4 Percent Credit Projects
The Kunzelmann-Esser Lofts in Milwaukee provide 67 loft apartment/studios for artists in a converted building that was formerly the home of the Kunzelmann-Esser Furniture Company.
The property was renovated by Gorman and Company in 2003 using a mix of the 4 percent Low-Income Housing Tax Credit, historic tax credits, federal HOME funds and financing from the Wisconsin Housing and Economic Development Authority.
At 51st and King Street in Chicago, a 96-unit affordable housing complex subsidized partially by Section 8 funds was in danger of losing its affordable status due to rising home prices in the area. The National Housing Trust and the Chicago Community Development Corporation partnered in 2002 to acquire and preserve the property. They developed a complex financing plan that included 4 percent LIHTCs, a loan from the Illinois Housing Development Authority and increased Section 8 funding. With private activity bonds in the amount of $4.25 million, the complex was able to access $2.5 million in equity through the 4 percent LIHTC — a significant contribution to the total acquisition and renovation cost of $8.8 million.
New York, N.Y.
In July 2003, the New York City Housing Development Corporation (HDC) introduced its Low-Income Affordable Marketplace Program (LAMP), which provides financing for the creation of apartments affordable to residents earning less than 60 percent of area median income. Through this program, HDC issues tax-exempt bonds and couples the permanent mortgage made through the bond proceeds with a 1 percent second mortgage loan made directly through its corporate reserves. The tax-exempt bond financing qualifies the project for as-of-right 4 percent LIHTC, which is an essential component of the project’s financing. From 2003 to 2009, HDC created and preserved 18,782 LAMP units.
HDC brought the LAMP program to an end in November of 2014, replacing it with the Extremely Low and Low-Income Affordability (ELLA) Program. The ELLA Program aids households that earn up to 60 percent of AMI by constructing low-income multi-family rental projects. The ELLA program uses the LAMP program as a base, paying particular attention to increasing the set-aside units for homeless individuals.
In 2004, the $45.8 million Columbia Knoll development was built on the former site of the historic Shriners Hospital for Children. Because the site was listed in the National Register of Historic Places, the pre-development process took longer than usual. The preservation project lasted for three and a half years. Many building components of the Shriners Hospital, including doors, windows and cabinets, were preserved and incorporated into the new development.
Columbia Knoll includes a 208-unit building for seniors and 118 units for families spread across eight buildings. Apartments are restricted to families earning 30 to 60 percent of area median income. Units are required to remain affordable for a minimum of 60 years. The construction was funded by a $3 million loan from the Portland Development Commission, 4 percent LIHTCs, state energy grants and a number of other sources. Bond financing was responsible for 53 percent of the development’s funding, while 4 percent LIHTCs contributed 23 percent.
In 1991, residents of Meridian Manor successfully sued the building’s owner over housing code violations. When the owner was unable to pay the judgment, the residents assumed ownership of the building and formed a cooperative. Soon after, the city condemned the structure, but the cooperative lacked the resources to make the necessary renovations. The very low incomes of cooperative members prevented self-financing, while a shortage of subsidies and the competitiveness of the 9 percent LIHTC allocation process limited the options available for financing using public funds.
The District of Columbia Housing Finance Agency helped the residents finance the renovations by issuing tax-exempt bonds so Meridian Manor could qualify for the 4 percent LIHTC, which provided $1.15 million in equity. The D.C. Housing Authority also provided Section 8 funds to bring the rental income up to a level that would support repayment of the bonds. In order to qualify for these financing sources, Meridian Manor became a “rental-cooperative” — a combination of cooperative and rental housing. After 15 years, members of the cooperative would accumulate the financial resources necessary to own the property outright. Gap financing was provided by the D.C. Department of Housing and Community Development and the sale of historic tax credits.
New York City’s 50/30/20 Mixed-Income Model
New York City builds on the 80/20 platform by using local funds to make 30 percent of the market-rate units affordable to middle-income families (earning between 81 and 175 percent of area median income). This “50/30/20” split results in developments where 50 percent of units rent at market rates, 30 percent rent to middle-income families and 20 percent of units are rent-restricted according to Low-Income Housing Tax Credit guidelines.
This model facilitates mixed-income housing, however, a potential downside is that reserving 30 percent of the units for middle-income families might reduce the number of affordable units that can be created in the city overall. The housing units affordable to middle-income families require subsidy from the private activity bond that could have otherwise been devoted to creating additional units affordable to low-income families.
9 Percent Credit Projects
In 2006, the Skyview Park Apartments in Scranton faced the possible loss of affordability, as the property’s Section 8 contract was about to expire. The apartments were also in need of substantial renovation to make them physically viable. The National Housing Trust-Enterprise Preservation Corporation (NHT/Enterprise), in partnership with Evergreen Partners, acquired the property and worked with HUD and the Pennsylvania Housing Finance Agency to fund the renovation and preservation of affordability.
The Pennsylvania Housing Finance Agency provided 9 percent Low-Income Housing Tax Credits and a soft loan through its PennHOMES program to financially anchor the rehabilitation of the property. HUD also approved a 20-year Section 8 contract, and the city, county (Lackawanna) and state housing and economic development agencies provided additional capital to support this $8 million renovation and preservation of 188 affordable apartments.
The Residences at Wiley H. Bates Heritage Park is a multi-use complex converted from an old high school that sat vacant for 20 years. In 2005, Community Preservation and Development Corporation (CPDC) and its partner Northern Real Estate Urban Ventures LLC developed the former classroom wings of the building into a 71-unit independent living facility for low-income seniors.
The very low incomes of targeted residents, along with the historic nature of the building, required CPDC to put together a variety of private and public funding sources. Private sector financing consisted of tax credit equity from Hudson Housing Capital, who purchased the 9 percent Low-Income Housing Tax Credits allocated to the project. Public sector financing included secondary loans from Arundel Community Development Services Inc. and Maryland Department of Housing and Community Development.
In addition, the project received a project-based voucher Section 8 contract for all 71 apartments from the Housing Commission of Anne Arundel County. The project includes 36 units restricted to residents earning up to 40 percent of the area median income and 35 units restricted to residents at 50 percent of AMI.