Web Feature: Tools for Preserving Aging Affordable Housing

Embury (Before)                                                                                          Embury (After)

New York–Embury, a 35-year-old, 200-unit seniors affordable housing project in Saratoga Springs, was outdated and featured old fixtures and appliances. All these factors contributed to higher energy usage, and many of the systems in the building weren’t safe for seniors. But in 2009, Omni Development received $18 million in financing for rehabilitation.

The renovation, now complete, will lower utility costs for residents and make the complex safer and more affordable to maintain. With updates to fire safety and energy conservation systems; replacement of windows and insulation, installation of handrails; a Wi-Fi hub to provide free Internet access to all tenants; and Energy Star appliances and light fixtures in every unit, the project will be the kind of healthy community that Omni Development believes is key in the process of preserving aging affordable housing.

Mark Irving, Urban Housing Committee’s director of land planning and entitlements, echoes the same thought. “It’s always good to build as best as you can rather than have issues later on. You also need to have good property management and good quality services in that community, such as health and wellness and education programs. You want to create a community where people have pride in their home. Effectively, the tenants have a sense of pride and ownership and they will take better care of the property, which will reduce maintenance costs.”

Duncan Barrett, COO of Omni Development, tells MHN, “From our perspective, there are a few core principles to preserving aging affordable housing. One really needs to put together enough capital to rehab a 35-year-old building. Even if it’s well maintained, the market will have changed, so you will have to make improvements to the building to reposition it. So you need to put together enough sources of funds to create a property that can sustain over the next 30 years.” The cost of renovating per dwelling unit for Embury was $125,100.

Once the financing is in place, Barrett says developers should conscientiously take a look at reduction in energy usage because affordable housing has inelastic incomes, which means that rents cannot be raised quickly or flexibly because they are limited by regulations and low incomes of people, yet the future of energy cost is very uncertain. “So we look at the building envelope, heating and cooling fixtures, etc. to figure out how to minimize current and future energy cost. We also look at whether there is a market for the project in the future,” says Barrett.

Financing

Relative to the tax credits, there are two programs—the 9 percent tax credit program, which is very competitive, and is dependent on the unit mix (it has minimum requirements) and the amenities (proximity to schools, grocery stores, pharmacies, etc). These days, the 4 percent tax credit and bond program is undersubscribed, and part of that is the way those deals are structured. “From a city and developer perspective, the 4 percent tax credits do not bring as many tax credit subsidies. This requires the city to provide more funding, something that has been reduced in the last few years due to the slowdown in the economy and, in California, a take by the state of a portion of the redevelopment funds from nearly every city,” says Irving.

Irving’s advice to managers of aging affordable housing communities who don’t have money for rehabilitation is to look thoroughly. “Explore grants through HUD and various state programs. One that’s very popular right now is the energy efficiency program through HUD, which makes sense for all these projects to apply to. If you can replace your windows to double-pane instead of single and improve various mechanical systems, it’s better for the building as well as the tenants. If mechanical systems are up-to-date, residents won’t spend as much money on utilities and will instead spend on the other things they need. All these factors make for a better project,” explains Irving.

Property Management

On the operations and maintenance side, Irving says it also comes down to money, so you have to allocate resources properly. Things like maintaining the mechanical systems and making sure your sprinklers are not hitting the building; that you aren’t over-watering so you eliminate issues of mold and infiltration of water; repairing roofs if they need fixing; cleaning out rain gutters if they are clogged, etc. are some of the small preventive things you can do to avoid turning the small problems into big ones. He also recommends using technology such as software programs that help manage the properties.

Gianna Solari, vice president and COO of Solari Enterprises, a third-party property management company, outlines five important points from the management and operations perspective.

1. Education and training of staff: People need to have dedication to pursuing new knowledge and thinking outside the box. People need to be reminded that business is not done the same way it used to be done 30 years ago. Think outside the box.
2. Maintenance: Quality, procedures and protocol have to be maintained. Well-educated maintenance staff that updates their knowledge in a variety of ways including energy efficiency. Stay ahead of the curve when it comes to maintenance. Make sure unit inspections are done properly and in a timely manner. It is difficult to preserve a building when the maintenance is not taken care of.
3. Energy efficiencies and green operations: Sustainability is important. Take natural resources without destroying ecological balance of that community. Take the best of everything as far as efficiencies go; adding solar panels, water reduction, changing landscaping are all part of it. Being efficient in everything we use: water fixtures, appliances, windows and doors.
4. Resident involvement: educating them to maintain their units and the community. Conducting activities. Have meetings and events with residents so they can bring ideas, etc.
5. Maintaining the requirements of the deal that the developers have created and left in a manager’s hands: To make sure that extended use agreements or Section 8 contracts or whatever affordability deals are on the property are in compliance during the life of the property. All the regulatory agreements and conditions of a deal must be adhered to so that the property maintains its affordability. Tax credits of a property could be captured back and instantly it becomes a market-rate property.