OHFA Annual Plan - Ohio Housing Finance Agency

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Workgroup #2:Development and Operating Costs for Multifamily HousingWorkgroup MembersChair: Paul Henley, 5/3 CDCMembers: Debbie Barry, Millenia Management; Scott Hunley, HUD; Hal Keller, OCCH;Michelle Norris, National Church Residences; Jay Scott, Ohio Housing Council; Steve Smith,Model Group; Spencer Wells, COHHIO; Andrew Whapham, LW Associates.OHFA Staff: Sylvia Ray and Brian CarnahanMeeting HistoryTeleconference 8/7/08; meeting 8/12/08; meeting 9/12/08; teleconference 9/18/08;meeting 11/4/08Executive SummaryBoth operating and development costs can be driven only so low. To achieve lower operatingcosts, it often requires a larger upfront investment in building systems, materials, etc.Housing NeedThe need for affordable rental units continues as a pressing housing need. Many householdsin Ohio face a housing burden. These households either do not have access to appropriatehousing or pay too much for the rental housing they occupy. This need is met by developingnew affordable housing for families, seniors, and special needs populations.Once an apartment community is developed, it begins incurring operating costs. Multifamilyhousing projects are experiencing increasing costs, including real estate taxes, utilities,and insurance. Because of stagnant or slow growing household incomes in much of Ohio,multifamily projects are unable to mitigate rising costs through rent increases. The inabilityto increase rents, even marginally, further restricts the capital available to maintain projectsappropriately, which impacts the ability to provide an attractive product. Potential residentsare not attracted to poorly maintained projects, so the cash flow of projects is furtherreduced because of unoccupied units, creating a downward cycle.Development - Met and Unmet Housing NeedsEach year, approximately $50 million is invested by OHFA in the development andconstruction of new units of affordable housing. Approximately, $22 million is from taxcredits and $27 million from gap financing sources such as HOME and the Ohio HousingTrust fund. Other funders such as HUD, Rural Development, and the Federal Home LoanBank, invest significant resources in Ohio.These new units only meet a modest percentage of the identified need. According to TheMillennial Housing Commission (MHC), nationally “the gap between the available rentalsupply of units affordable to the poorest households and the demand for them stood at 1.8million in 1999.” To make a substantial impact on the gap between extremely low-incomehouseholds and the supply of affordable units available to them MHC determined that itwould take annual production of more than 250,000 units for more than 20 years to closethe gap. These national figures are reflective of the affordable housing gaps in Ohio as well.60
Operating Costs – Met and Unmet NeedsFew programs exist to meet the housing costs needs of affordable housing. HUD subsidyprograms such as Section 8 help to pay many of the operating costs of affordable apartmentcommunities. Such subsidies are not available to all properties. More importantly, eventhose properties with a dedicated subsidy for operating costs find that the costs are risingfaster than the subsidy payments, leaving a significant gap between what is collectedthrough rents and subsidies and what must be paid to operate the property.Apartment communities can obtain some property tax relief through abatements and otheragreements. Unfortunately, such opportunities are not often available as local communitiesalso face revenue pressures.The cost of utilities, and the impact of rising costs, is not covered by any specific housingprogram. While programs and resources exist to increase the energy efficiency of apartmenthomes, such programs usually require an investment from the owner. Cash constrainedproperties find it difficult to raise the capital necessary to fund energy efficiency measures.Residents can find some relief from utility costs by applying for assistance from the HomeEnergy Assistance Program (HEAP).Utility costs impact both the revenue and expenses of a property. As utility costs rise, theincrease is reflected in a reduction in the net rent an owner receives as a result of theutility allowance most housing programs require. Other than encouraging the resident toreduce usage, the owner has few options to reduce the impact of rising utility allowances.The IRS has issued a revised utility allowance regulation that should ensure more accurateallowances. Prior to the issuance of the revised IRS regulation, OHFA issued an alternativeutility allowance policy that allowed owners to calculate