Originally published on Forbes Business Councils by Seth Gellis, President of CPP.
It’s no secret that there is a nationwide housing crisis. According to the National Low Income Housing Council, "there is a shortage of more than 7 million affordable homes for our nation's 10.8 million plus extremely low-income families." And that’s just one of many sobering statistics. It’s clear that there is a need to develop affordable housing across the nation. While there isn’t a silver bullet to solve the crisis, I believe a solution that supports reducing per unit cost while also increasing generation of affordable units is a step in the right direction.
Affordable housing tax credits, issued through the Low-Income Housing Tax Credit (LIHTC) program, are instrumental for developers and partners looking to develop and preserve affordable housing nationwide. Qualified Action Plans (QAPs) outline housing priorities of the state and create the rules by which LIHTC applications are scored and credits are awarded. Examples of set-asides include geographic preferences, local housing market conditions, building characteristics (e.g., unit size) and type of project (e.g., new construction, rehabilitation), among others.
LITHC remains an essential part of the housing crisis solution in the U.S. Since 1987, it has helped to place 3.55 million affordable housing units in service. However, the guidelines and scoring mechanisms used to award tax credits for affordable housing projects have remained largely unchanged for decades—meaning that we are consistently evaluating (and funding) today’s affordable housing projects by 1986 standards.
At a high level, the goal of these guidelines is to promote the development of suitable, community-based affordable housing properties. But many of the guidelines are based on antiquated schemas and use cases that don’t factor in how people work, live, and interact with their community today. As a result, the scoring guidelines in the QAPs have the unfortunate and unintended consequence of discouraging affordable development—usually by increasing the cost of the development until it becomes unattainable, even with LITHC.
So, how do we increase affordable housing development while also maintaining a reasonable per unit cost? One key may be for affordable housing developers to take a critical and collaborative look at QAP scoring mechanisms to ensure that LITHC is operating effectively and efficiently. Based on my experience working in this sector, here are three scoring areas ripe for re-examination and collaboration among affordable housing stakeholders.
Many current state QAPs require affordable housing units to be a certain size, with California’s most recent QAP requiring one-bedroom LITHC units to be at least 450 square feet. At the same time, we’re seeing the emergence of market rate micro-units (apartments between 140 and 350 square feet) in urban cores as a solution to the need for more rental units in densely populated areas. Cities like Seattle have incorporated thousands of micro-units in their downtown core housing supply, resulting in high occupancy and more affordable rent.
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Downsizing the square footage requirement for affordable units to reflect trends in market rate units could enable developers to increase the density of affordable units within a property—making the property more affordable to develop and enabling the property to serve more people. In today’s world, where common property amenities and greenspaces may take precedence over primary living spaces, we must ask ourselves if unit square footage matters as much as it did previously.
Today’s tenants are looking for spaces that allow them to live, work, play and thrive in a seamless and convenient environment. Currently, many QAPs provide higher scores to affordable housing developments that are within certain distances of parks, libraries and other community cornerstones. However, many proposed affordable housing developments are looking to create those cornerstones within property lines—making the address’ location relative to existing cornerstones less important.
One example being explored involves including on-property parks, gathering spots, community rooms and social services. By providing your residents with free or subsidized high-speed internet access, they can access library materials online. There is also an opportunity for developers and property managers to subsidize subscription services (like Amazon Prime) for residents, which would allow for access to books and other entertainment media that would otherwise be accessible via library services. Through collaboration and implementation of creative on-site and technological solutions, you can create access to amenities and build community cornerstones within your own developments.
When LITHC scoring was first developed, there were no such things as Uber, Lyft, work-from-home or Amazon. Everyone was required to go to their place of work to get a paycheck—either via personal vehicle, public transportation or walking—and they’d have to visit a brick-and-mortar store to get their goods. Today’s mobile and gig economy enables residents to reap the benefits of a downtown core location while living further out from a city’s epicenter, where land costs for development are cheaper. For example, people can use rideshare services as transportation to work and can order groceries and medications to be delivered directly to their doorstep.
