11

FEDERAL HOME LOAN BANK OF PITTSBURGHFEDERAL HOME LOAN BANK OF PITTSBURGH

BLUEPRINT COMMUNITIESBLUEPRINT COMMUNITIESHOUSING DEVELOPMENT SEMINARHOUSING DEVELOPMENT SEMINAR

DEVELOPMENT AND FUNDING OPTIONSDEVELOPMENT AND FUNDING OPTIONS

OCTOBER 19, 2005OCTOBER 19, 2005

22

Pride of Carlisle: BackgroundPride of Carlisle: Background

Began in 1997Began in 1997 Neighborhood plagued by drug Neighborhood plagued by drug

activity & violent crimeactivity & violent crime Poor image perception & self-Poor image perception & self-

perceptionperception Supported by existing neighborhood Supported by existing neighborhood

organizations, business community organizations, business community and nonprofit organizationsand nonprofit organizations

33

Pride of Carlisle: Background Pride of Carlisle: Background cont.cont.

Overarching goal – improve stability Overarching goal – improve stability of neighborhood by dealing with root of neighborhood by dealing with root causes of neighborhood decline.causes of neighborhood decline.

Total project cost to date: $5+ Total project cost to date: $5+ millionmillion

44

Pride of Carlisle: Background Pride of Carlisle: Background cont.cont.

Project partners:Project partners:Borough of CarlisleBorough of CarlisleRedevelopment & Housing Redevelopment & Housing

AuthoritiesAuthoritiesCarlisle Housing Opportunities Corp.Carlisle Housing Opportunities Corp.County of CumberlandCounty of CumberlandBanksBanksPA Department of Community & PA Department of Community & Economic Development Economic DevelopmentFederal Home Loan Bank of Federal Home Loan Bank of

PittsburghPittsburgh

55

Project Case Study: Project Case Study: Pride of CarlislePride of Carlisle

Acquisition and rehabilitation (for Acquisition and rehabilitation (for resale) of houses in declining resale) of houses in declining neighborhood.neighborhood.

Rehabilitation of owner-occupied Rehabilitation of owner-occupied properties/rehabilitation of public properties/rehabilitation of public housing/rehabilitation of deteriorated housing/rehabilitation of deteriorated rental housing.rental housing.

66

Project Case Study: Project Case Study: Pride of CarlislePride of Carlisle

Demolition of dilapidated properties – Demolition of dilapidated properties – construction of infill (new construction) construction of infill (new construction) housinghousing

Street trees, park improvements, police Street trees, park improvements, police stationstation

Complementary economic development Complementary economic development & empowerment programs& empowerment programs

Formation of neighborhood associationFormation of neighborhood association

77

Acquisition and RehabilitationAcquisition and Rehabilitation(for Resale) of Houses(for Resale) of Houses

30 houses acquired/rehabilitated & 30 houses acquired/rehabilitated & sold to first-time buyerssold to first-time buyers

Homeowner counseling requiredHomeowner counseling required Acquisition cost (per unit) Acquisition cost (per unit)

$40,000 - $60,000$40,000 - $60,000 Rehabilitation cost (per unit) Rehabilitation cost (per unit)

$40,000 - $100,000$40,000 - $100,000 Selling prices (per unit) Selling prices (per unit)

$40,000 - $70,000$40,000 - $70,000

88

Rehabilitation of ExistingRehabilitation of ExistingOwner-Occupied/Public Owner-Occupied/Public

Housing/Housing/Vacant PropertiesVacant Properties

Forgiveness loans to income-eligible Forgiveness loans to income-eligible owner-occupants (Home funds)owner-occupants (Home funds)

Façade/Landscaping upgrades in Façade/Landscaping upgrades in public housingpublic housing

Rehabilitation of vacant/deteriorated Rehabilitation of vacant/deteriorated housing for renthousing for rent

99

Demolition of Dilapidated Demolition of Dilapidated PropertiesProperties

Demolished properties sold off to Demolished properties sold off to adjoining owners or to nonprofits adjoining owners or to nonprofits (Habitat)(Habitat)

Constructed new for-sale (housing) Constructed new for-sale (housing) targeted blighted propertiestargeted blighted properties

Redevelopment Authority used spot Redevelopment Authority used spot blight (eminent domain) powers to blight (eminent domain) powers to acquireacquire

1010

Street Trees, Park Upgrade, Street Trees, Park Upgrade, Construction of New Police Construction of New Police

