Stabilize rental households in the new Federal era
No one knows, but many advocates believe that Federal support for affordable housing is going to change...for the worse. A new strategy developed by Enterprise Community Partners (ECP) could provide an alternative for small local housing and social service providers.
What are the challenges for affordable housing expected to arrive from DC?
Deficit hawks in the Congress will be looking to offset President-elect Trump's proposed increases in infrastructure spending and upper income tax cuts by additional cuts in domestic spending.
Low Income Tax Credits (LIHTC) will be "in the mix" when Congress considers Tax Reform proposals in early 2017. Right now, LIHTC is the only source of funding for new affordable units that are needed to replace lost units and address the need for more affordable units.
For small to medium sized nonprofits that are interested in housing as a service, master leasing could provide a way meet the affordability needs of program participants with stability features, and increase the capacity of the organization to take on housing development projects, particularly in areas not served by nonprofit housing developers.
Master leasing works like this. A nonprofit enters into a long term (five years or more) commercial lease for a number of residential units in an existing building or development. The owner accepts a below market rate because she/he benefits from a guaranteed income stream, no turnover costs, and reduced management costs. Operating costs can be further reduced because the nonprofit sponsor doesn't need to make a profit or realize a return on investment.
Along with a lower fixed rent, the "Staying in Place to Get Ahead" plan proposes a mandatory savings account be established by the nonprofit sponsor. A portion of the rent payment (ECP suggests $25 per month) is deposited into a “rainy day fund” for use by the household when a short term financial emergency arises that could threaten household stability. To promote stability, the nonprofit sponsors might choose to match the household contribution, using grant funds. For more on how rainy day funds can promote household stability visit http://home.rhinohio.com/stabilize/your-business/rainy-day-funds
Wait...there's more cost savings ideas that can reduce rents.
A sharp pencil is a must. Sponsoring organizations will need help from a real estate professional to make a business plan before approaching a funder or Board of Trustees. Master leasing is a multi-year commitment with risks.Keep in mind that a third party ( non owner) property manager in Ohio are required to have areal estate license.
Reducing Energy Costs preserves affordability $648/year is the average savings for a tenant in an energy efficient rental home in Virginia according to a new study by Virginia Tech conducted for Housing Virginia, a public and private venture focused on high-quality affordable housing. According to Housing Virginia the cost of improving energy efficiency does not make the housing more costly. The study looked at Low Income Housing Tax Credit Housing that was both newly constructed and rehabilitated. "The target communities are affordable rental housing that is developed through the Virginia Housing Development Authority’s (VHDA) Low Income Housing Tax Credit (LIHTC) program. The study included senior housing and family housing. It also looked at the differences between new construction, rehabilitated housing and adaptive re-use." Learn more here: http://www.housingvirginia.org/Blog-2015-02-10-New-Housing-Virginia-Study-Finds-Residents-of-Energy-Efficient-Affordable-Rental-Housing.aspx