Looking forward, there is an opportunity to come up with flexible and innovative solutions that account for these types of amenities. One solution could be to work directly with cities to expand bus stops and routes further outside of the downtown core. However, there are other creative solutions to the issue to consider. If a property is not on a direct public transportation route, you may be able to work with rideshare companies to provide ride credits or reduced rates for their services to create affordable transportation options for your residents. Similarly, credits or partnerships with major retailers like Amazon, Target and Walmart could be explored for groceries and medications.
I believe looking at the affordable issue from a modernized lens will be an important first step in beginning to solve the nation’s affordable housing crisis, and that exploring creative options that allow developers to increase densification and unit creation will be foundational to the solution. Developers, businesses and public entities can (and should) work together to determine how QAPs can both better reflect the needs of modern-day residents and reduce per unit costs.
CPP (Community Preservation Partners), a mission-driven affordable housing preservation developer, has announced the acquisition and planned renovation of Normandie Villas, an affordable housing complex in Los Angeles. The property is situated in the highly desirable Adams Normandie neighborhood of Los Angeles. This is the sixth community in the greater Los Angeles region for CPP.
Normandie Villas is located approximately one mile from the campus of the University of Southern California and five miles from downtown Los Angeles. The transit-oriented location allows residents easy access to a bus stop, grocery store, public park and elementary school. Originally built in 1983, the property has not received any major renovations. The property is comprised of a single one-story garden style building and three, two-story townhome style buildings. Designed to accommodate families, Normandie Villas offers 15 two bedroom and 10 three-bedroom units, two of which will become fully handicap accessible as a result of the renovation. CPP’s total development investment is approximately $20.6M, which includes the purchase price of $11.5M and estimated renovation costs of $165,916 per unit.
“The south-central region of Los Angeles has a strong need for quality affordable housing and as evidenced by its long wait list, Normandie Villas reflects this need,” said Evan Cramer, Development Manager at CPP. “We are pleased that we are able to preserve 25 units of critical affordable housing for this community for years to come.”
Normandie Villas will receive significant renovations, including new shingle roofing, and energy-efficient HVAC systems and gas water heaters. Additionally, by implementing energy efficient improvements throughout the project, including upgraded roof insulation, installation of Energy Star windows and appliances, and use of high-efficiency LED lighting, CPP expects to double the property’s 10% energy efficiency improvement required by the California Tax Credit Allocation Committee (CTCAC).
“We are proud to be part of the solution to the affordable housing crisis in south-central Los Angeles and look forward to seeing the positive impact these improvements will have for years to come,” said John Fraser, Vice President at CPP.
Additional in-unit upgrades include new kitchen and bathroom cabinets, sinks, faucets and solid surface countertops, new entry and patio doors, new flooring, new toilets, shower surrounds and shower heads, and upgraded patio fencing. During the renovations, two of the property’s units will be made ADA compliant.
CPP will also make significant improvements to the property’s community spaces, including new site signage, landscaping improvements, new mailboxes, leasing office and laundry room upgrades, the installation of a new playground, ADA path of travel upgrades, new fencing at pedestrian gates, and exterior painting, among others.
CPP is partnering with LifeSTEPS to provide on-site adult education, health and wellness, and skill-building classes and services to residents.
Renovations are expected to be complete by June 2025. The property’s affordability was set to expire in 2027, but with CPP’s involvement, the Section-8 Housing Assistance Payment (HAP) contract will be renewed until 2044. Units will be set to 30%, 40%, 50%, or 60% of Area Median Income (AMI).
Additional partners on the project include the California Tax Credit Allocation Committee (CTCAC), who issued and allocated 9% LIHTC. WNC & Associates serves as the equity partner. Banc of California is providing construction financing, while Key Bank serves as the permanent lender, using a Freddie Mac product.
CPP (Community Preservation Partners), a mission-driven affordable housing preservation developer, has announced the acquisition and planned renovation of MCA III Apartments, an affordable housing complex in Los Angeles. The property is situated in the highly desirable south-central region of Los Angeles, which has a significant demand for affordable housing. This is the seventh community in the greater Los Angeles region for CPP.