StationStation Street trees “soften” streetscape & Street trees “soften” streetscape &

absorb noise (CDBG-funded)absorb noise (CDBG-funded) Park improvements ($250,000) Park improvements ($250,000)

included new splash pad, gazebo, included new splash pad, gazebo, upgraded equipment, landscaping upgraded equipment, landscaping (CDBG-, borough- funded)(CDBG-, borough- funded)

New police station constructed 2004New police station constructed 2004 Railroad station renovated (CDBG-Railroad station renovated (CDBG-

funded)funded)

1111

Complementary Economic Complementary Economic Development and Development and

Empowerment ProjectsEmpowerment Projects

Assisted business in acquiring Assisted business in acquiring properties (example: print shop, TV properties (example: print shop, TV repair & sales)repair & sales)

Developed neighborhood computer Developed neighborhood computer center (The Cyberspace)center (The Cyberspace)

Developed comprehensive service Developed comprehensive service program to organize job training, program to organize job training, family savings account, health family savings account, health advocate programsadvocate programs

1212

Formation of Neighborhood Formation of Neighborhood AssociationAssociation

Essential agreement for successEssential agreement for success Residents need to “buy in” and take Residents need to “buy in” and take

responsibility for solutionsresponsibility for solutions Sharing of information (among & Sharing of information (among &

between residents) helpfulbetween residents) helpful

1313

414 North West Street:414 North West Street:Case StudyCase Study

Rehabilitation of extremely Rehabilitation of extremely deteriorated structure into 5 deteriorated structure into 5 efficiency apartments for persons efficiency apartments for persons transitioning out of short-term transitioning out of short-term sheltershelter

FHLBank AHP funds used ($40,000)FHLBank AHP funds used ($40,000)

1414

BEFORE

1515

AFTER

1616

414 North Hanover Street:414 North Hanover Street:Sources of FundsSources of Funds

FHLBank AHPFHLBank AHP $ 40,000$ 40,000 County (Act 137)County (Act 137) $ 40,000$ 40,000 Bank LoanBank Loan $ 20,000$ 20,000 Neighborhood Assistance ProgramNeighborhood Assistance Program $ 40,000$ 40,000 Housing Authority GrantHousing Authority Grant $ 23,000$ 23,000 Housing Authority LoanHousing Authority Loan $ 46,630$ 46,630

Total SourcesTotal Sources $209,630$209,630

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414 North West Street:414 North West Street:Uses of FundsUses of Funds

AcquisitionAcquisition $ 0$ 0 RehabilitationRehabilitation $203,630$203,630 Soft CostsSoft Costs $ 6,000$ 6,000

Total UsesTotal Uses $209,630$209,630

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West Street Pride:West Street Pride:Case StudyCase Study

Acquisition and rehabilitation of 5 Acquisition and rehabilitation of 5 houses on 400 block of North West houses on 400 block of North West StreetStreet

Construction of 3 new houses on infill Construction of 3 new houses on infill sitessites

$132,000 FHLBank AHP$132,000 FHLBank AHP

1919

West Street Pride:West Street Pride:Sources of FundsSources of Funds

HOME (DCED/PHFA)HOME (DCED/PHFA) $ 429,425$ 429,425 FHLBank AHPFHLBank AHP $ 132,000$ 132,000 Construction LoanConstruction Loan $ 169,500$ 169,500 County (Act 137)County (Act 137) $ 385,000$ 385,000 Bank LoanBank Loan $ 100,000$ 100,000 Housing Authority GrantHousing Authority Grant $ 11,675$ 11,675

Total SourcesTotal Sources $1,227,600$1,227,600

2020

West Street Pride:West Street Pride:Uses of FundsUses of Funds

AcquisitionAcquisition $ 283,787.02$ 283,787.02 Rehabilitation/New ConstructionRehabilitation/New Construction $ 746,161.38$ 746,161.38 Infrastructure (street trees)Infrastructure (street trees) $ 2,476.60$ 2,476.60 Developer FeeDeveloper Fee $ 60,000.00$ 60,000.00 Delivery CostsDelivery Costs $ 15,000.00$ 15,000.00 Administration/AuditAdministration/Audit $ 25,675.00$ 25,675.00 Soft CostsSoft Costs

Settlement – AcquisitionSettlement – Acquisition $16,000$16,000 Settlement – SaleSettlement – Sale $16,000$16,000 Marketing ExpensesMarketing Expenses $ 8,000$ 8,000 Insurance/TaxesInsurance/Taxes $ 9,500$ 9,500 Construction InterestConstruction Interest $30,000$30,000 Operating CostsOperating Costs $15,000$15,000

