Weird Affordable Housing Deals: A Primer

Mansur Abdul-Malik

Merriam-Webster defines weird as “of strange or extraordinary character.” When applied to potential affordable housing deals, weird is exactly the type of deal a willing developer ought to go for, but it’s not for the faint of heart

These include deals plagued by previous failure, those burdened by lawsuits or complicated legal situations, niche projects and those requiring tremendous financial finesse.

Experienced developers seeking tough projects and opportunities and willing to test the boundaries of affordable housing with regards to financing, structure, design, project management, and resident engagement, ask yourself these questions:

• Can your firm creatively put a project together, seeing past the obstacles, to construct the ideal situation for the resident population and the community?
• Are you comfortable testing to suss out problems, never simply accepting that past experience will lead to future success?

If you answered yes, the world of weird affordable housing deals, such as the below examples, may be right for you.

Hollander Ridge in Baltimore 

Hollander Ridge is an award-winning development of 94 single-family rental homes. This unique (read weird) rehab stems from a decades-old class action lawsuit brought on behalf of public housing residents who alleged a violation of the fair housing laws by HUD and the local housing authority. The case resolved in 1996 in a consent decree. Finally settled in 2003, the lawsuit found the housing authority not liable. However, HUD,  the housing authority, and the plaintiffs collaborated on this redevelopment concept that was financeable and was a model for future affordable housing development.

NHPF helped finesse the complex situation via its relationships with key players such as the state bond issuer, lenders, investors, and the housing authority, who fulfilled the promise of completing the rehabilitation program. Today, the completely rented homes at Hollander Ridge extend this promise as they give home renters the opportunity to experience the feeling of home ownership in non-impacted neighborhoods.  

City of Falls Church REACH Program 

What places the Falls Church, Va., project in the weird category? In this first-of-its-kind arrangement with $3.75 million in funding from Amazon, NHPF will directly manage a new homeownership program but own nothing. Eighteen applicants will be selected, most as qualified first-time home buyers able to purchase rehabilitated homes through NHPF for approximately $425,000 to $525,000. Amazon has provided the funding to the City of Falls Church via the Virginia Housing Development Authority for affordable housing initiatives through its Resources Enabling Affordable Community Housing in Virginia Program.

NHPF has had a thriving relationship with Falls Church for many years owing to its CDC Falls Church Housing Corporation. The program maximizes homeowner affordability using Virginia Housing Special Lending Programs and mortgage credit certificates, and local down payment assistance. With its commitment to helping home renters become homeowners, NHPF is placing all its expertise and experience to seeing that those qualified can build equity in a place they can afford, leveraging that equity to ultimately purchase a market-rate home at a below market price.

Magnificat and Temenos in Houston

Magnificat and Temenos are two PSH (Permanent Supportive Housing) “niche” deals in which NHPF has joined with the City of Houston, Harris County, Houston Housing Authority, Texas GLO, TDHCA and local partners. Each project presents many challenges providing housing for residents facing chronic homelessness. Many of these individuals have addiction and mental and physical health issues as well as job readiness needs. Offering extensive place-based supportive services helps them become self-sufficient. The small percentage of developers experienced and skilled enough to manage the process of developing PSH in Houston, a city known for its commitment to ending homelessness but in a state that doesn’t have adequate funding for operating these buildings, is also a challenge.

For both of these buildings, NHPF worked closely with local partners uniquely experienced in working with those living unhoused, a population with very particular needs. For example: the need to eradicate bed bugs that some residents encounter living in less than ideal conditions. Their experience helped shape the buildings themselves and not just the supportive service programs. For example, the Apartments at Temenos feature treatment for bed bugs via a hot room. All of the flooring is resilient and easy to clean for a population that is often ill while working through addiction issues. We seek out partners that offer organizations their wisdom and experience so building can be handled with respect and care.

Cardinal Ridge in Kansas City, Mo.

The clock was ticking on this affordable housing preservation project in Kansas City, scheduled to enter foreclosure in 30 days. The Housing Authority of Kansas City partnered with NHPF to prevent the foreclosure. Because the initial 15-year compliance period on the property had expired, the acquisition had to ensure the property remain affordable beyond the remainder of its 30-year extended use period and into the foreseeable future. With the deadline looming, the NHPF team went swiftly into action, performing all due diligence, negotiating, and structuring the deal, enabling the partners to close within 30 days, saving the 160-unit former 9 percent tax credit deal including LIHTC, market rate, and public housing units for seniors and families.

To those considering a weird, challenging deal, we offer some recommendations:

• Come from a place of yes—Follow this simple credo. If a potential property meets an organization’s parameters, consider it, even if it presents huge challenges from the get-go. Gather a team, take a meeting, do some due diligence and see if you can create a structure to get a deal done.
• Gain a granular understanding of the project—Begin by looking at the positives, but make a very thorough assessment of the risks and potential mitigants. Determine what resources are needed to tackle the challenge, delve into past projects with similar details and do qualitative and quantitative research.
• Put your “A” team on the project—Some firms are very risk-aversive and may, at the outset of a tricky or weird project, assign whoever has some free time to poke around a bit and assess. We recommend the opposite: Assign the most qualified folks to determine viability from the beginning in order to get a jump on the assignment or step away without wasting too much time.
• Closely monitor and always be willing to course correct—Especially during Covid, we were all assessing and reassessing plans. For example, we may have undertaken a rehab keeping residents onsite for the duration only to find out the best option would be an offsite relocation. Remain nimble and always have a Plan B (C and D are good as well) available to help successfully course correct.
• Communicate lessons learned early and often—All partners on a project (from the CEO to the residents) benefit from lessons learned. We encourage weekly reporting designed to capture the best ideas to replicate, those to change and those to abandon altogether, gathered from and shared with, every party including lenders, investors, state allocators, contractors, architects, residents, partner organizations and vendors.

Most of all, remain curious, unafraid and open. A combination of creativity, stick-to-itiveness, and acumen will lead you to complete even the weirdest projects.

Mansur Abdul-Malik is vice president, NHP Foundation.