MCA III Apartments is located nearby the desirable Baldwin Hills and Crenshaw neighborhoods, which offer residents convenient access to public transportation, groceries, and recreational activities. Originally built in 1958, the property has experienced significant deferred maintenance and has aging building systems. The two-story property consists of 20 units, including 12 one-bedroom units and eight two-bedroom units. CPP’s total development investment is $13.1M, which includes the purchase price of $7.25M and estimated renovation costs of approximately $163,000 per unit.
“MCA III Apartments has been an affordable housing option for residents of south-central Los Angeles for more than 60 years. As evidenced by the long wait list at the property, the demand for affordable housing in this region of Los Angeles is in extremely high demand,” said Evan Cramer, Development Manager at CPP. “We are excited to be able to not only preserve the affordability of MCA III Apartments, but also modernize the property and create more opportunities for community for its residents.”
MCA III Apartments will receive a comprehensive renovation, including the replacement of several large building systems, including water heaters, unit heating, plumbing, electric, flooring and roofing.
“By investing in modern, energy-efficient upgrades and creating new spaces for connection and learning, we’re strengthening the fabric of this community and ensuring that MCA III Apartments continues to be a vibrant affordable home for families for many years to come,” said John Fraser, Vice President, CPP.
Additional in-unit upgrades include new paint, energy efficient appliances, cabinets, countertops, LED lighting, ceiling fans and doors. To provide residents with more opportunities to socialize and gather, a brand-new common area and leasing office will be constructed. The property’s centrally located courtyard will also receive upgrades, including new concrete and landscaping.
CPP is partnering with LifeSTEPS to provide on-site adult education, health and wellness, and skill-building classes and services to residents.
Renovations are expected to be complete by June 2025. The property’s affordability was set to expire in 2024, but with CPP’s involvement, the Section-8 Housing Assistance Payment (HAP) contract will be renewed for 20 years. Units will be set to 30%, 40%, 50%, or 60% of Area Median Income (AMI).
Additional partners on the project include the California Tax Credit Allocation Committee (CTCAC), who issued and allocated 9% LIHTC, U.S. Bank as the equity partner and construction lender, and KeyBank as the permanent lender, using a Freddie Mac Product.
Originally published on Forbes Business Councils by Seth Gellis, President of CPP.
With the continued urgent need for more affordable housing across the country, industry experts and academics are looking for solutions, whether they involve preserving existing communities nationwide or creating additional units where they are needed most.
According to a recent study by the National Low Income Housing Coalition, there is a shortage of 7.3 million available affordable rental homes for the lowest-income renters in the U.S. While it’s a complex issue, one overlooked path to financing is the option to increase the use of private activity bonds (PABs), which pair with 4% low-income housing tax credits (LIHTCs).
Volume cap, a “use it or lose it” resource provided by the federal government to the states based on a per capita formula, allows tax-exempt financing to be issued for affordable housing at a lower interest rate. The lower interest rates offset the lower net operating income that debt is sized from as a tool to help keep project sources and uses in balance. This ensures a greater level of capitalization, reducing the need for other sources and increasing the funding available for construction activity.
This important resource is allocated and awarded by state finance agencies, some of which unfortunately do not use all the resources made available to them. This means that if a state agency has unused volume cap and a deal is unable to make it through the funding cycle for that state in a timely manner, the resource and accompanying economic and social benefits are lost for good.
So, what can affordable housing professionals and organizations do to ensure the volume cap does not go to waste or to use it in the most efficient manner possible?
One solution is to work with local bond issuers and agencies that support them.
Local bond issuers play a major role in identifying the projects most impactful for their community and often can reduce the overburdened load that housing agency staff must deal with.
At my company, we find that an average deal may take nine months to close, plus an additional year to complete the development or preservation of the property (with a few more months of time tagged on for an IRS Form 8609 to be issued). We consider that a quick turnaround. But when entities do not use a local issuer for the deal, the acquisition or renovation timeline can extend for an additional one and a half to two years—sometimes making the deal untenable.
