Condo Percentages – Area Median Income (census data) 3. ▪ 0 – 30% = Extremely Low Income ▪ 30 – 50% = Very Low Income ▪ 50 – 80% = Low Income (60% is maximum for tax credits) ▪ 80 – 120% = Moderate Income Financial 11 Introduction What is it? Process Funding The Future Conclusion Feasibility

What is Affordable RENTAL Housing? WSHFC Income Limits (2018): 3 person household 30% AMI 50% AMI 60% AMI Yakima $29,250 $35,100 $17,550 Spokane $18,030 $30,050 $36,060 King/Sno $28,890 $48,150 $57,780 Financial Introduction What is it? Process Funding The Future Conclusion Feasibility

What is Affordable RENTAL Housing? WSHFC Rent Limits (2018): 2 bedroom units 30% AMI 50% AMI 60% AMI $17,550 $29,250 $35,100 Yakima $438 $731 $877 $18,030 $30,050 $36,060 Spokane $450 $751 $901 $28,890 $48,150 $57,780 King/Sno $722 $1,203 $1,444 Financial 13 Introduction What is it? Process Funding The Future Conclusion Feasibility

Who Provides Affordable Housing? ▪ Housing Authorities ▪ Non-profit / social service organizations ▪ Public Agencies ▪ Private Market Financial 14 Introduction What is it? Process Funding The Future Conclusion Feasibility

I. Project Definition & Feasibility Financial 15 15 Introduction What is it? Process Funding The Future Conclusion Feasibility

I. Project Definition & Feasibility 1. Who are you going to serve? ▪ What’s the market? (i.e. the need) ▪ What makes you the right provider? ▪ Impact of prioritizing populations? 2. Due Diligence ▪ Survey, Phase I, title report, design studies Financial 16 16 Introduction What is it? Process Funding The Future Conclusion Feasibility

I. Project Definition & Feasibility 3. What are the costs? ▪ ▪ Site Acquisition Financing & Soft Costs ▪ ▪ Construction/A&E Replacement & Operating Reserves 4. What are the likely development and operating sources? ▪ Local subsidy and support ▪ Tax credits: Are you competitive? What’s the equity calculation? ▪ Rent levels Financial 17 17 Introduction What is it? Process Funding The Future Conclusion Feasibility

II. Funding Applications Financial 18 18 Introduction What is it? Process Funding The Future Conclusion Feasibility

II. Funding Applications 1. Applications are required to: City, County, State, Finance Agency. Common application helps, but each has a different addendum/focus. 2. Will you get an award: ▪ Local capital subsidy, then State capital subsidy, then operating subsidies, then tax credits!!! ▪ Current system headed in direction of being population based, vets, etc.; not project oriented, less predictable, timing uncertain ▪ Challenge is to conserve $ while trying to get to yes Financial 19 19 Introduction What is it? Process Funding The Future Conclusion Feasibility

III. Design and Permits Financial 20 20 Introduction What is it? Process Funding The Future Conclusion Feasibility

III. Design and Permits 1. Design a functional, bullet-proof building that can be built at rock bottom construction costs 2. Meet all funding requirements ▪ Green/Sustainable ▪ Prevailing Wages and Labor Standards ▪ Program space ▪ Lender preferences ▪ Historic, Neighborhood, or other constraints 3. Line up permits with closing of all subsidies and the tax credit partnership Financial 21 21 Introduction What is it? Process Funding The Future Conclusion Feasibility

IV. Closing Financial 22 22 Introduction What is it? Process Funding The Future Conclusion Feasibility

IV. Closing Meet the requirements of 3 – 5 different lenders 1. 23 simultaneously Get 3 – 5 different attorneys to agree on anything 2. 3. Priority Agreement ▪ Who’s on First? What’s on Second? 4. Manage guarantees (if possible) ▪ Construction completion ▪ Tax credit delivery ▪ Operating deficit Financial 23 Introduction What is it? Process Funding The Future Conclusion Feasibility

Funding Sources (Capital Stack) State Housing Trust Fund • Application • Note • Deed of trust • Loan agreement and assignment for security purposes • Regulatory agreement • Subordination agreement • Compliance Financial 24 24 Introduction What is it? Process Funding The Future Conclusion Feasibility

V. Construction Financial 25 25 Introduction What is it? Process Funding The Future Conclusion Feasibility

V. Construction 1. Try to find a contractor you trust with your life But one that’s hungry and willing to do high quality work for as little 2. overhead and profit as possible 3. Try to find a contractor who can navigate all the subsidy requirements: ▪ Green Requirements ▪ Prevailing Wage and other labor standards ▪ Hire Section 3 and WMBE firms ▪ Meet apprentice program requirements 4. Meet tax credit and investor delivery deadlines despite weather and unforeseen site conditions Financial 26 26 Introduction What is it? Process Funding The Future Conclusion Feasibility

VI. Lease-Up & Management Financial 27 Introduction What is it? Process Funding The Future Conclusion Feasibility

VI. Lease-Up & Management 1. Lease-Up ▪ Deliver units according to the schedule you set with the investor 12 – 18 months earlier so you don’t lose equity ▪ Lease up to fully qualified households who meet all the income and lease guidelines and will be stable happy residents 2. Management ▪ Then starts the hard part – operating a financially and socially stable housing community for the long term ▪ Next Class: Affordable Housing Management 101 Financial 28 Introduction What is it? Process Funding The Future Conclusion Feasibility

Housing 101 1. What is affordable housing? 2. What’s the process? 3. How is it funded? 4. How do you make it pencil? 5. How does the future look? Financial 29 Introduction What is it? Process Funding The Future Conclusion Feasibility