Affordable rental housing is gradually disappearing in America. Not just subsidized housing, but unsubsidized small multifamily and single family rental homes as well. Thus concludes America’s Rental Housing: Homes for a Diverse Nation (click here for highlights), released this month by Harvard University’s Joint Center for Housing Studies. Among the findings:

·       200,000 rental units are demolished each year: twice the amount of rental homes added annually under the Low Income Housing Tax Credit program and other initiatives.

·      Monthly renter income went up 3% between 1994 and 2004; median asking rents for newly built units shot up 33%.  

The report documents the shrinking supply of affordable rental homes; reminds us that the elderly, working poor, and single-parents are among those squeezed hardest; and calls for policy changes to stem the loss.

The Joint Center makes clear what many of us have said for years; while new construction is essential, we can’t build our way out of our affordable housing problems. Preservation of what we’ve already built is an essential element to any sound affordable housing policy.

Stay tuned…

• On March 2, Rep. Jim Ramstad (R-MN) introduced legislation to make improvements to the Low Income Housing Tax Credit program.  Among the changes, the bill would end the current prohibition of using tax credits with Section 8 moderate rehabilitation assistance.  Click here for text of the legislation.

• On March 14, HUD proposed a new rule that would implement a number of changes to the Mark-to-Market program (M2M).  The rule addresses a range of administrative and programmatic issues.  Comments are due on May 15, 2006 .  Click here for the text of the proposed rule in PDF format. 

• On March 16, Rural Housing Services announced the availability of funds for a new Multi-Family Preservation and Revitalization Restructuring Demonstration Program.  Money will be provided to owners of Section 515 properties for financing restructuring.  The demonstration program is designed to help owners maintain decent affordable housing. Pre-applications are due by April 17.  More information is provided on the Housing Assistance Council’s website.

• On March 16, the House approved $19.8 billion in supplemental appropriations (H.R. 4939) for hurricane relief efforts.  The spending package includes $4.2 billion in community development block grants and directs at least $1 billion of those funds to be set aside for the repair, rehabilitation and reconstruction of the affordable rental stock, including HUD-assisted and public housing.  For more information on hurricane supplemental appropriations visit the National Low Income Housing Coalition’s special report on housing policy responses to the hurricanes.

With mounting losses of affordable rental housing, projected growth in renter populations and added pressures on state budgets, state housing finance agencies are increasingly targeting low income housing tax credits to preserve existing affordable housing.   A recent survey by the National Housing Trust found that 45 states prioritize preservation through points or a specific preservation set-aside in their 9% competitive tax credit program.  And these preservation efforts are succeeding. For the two year period from 2003 to 2004, states deployed tax credits to preserve and improve almost 100,000 apartments in more than 1,000 properties.  (Click on the map for a summary of how states allocate 9% competitive tax credits to preserve affordability).

Recognizing alarming trends, state housing finance agencies realize that they must preserve their existing affordable housing; and they are doing just that.  Jonathan Fanton, president of the John D. and Catherine T. MacArthur Foundation, recently summarized these trends, explaining that over the last decade, “[we] have lost hundreds of thousands of affordable rental homes as markets soared, federal subsidies waned, owners divested, and aging properties deteriorated beyond repair.”

Most states now reserve funds in “set asides” or provide additional points in their allocation plans for developers seeking to preserve federally assisted and/or insured multifamily affordable housing or expiring low-income-housing tax credit units. Nearly all the states use private activity bonds and 4% credits to save existing, affordable housing.  States as diverse as South Dakota, Wisconsin, Massachusetts and Michigan are leading the way, with set- asides ranging from 30% to up to 60%. Eighteen states set-aside at least 10% of their 9% tax credits for preservation. In just the past year, 11 states have increased their preservation priorities in their tax credit allocation plans by creating or increasing preservation set-asides and establishing new points for preservation.

Click here for the full text of the National Housing Trust's survey.

In 2003, with property values in the neighborhood on the rise, the owner of Battery Park Apartments in downtown Asheville, NC was contemplating selling the 14-story building to a developer with plans to convert it to market-rate condos. That meant the property’s elderly residents would lose their homes and the city would lose a key affordable housing resource: the community’s 122 units of project-based Section 8 assistance.

On learning of the potential sale, National Church Residences (NCR) quickly decided that losing this housing was not an option. A national non-profit with previous experience preserving properties in North Carolina, NCR stepped in and bought the property quickly with an acquisition bridge loan. This was an unusual feat, since all the permanent financing pieces were not yet in place. It was also the first such loan made by Fannie Mae through its American Communities Fund.

When NCR expressed interest in preserving the property’s affordability, the owner agreed to sell to them– but only if they could match the other buyer’s offer. The challenge: meeting not just the price, but the purchase deadline. That’s where the National Affordable Housing Trust (NAHT) came in, helping to structure a six-month interest-only acquisition/bridge loan allowing NCR to buy the property. The loan involved two pieces: $4.465 million from Fannie Mae’s American Communities Fund, and $235,000 lent by NAHT. A key element: NAHT took the top loss position, with its funds covering the top 5% of the combined loan.

NCR started its $30,000 per unit renovations immediately after closing. The bridge loan was repaid and the deal went forward with the typical range of financing sources: a HUD 221(d)(4) mortgage, 4% Low Income Housing Tax Credits, federal and state historic tax credits, HOME funds from the City of Asheville, and NCR’s deferral of developer fees. This was a flagship preservation effort by the North Carolina Housing Finance Agency.

As Charlotte Caplan, Asheville’s community development director said, “Finding decent, safe, affordable rental housing in Asheville is a growing problem for our elderly… The preservation of Battery Park Apartments is a significant success for the city and its citizens. The residents of Battery Park now know that their future is secure.”

Mayor Bloomberg’s recently announced New York City Acquisition Fund will use a similar approach to the one described here. In that case funds from a variety of foundations and the City will serve as guarantees for loans provided by local lending institutions (click here for more information on Bloomberg’s announcement).  Having up-front capital like this allows preservation-minded groups to compete much more effectively in the race to acquire multifamily properties.

The National Housing Trust Community Development Fund (NHTCDF) is partnering with the Pennsylvania Housing Finance Agency (PHFA) to make preservation easier in Pennsylvania.  Non-profits seeking to preserve low- and moderate-income housing can now apply for predevelopment loan funds.  The funds can be used by eligible applicants to help with financing application costs, e.g. development consultant fees, market study costs, legal fees, etc.  Click here for the loan fund term sheet or contact Eric Herrmann (202-333-8931 ext. 26). 

“Getting it Done” is the focus of Preserving Rural Rental Housing: A Practitioner’s Conference, sponsored by the Housing Assistance Council. USDA’s Section 515 program provides decent, affordable housing for rural residents with very low incomes, but rural communities are losing Section 515 affordable rental stock. Participants will leave this training knowing how to use available funding and programs to keep these properties affordable in the long term.  Preserving Rural Rental Housing: A Practitioner’s Conference will be held in Seattle on May 24-26, 2006 .

For details and registration information, visit HAC’s web site, www.ruralhome.org, or call 415-381-1706.