Across the U.S., many affordable properties are in immediate need of preservation; and many of these deals use LIHTC as a part of their financing. Completing these deals as quickly as possible is integral to reducing the loss of affordable units and preserving options for communities.
According to a 2024 report from Harvard’s Joint Center for Housing Studies (JCHS), there was a loss of 2.1 million units with rents below the maximum amount affordable for the lowest income group since 2012. While creating new affordable housing units is a part of the solution, new construction alone won't be able to keep up with the need, especially if communities are losing more units than are being created.
I've found that when local leaders, community advocates, developers, lenders and agencies can work together, it creates efficiencies and the strongest outcomes in affordable housing development and preservation. Communities should have a say in their local housing choices. Local leaders and community advocates have the best understanding of residents’ needs and where and how to invest, and good developers will listen.
Working with local issuers increases the ability for local jurisdictions to control the terms and circumstances that preservation or new development must follow in addition to minimum state provided standards. When deals and terms are localized, it creates the largest impact for the community. Specific benefits may include:
• The community is empowered to decide the priorities they wish to address. Developers should foster dialogue with local housing advocates and community leaders to discuss and outline their wish list. Unsurprisingly, the goals are often the same.
• Related improvement projects (e.g., street, sewer, LEED), social service requirements, crime prevention programs, prevailing wage, are benefits that are, by and large, staying within their community (should they choose). This autonomy also relieves pressure on developers by having an equal partner in the myriad decisions.
• Locals control within the development what is done, where it’s done and who does it within the community. For example, they may have checklists or requirements (e.g., Section 3 that requires a local workforce) that directly benefit the local community and economy.
Affordable housing developers looking to finance their deals may have the opportunity to work with a local issuer to get the deal done. I recommend you keep these best practices in mind:
Just like when working with any financial partner, organization is paramount. As a developer, that means having the deal structure solidified, financial documents in place and a single point of contact for the local issuer identified. The more streamlined you can make the process, the better.
Developers likely understand that one of the key benefits of working with a local issuer is the ability to help impact the local community in specific ways. But, for that impact to be felt in the biggest way, developers must take the time to truly understand the local community and its needs.
Developers need to reach out early in the process to understand if the issuer has sufficient volume cap, and what their processes may be. Creating a relationship early makes the processing, organization and understanding of their needs much easier.
Ultimately, the ability to work with local agencies carries many benefits and can make developers and investors nimbler in their work solving the nation’s affordable housing crisis.
CPP (Community Preservation Partners), a mission-driven affordable housing preservation developer, has announced the acquisition and planned renovation of Normandie Villas, an affordable housing complex in Los Angeles. The property is situated in the highly desirable Adams Normandie neighborhood of Los Angeles. This is the sixth community in the greater Los Angeles region for CPP.
Normandie Villas is located approximately one mile from the campus of the University of Southern California and five miles from downtown Los Angeles. The transit-oriented location allows residents easy access to a bus stop, grocery store, public park and elementary school. Originally built in 1983, the property has not received any major renovations. The property is comprised of a single one-story garden style building and three, two-story townhome style buildings. Designed to accommodate families, Normandie Villas offers 15 two bedroom and 10 three-bedroom units, two of which will become fully handicap accessible as a result of the renovation. CPP’s total development investment is approximately $20.6M, which includes the purchase price of $11.5M and estimated renovation costs of $165,916 per unit.
“The south-central region of Los Angeles has a strong need for quality affordable housing and as evidenced by its long wait list, Normandie Villas reflects this need,” said Evan Cramer, Development Manager at CPP. “We are pleased that we are able to preserve 25 units of critical affordable housing for this community for years to come.”
Normandie Villas will receive significant renovations, including new shingle roofing, and energy-efficient HVAC systems and gas water heaters. Additionally, by implementing energy efficient improvements throughout the project, including upgraded roof insulation, installation of Energy Star windows and appliances, and use of high-efficiency LED lighting, CPP expects to double the property’s 10% energy efficiency improvement required by the California Tax Credit Allocation Committee (CTCAC).