Subtotal – Soft CostsSubtotal – Soft Costs $ 94,500.00$ 94,500.00

Total Uses of FundsTotal Uses of Funds $1,227,600.00$1,227,600.00

2121

FEDERAL HOME LOAN BANK OF PITTSBURGHFEDERAL HOME LOAN BANK OF PITTSBURGH

BLUEPRINT COMMUNITIESBLUEPRINT COMMUNITIESHOUSING DEVELOPMENT SEMINARHOUSING DEVELOPMENT SEMINAR

DEVELOPMENT AND FUNDING OPTIONSDEVELOPMENT AND FUNDING OPTIONS

Presented by: Christopher GulottaPresented by: Christopher Gulotta

Executive DirectorExecutive Director

Redevelopment and Housing Redevelopment and Housing AuthoritiesAuthorities

of the County of Cumberlandof the County of Cumberland

114 North Hanover Street114 North Hanover Street

Carlisle, PA 17013Carlisle, PA 17013

cgulottacgulotta@cchra.com@cchra.com

website: cchra.comwebsite: cchra.com

2222

Homeownership Choice Homeownership Choice ProgramProgram

PHFA programPHFA program Purpose is to encourage for-profit Purpose is to encourage for-profit

homebuilders/ developers to build for-sale homebuilders/ developers to build for-sale housing in urban communitieshousing in urban communities

Provides flexible financing with less Provides flexible financing with less restrictions than other financingrestrictions than other financing

Local municipality must matchLocal municipality must match PHFA and local funding provide the much- PHFA and local funding provide the much-

needed gap in costs versus sales priceneeded gap in costs versus sales price Projects must be > 50 units in large cities,Projects must be > 50 units in large cities,

> 25 units in smaller cities> 25 units in smaller cities

2323

Homeownership Choice Program:Homeownership Choice Program:Project ExampleProject Example

Federal Hill, Northside, PittsburghFederal Hill, Northside, Pittsburgh 60 units for sale new construction along60 units for sale new construction along

Federal Street in PittsburghFederal Street in Pittsburgh URA is providing 75% of property through URA is providing 75% of property through

redevelopment processredevelopment process URA is providing $2.2 million in soft financing URA is providing $2.2 million in soft financing

to defray construction development coststo defray construction development costs PHFA, via HCP, providing a $1.8 million loan PHFA, via HCP, providing a $1.8 million loan

that is flexible in its reusethat is flexible in its reuse Remainder of financing from local lenders, Remainder of financing from local lenders,

funding about ½ of the housing costfunding about ½ of the housing cost Homes to sell from $100,000 to $185,000Homes to sell from $100,000 to $185,000

2424

Development and Funding Development and Funding

OptionsOptions Rental HousingRental Housing

2525

Sources of FinancingSources of FinancingDevelopment FinancingDevelopment Financing

Pennsylvania Housing Finance Agency (PHFA)Pennsylvania Housing Finance Agency (PHFA) Low-income housing tax credits (LIHTC)Low-income housing tax credits (LIHTC)

Rehabilitation/New constructionRehabilitation/New construction Acquisition on existing buildingsAcquisition on existing buildings

Private activity bonds (4% credits)Private activity bonds (4% credits) Penn Homes loans, 0%, 30-year loanPenn Homes loans, 0%, 30-year loan

State HOME programState HOME program Local government - HOME, CDBG or Act 137 funds (Trust Local government - HOME, CDBG or Act 137 funds (Trust

funds from the county)funds from the county) Historic tax creditsHistoric tax credits Federal Home Loan Bank Affordable Housing ProgramFederal Home Loan Bank Affordable Housing Program Other sourcesOther sources

DCED/PHFA financingDCED/PHFA financing Brownfields fundingBrownfields funding Housing Authority capital fundingHousing Authority capital funding

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Ongoing Operational FundingOngoing Operational Funding

Tax abatements (during construction Tax abatements (during construction & operations)& operations)

Section 8 subsidy - can charge higher Section 8 subsidy - can charge higher rents with Section 8 covering rents with Section 8 covering differencedifference

Tax incremental financingTax incremental financing

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Challenges in FinancingChallenges in Financing

Very competitive financingVery competitive financing Difficult to layer financing, both in timing and Difficult to layer financing, both in timing and

different funding requirementsdifferent funding requirements Who wants to be the first in?Who wants to be the first in? Leveraging the financing while keeping your site in Leveraging the financing while keeping your site in

place and costs downplace and costs down NIMBYism of affordable housingNIMBYism of affordable housing All funding types have restrictionsAll funding types have restrictions

LIHTC requires rents to be affordable to households < 60% LIHTC requires rents to be affordable to households < 60% area median incomearea median income

FHLBank requires energy efficiency modeling (may result in FHLBank requires energy efficiency modeling (may result in higher construction costs)higher construction costs)

Federal and state funds may also require Davis Bacon,Federal and state funds may also require Davis Bacon,MBE/WBE requirementsMBE/WBE requirements

2828

Sample Project - Negley Sample Project - Negley NeighborsNeighbors

49 units of renovation, new construction and historic 49 units of renovation, new construction and historic rehabilitation in East Liberty.rehabilitation in East Liberty.

