Rental Assistance Demonstration
description
Transcript of Rental Assistance Demonstration
Rental Assistance Demonstration
HUD Office of Public & Indian Housing
Conference
Meridian, Mississippi, April 23, 2012
Vincent O’DonnellVice President, Affordable Housing Preservation
Local Initiatives Support Corporation
What is LISC?
• Local Initiatives Support Corporation– LISC is dedicated to helping nonprofit community development
organizations transform distressed communities into healthy and sustainable communities of choice- good places to work, do business, and raise children.
– LISC local offices serve 30 urban areas and Rural LISC works with 74 partner CDCs in 36 states nationwide
• LISC’s Preservation Initiative– Provided $80 million in financing since 2002 to preserve 15,000
homes
– Supports LISC local offices and our nonprofit partners with financing, project-specific TA, creation of preservation strategies and partnerships, and policy analysis
– Produces information products: guides, webcasts, trainings
Summary of Types of Section 8 TYPE OF S. 8 ADMINISTRATOR FEATURES
Housing Choice Vouchers
Public Housing Authority (PHA), with HUD PIH Funds
• Portable• Voucher issued to tenant.• Leases and funds renewed annually.
Project-Based Vouchers (PBVs)
Public Housing Authority (PHA), with HUD PIH Funds
• PHA guarantees Owner tenants with vouchers.• New voucher holders referred if tenants leave with original vouchers.• Contracts up to 15 years, renewable at any time for an additional 15 years.• First claim on available PHA voucher funds.• Subject to annual appropriations.
Enhanced Vouchers
Public Housing Authority (PHA), with HUD PIH funds
• Tenant protection measure, after mortgage prepayment or Section 8 opt-out.• Rents set at market level, holding owner harmless.• Portable• Tenant has right to remain, unless use changes to non-rental.
Moderate Rehabilitation
Public Housing Authority (PHA), with HUD PIH Funds
• PHA entered fifteen year project-based contract with Owner.• Not portable: subsidy tied to units.
Project-Based Contracts
HUD Office of Housing • Tool for production and stabilization of existing FHA-insured stock.• Owner has 5-40 year Housing Assistance Payments (HAP) contract directly with HUD, not PHA.• MAHRA establishes HAP renewal rules.
Homeownership Vouchers
Public Housing Authority (PHA), with HUD PIH Funds
• Minimum income, employment and counseling requirements• First-time homebuyers only• 10-15 year term limit on assistance• Assistance payment made to family or to mortgage lender
Types of Project-Based Section 8
Types of Project-Based Rental Assistance
Characteristics
Section 8 New Construction – Substantial Rehabilitation (S.8 NC/SR)
• Production mechanism• HUD Office of Housing• 20 year initial HAP terms for FHA-insured; 30-40 years for HFA uninsured. • Fully funded for contract term• Regulatory Agreement requires limited dividend [none for nonprofits]
Section 8 Loan Management Setaside (LMSA)
• Retrofit for FHA-insured properties, for economic stability and tenant protection.• HUD Office of Housing• Initial 5 year term, renewable for total of 15 years.• No independent dividend limitation beyond existing FHA requirements.
Section 8 Moderate Rehabilitation (Mod Rehab)
• Modest rehabilitation mechanism• HUD Office of Public & Indian Housing (PIH)• 15 year fully-funded initial HAP terms• HAP is between owner and participating PHA• Rental Assistance Demonstration provides some options.
Property Disposition • Provided at sale of foreclosed Formerly Assisted multifamily properties• HUD Office of Housing• 15 year fully-funded contracts• Cost-based rent increase rules
Preservation • Provided with ELIHPA & LIHPRHA Transactions• Office of Housing• 5 year term, fully funded.• Rents tied to owner incentives• Special renewal rules under MAHRA
“Orphan” Project-based AssistanceTypes of Project-Based Rental Assistance
Characteristics
Rent Supplement • Section 8 precursor• HUD Office of Housing• 40 year fully-funded contracts• Restrictive rent increase rules• Not renewable under MAHRA; temporary one-year extension authority. • Residents get HCVs for tenant protection at expiration.
Section 236 Rental Assistance Program (RAP)
• Section 8 precursor• HUD Office of Housing• 40 year term, fully funded. RAP linked to underlying Section 236 Mortgage• Rents tied to §236 Basic Rent; • Not renewable under MAHRA; temporary one-year extension authority. • Residents get HCVs for tenant protection at expiration.
Section 8 Moderate Rehabilitation (Mod Rehab)
• Modest initial rehabilitation mechanism• HUD Office of Public & Indian Housing (PIH)• 15 year fully-funded initial HAP terms• HAP is between owner and participating PHA• Renewable under MAHRA, but HUD policy limits renewals to one year and MAHRA rent structure is limiting.• Residents get HCVs for tenant protection at expiration.
Section 8 Expiration and Opt-out: MAHRA
• Basic rules for renewal of project-based Section 8 (but not Rent Supplement or §236 RAP)
• Options depend on type of Section 8 and property’s history
• Most renewal rents at or below market level• Exception: non-FHA-insured• If FHA-insured and above market, must
restructure mortgage (OAHP, née OHMAR)
Section 8 Expiration and Opt-out: MAHRA
• Enacted in 1997; amended in 2000, clarifying that “renewal rents no higher than market” can also mean mark up to market (or budget).
• Long-term HAPs permitted, but subject to annual appropriations.
Madison Park IIIMadison Park Development Corporation, Boston MA
• 120 units of nonprofit-controlled family housing.• New Construction in 1975 – dense inner core neighborhood. High Utility, Property Tax, Resident Services and Security
Costs.• Pre-LIHTC Equity Syndication (accelerated depreciation);
Nonprofit parent has purchased investor interests. • Section 236 with Interest Reduction Payments; Mortgage
Matures in 2020.• Section 236 Rental Assistance Payments (RAP); Contract
expires in 2015 (prior to mortgage maturity) and is not renewable.
• Rents are $500 below market.• Well-maintained, but significant capital needs, due to low
Section 236 rents and land settling.• Section 236 mortgage can be prepaid, generating Enhanced
Vouchers.
Project-Based Rental Subsidy Scenarios
SCENARIO 100% PBVs 50% PBVs; 50 EVs
Average Initial PBV Rent $1,593 $1,593
Average Initial EV Rent Not Applicable $2,107
Initial Operating Expense PUY $11,006 $11,153
Subsidy Attrition Not Applicable 20% per year
Rents After Turnover PBV Standard LIHTC Standard
Initial Net Operating Income $856,005 $1,191,005
Initial Cash Flow $74,925 $109,003
Year 10 NOI $890,083 $687,828
Year 10 Cash Flow $529,655 $82,298
SOURCES AND USESSCENARIO 100% PBV 50% PBVs; 50 EVs
SOURCES
HFA First Mortgage 12,125,000 9,400,000
HFA Second Mortgage 246,500
HFA §236 Decoupling Note 2,158,270 2,158,270
4% LIHTC Equity 11,180,000 11,160,000
Seller Note, Deferred Fee 10,907,730 13,093,730
Total Sources 36,371,000 36,058,500
USES
Acquisition 18,000,000 18,000,000
Construction 9,999,000 9,999,000
Hard Cost Contingency 1,000,000 1,000,000
Soft Costs 2,036,000 2,030,000
Dev. Fee, Overhead & Reserves
4,202,000 4,026,000
Financing Expense 1,134,000 1,003,500
TOTAL DEVELOPMENT COST 36,371,000 36,058,500
LISC’s Green Preservation Resources
www.lisc.org/greenpreservation