a more accurate allowance.Property taxes remain an enduring unmet operating cost for affordable housingcommunities. Owing to the use of the income approach to property valuation, most taxcredit properties, in particular, find they are over-valued for tax purposes. This results inhigher payments of property taxes. This problem is often addressed locally through Boardsof Tax Appeal. At present there is no policy, program, or state law that helps to address thisissue.Insurance costs also impact affordable housing communities. Costs for insurance arecovered by property revenues. While the need is generally met, increasing costs haveimpacted many property budgets.The cost to comply with multiple programs can increase a property’s costs. While there isnot a specific program to reduce the costs confronted by properties.Best Practices and Programs for Development and Operating Costs for Multifamily Housing• Promote National Council of State Housing Agencies (NCSHA) role in identifying bestpractices.• Many states such as Florida and New York use actual rents in setting property valuesor offer special exemptions for tax credit properties. These steps ensure affordableproperties pay their fair share of property taxes.Action ItemsDevelopment and operating costs are two unique, but intertwined problems. Projects thatare well-built and energy efficient usually have lower operating costs, while poorly built andinefficient properties are more expensive to build. Therefore, there are some trade offs.Lowering operating costs requires more upfront capital.61
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OHFA Annual PlanThe Ohio Housing Fi
Page 5:
Mission StatementsThe OHFA Annual P
Page 8 and 9:
The State’s Housing NeedsAffordab
Page 10 and 11: Subject Matter Expert (SME) Workgro
Page 12 and 13: 3. Financial LiteracyOHFA and other
Page 14 and 15: Affordable Housing Preservation & D
Page 16 and 17: federal subsidies. To achieve this
Page 18 and 19: Accessible HousingBackground DataOh
Page 20 and 21: 3) Create dedicated funding streams
Page 22 and 23: • Recommend that Ohio support the
Page 24 and 25: Rural and Appalachian RegionsBackgr
Page 26 and 27: 6. Annual Set-Asides and Incentives
Page 28 and 29: • Several cities in Ohio current
Page 30 and 31: OHFA should provide funding, traini
Page 32 and 33: Permanent Supportive Housing Produc
Page 34 and 35: 3. The State should assist local Co
Page 45 and 46: PrioritizationThe challenge of prio
Page 47 and 48: Agency RecommendationsThe Annual Pl
Page 49 and 50: APPENDIXWorkgroup 1: Affordable Hom
Page 51 and 52: Executive SummaryHousing Need Descr
Page 53 and 54: efficiency and resource conservatio
Page 55 and 56: 554. Home Buyer Education in OHFA F
Page 57 and 58: Estimated Units in Need of Some For
Page 59: Ohio County Foreclosure Filings (19
Page 63 and 64: Workgroup #2:Affordable Housing Pre
Page 65 and 66: Secondary Recommendations• Explor
Page 67 and 68: Executive SummaryOhio’s supply of
Page 69 and 70: Met Housing Needs (“Resource Inve
Page 71 and 72: Ohio Deptof MentalRetardation andDe
Page 73 and 74: Unmet Housing NeedsData OverviewThe
Page 75 and 76: ody, and will be built within the C
Page 77 and 78: • OHFA will continue to maintain
Page 79 and 80: Best Practices, Policies and Progra
Page 81 and 82: addition, 60,111 one-person househo
Page 83 and 84: Across Ohio, people with very low i
Page 85 and 86: • Responsible for Rent - The pers
Page 87 and 88: Seattle, St. Louis, and Washington,
Page 89 and 90: Primary Recommendations• Create a
Page 91 and 92: Unmet Housing Needs:• Due to the
Page 93 and 94: • The cost of construction often
Page 95 and 96: Recommendations for Annual Plan Adv
Page 97 and 98: capacity to quantify vacant propert
Page 99 and 100: distributed on or about January 15,
Page 101 and 102: Action is needed at the State level
Page 103 and 104: a “user-friendly” data system,
Page 105 and 106: 5) Incentivize the formation of bro
Page 107 and 108: Workgroup #8:Permanent Supportive H
Page 109 and 110: 3. Assist local Continuums of Care
Page 111 and 112:
Program and Resource InventoryNonpr
Page 113 and 114:
Table 2PopulationsPersons whoexperi
Page 115 and 116:
Examples: A national model for succ
Page 117 and 118:
oles, so they create a contract bet
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Workgroup #8:Appendix ANameProgramD
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or remedyingneglect, abuse,or the e
Page 123 and 124:
ased healthcare, and earlyintervent
Page 125 and 126:
“Bob” of Stark County, OhioPubl
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OHFA Annual Plan - Ohio Housing Finance Agency

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