“We are proud to be part of the solution to the affordable housing crisis in south-central Los Angeles and look forward to seeing the positive impact these improvements will have for years to come,” said John Fraser, Vice President at CPP.
Additional in-unit upgrades include new kitchen and bathroom cabinets, sinks, faucets and solid surface countertops, new entry and patio doors, new flooring, new toilets, shower surrounds and shower heads, and upgraded patio fencing. During the renovations, two of the property’s units will be made ADA compliant.
CPP will also make significant improvements to the property’s community spaces, including new site signage, landscaping improvements, new mailboxes, leasing office and laundry room upgrades, the installation of a new playground, ADA path of travel upgrades, new fencing at pedestrian gates, and exterior painting, among others.
CPP is partnering with LifeSTEPS to provide on-site adult education, health and wellness, and skill-building classes and services to residents.
Renovations are expected to be complete by June 2025. The property’s affordability was set to expire in 2027, but with CPP’s involvement, the Section-8 Housing Assistance Payment (HAP) contract will be renewed until 2044. Units will be set to 30%, 40%, 50%, or 60% of Area Median Income (AMI).
Additional partners on the project include the California Tax Credit Allocation Committee (CTCAC), who issued and allocated 9% LIHTC. WNC & Associates serves as the equity partner. Banc of California is providing construction financing, while Key Bank serves as the permanent lender, using a Freddie Mac product.
CPP (Community Preservation Partners), a mission-driven affordable housing preservation developer, has announced the acquisition and planned renovation of MCA III Apartments, an affordable housing complex in Los Angeles. The property is situated in the highly desirable south-central region of Los Angeles, which has a significant demand for affordable housing. This is the seventh community in the greater Los Angeles region for CPP.
MCA III Apartments is located nearby the desirable Baldwin Hills and Crenshaw neighborhoods, which offer residents convenient access to public transportation, groceries, and recreational activities. Originally built in 1958, the property has experienced significant deferred maintenance and has aging building systems. The two-story property consists of 20 units, including 12 one-bedroom units and eight two-bedroom units. CPP’s total development investment is $13.1M, which includes the purchase price of $7.25M and estimated renovation costs of approximately $163,000 per unit.
“MCA III Apartments has been an affordable housing option for residents of south-central Los Angeles for more than 60 years. As evidenced by the long wait list at the property, the demand for affordable housing in this region of Los Angeles is in extremely high demand,” said Evan Cramer, Development Manager at CPP. “We are excited to be able to not only preserve the affordability of MCA III Apartments, but also modernize the property and create more opportunities for community for its residents.”
MCA III Apartments will receive a comprehensive renovation, including the replacement of several large building systems, including water heaters, unit heating, plumbing, electric, flooring and roofing.
“By investing in modern, energy-efficient upgrades and creating new spaces for connection and learning, we’re strengthening the fabric of this community and ensuring that MCA III Apartments continues to be a vibrant affordable home for families for many years to come,” said John Fraser, Vice President, CPP.
Additional in-unit upgrades include new paint, energy efficient appliances, cabinets, countertops, LED lighting, ceiling fans and doors. To provide residents with more opportunities to socialize and gather, a brand-new common area and leasing office will be constructed. The property’s centrally located courtyard will also receive upgrades, including new concrete and landscaping.
CPP is partnering with LifeSTEPS to provide on-site adult education, health and wellness, and skill-building classes and services to residents.
Renovations are expected to be complete by June 2025. The property’s affordability was set to expire in 2024, but with CPP’s involvement, the Section-8 Housing Assistance Payment (HAP) contract will be renewed for 20 years. Units will be set to 30%, 40%, 50%, or 60% of Area Median Income (AMI).
Additional partners on the project include the California Tax Credit Allocation Committee (CTCAC), who issued and allocated 9% LIHTC, U.S. Bank as the equity partner and construction lender, and KeyBank as the permanent lender, using a Freddie Mac Product.