Negley Neighbors is a scattered-site project in East Liberty and Negley Neighbors is a scattered-site project in East Liberty and Highland Park. A portion of the sites is in a Qualified Census Highland Park. A portion of the sites is in a Qualified Census Tract.Tract.

S&A partnering with East Liberty Development, Inc. (ELDI),S&A partnering with East Liberty Development, Inc. (ELDI),the local CDC.the local CDC.

Goal of the project was to target vacant and rundown properties Goal of the project was to target vacant and rundown properties on the private market.on the private market.

Partnership purchased 15 properties from private owners, city Partnership purchased 15 properties from private owners, city and ELDI.and ELDI.

Properties are in varied forms of condition, from substantial Properties are in varied forms of condition, from substantial demolition to selective demolition to new construction.demolition to selective demolition to new construction.

Will have 1-, 2-, 3-bedroom units, with rents from $400 to $800Will have 1-, 2-, 3-bedroom units, with rents from $400 to $800per month.per month.

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Sources & Uses for NegleySources & Uses for Negley

SourcesSources Citizens BankCitizens Bank

7%, 30-year term7%, 30-year term $800,000$800,000

Urban Redevelopment AuthorityUrban Redevelopment Authority $800,000, 0%, 30-year term,$800,000, 0%, 30-year term,

second mortgagesecond mortgage FHLBank AHPFHLBank AHP

$175,000 grant to ELDI$175,000 grant to ELDI Equity from sale of LIHTCEquity from sale of LIHTC

$485,000 per year, 10 years$485,000 per year, 10 years $4.8 million in credits x 96 $4.8 million in credits x 96

cents per credit = $4.6 million cents per credit = $4.6 million in equityin equity

Historic tax credit equityHistoric tax credit equity $300,000$300,000

UsesUses Construction cost - $6 millionConstruction cost - $6 million Acquisition cost - $600,000Acquisition cost - $600,000 Soft costs - $775,000Soft costs - $775,000

3030

Other Factors in FinancingOther Factors in Financing

Portion of site is in a QCT = increase of our Portion of site is in a QCT = increase of our credits by 30% for about 45% of the project.credits by 30% for about 45% of the project.

Used acquisition credits on portion of Used acquisition credits on portion of properties. Only eligible on buildings that properties. Only eligible on buildings that have been owned by the same owner for > have been owned by the same owner for > 10 years.10 years.

Cannot double up on historic tax credits, Cannot double up on historic tax credits, acquisition credits and QCT - must make acquisition credits and QCT - must make sure you are taking all into consideration.sure you are taking all into consideration.

3131

Keys to Successful Rental Keys to Successful Rental Affordable Housing Affordable Housing DevelopmentsDevelopments

Private and public participation - both in design and fundingPrivate and public participation - both in design and funding Work with a developer that understands the local needs and desiresWork with a developer that understands the local needs and desires Understand that the developer is also making a profit on this projectUnderstand that the developer is also making a profit on this project

Projects take 2 years to complete, with almost a daily commitment. What may Projects take 2 years to complete, with almost a daily commitment. What may seem like a lot of money is not always the caseseem like a lot of money is not always the case

Costs are going to be higher than what you may have seen on other Costs are going to be higher than what you may have seen on other projectsprojects

Federal, state and local funds bring good news and bad newsFederal, state and local funds bring good news and bad news Don’t let your real estate knowledge play a role in interpreting this projectDon’t let your real estate knowledge play a role in interpreting this project

In simple words - these projects do not make economic sense, that is why the In simple words - these projects do not make economic sense, that is why the LIHTC, HOME funds, etc.LIHTC, HOME funds, etc.

Leverage your funds - make sure the development team uses their skills to Leverage your funds - make sure the development team uses their skills to secure as much funding from as different sources as possiblesecure as much funding from as different sources as possible

Rental housing is a need in every community in Pennsylvania - you are Rental housing is a need in every community in Pennsylvania - you are fulfilling an important piece of your community puzzlefulfilling an important piece of your community puzzle