The Loss of Affordable
Housing Stock and the Need for Preservation
The total number of federally subsidized housing units in the
state is over 73,000, including those financed by HUD, USDA Rural
Development and state-administered by the Minnesota Housing Finance
Agency. Virtually all of these units are at risk of being
converted to market rate housing due to the federal government's
policy decision to enable private owners to opt out of these programs,
combined with the fact that nearly all of these projects were
built 20 years ago with federally-funded mortgages, guarantees
and subsidies which are now beginning to expire.
The change in tax code in 1986 provides few benefits to owners
to stay in these programs. Congress also has adopted policies
to reduce federal funding for subsidized housing. As of September
1998, nearly 1,400 units in the state were already converted to
market rate, with owners of an additional 2,500 units giving notice
of their intent to convert to market rate rents. A large number
of additional projects are at imminent risk but have not yet filed
any intent of leaving the programs.
It is interesting to note that only Section 8-sponsored projects
are required by federal law to give advance notice of their intent
to convert to market rate, which means tens of thousands of units
funded by Section 236 and USDA Rural Development are not required
by law to give notice. While Minnesota law requires a one-year
notice to convert any federal or state subsidized housing project,
few owners currently conform to this law.
Housing Preservation Project:
Preventing the Loss of
Affordable Housing in Minnesota
The Housing Preservation Project (HPP)
provides legal and financial planning assistance to housing developments
at risk of losing their federal subsidies and converting to market
rate housing. HPP is a non-profit entity led by attorneys Jack
Cann and Ann Norton, who each have extensive knowledge and experience
in the fields of affordable housing, government relations and
housing law. HPP is supported with funding from the Family
Housing Fund and Greater Minnesota Housing Fund, and provides
critical technical assistance and legal intervention to protect
projects at risk of conversion or deterioration. Assistance is
available for at-risk projects in Greater Minnesota. Contact Program
Officer Amy McCulloch at GMHF for further information.
National Housing Trust (NHT)
Identifies Key Strategies used
in Minnesota to Preserve Existing Housing
The National
Housing Trust is a national nonprofit organization
formed to preserve and improve affordable multifamily homes for
low and moderate income use. The Trust saves multifamily properties
at risk of conversion to market rate housing and resolves the
problems of "troubled" properties that suffer from physical
deterioration and financial and social distress. Michael Bodaken,
president of NHT, addresses the importance of this cause in Taking
the Right Steps to Preserve Affordable Housing (pdf).
The National Housing Trust has identify state and local level
initiatives that preserve affordable, multifamily housing in Minnesota
as part of a larger State
and Local Housing Preservation Initiatives survey.
Initiatives in Minnesota
Low Income Housing Tax Credits (9% Credits)
For 2004, one of the minimum threshold requirement is: projects
which preserve existing subsidized housing, if the use of tax
credits is necessary to (1) prevent conversion to market rate
use or (2) to remedy physical deterioration of the project which
would result in loss of existing federal subsidies.
The state awards 100 points--higher than any other category
in the QAP--to Non-Tax-Exempt, Minnesota Housing Finance Agency
(MHFA) Credit Ceiling, Competitive Round Projects that preserve
federally-assisted units (federally- assisted low income housing
which, due to mortgage prepayments or expiring rental assistance,
would convert to market rate use or due to physical deterioration
or deterioration of capacity of current ownership/management
entity would lose its federal subsidies within 2 years of the
application date).
- 10 points are awarded to Tax-Exempt, Non-MHFA Credit Ceiling,
and Non-competitive Round Projects for preservation.
- Up to 18 points are given to an owner that has entered into
negotiations with a Local Housing Authority to receive Project-Based
Rental Assistance.
Allocations: While the amount of tax credits
requested in 2003 was more than double the amount reserved,
two of the seven cities and counties that suballocate credits
returned theirs to MHFA. In 2003, acquisition/rehabilitation
projects received only $1.4 million of the $9 million in credits.
The tax credit amount per unit doubled in 2003, the median credit
reservations decreased by 30% and the median project size went
from 56 units to 40 units.
Private Activity Bonds with 4% Credits
The Minnesota Legislature has increased the share of the state’s
tax-exempt bond cap that goes to rental housing from $80.5 million
in 2001 to $123 million in 2002. For 2003, 33% ($124 million)
of the tax-exempt private activity bond cap was allocated to
housing.
Allocations: For 2002, MHFA and suballocators
allocated almost $5 million in multifamily bonds to six acquisition/rehabilitation
projects.
Other Preservation Initiatives
The State of Minnesota has also devoted $37 million in General
Fund appropriations to the preservation of federally-assisted
housing in that state. So far as the Trust is aware, apart from
Montgomery County, Maryland, this is the only municipality or
state to have devoted its general tax dollars to this type of
effort.
Understanding the Project-Based Section 8 Renewal and
Restructuring (“Mark to Market”) Program
The Section 8 world is changing. Many project-based subsidy
contracts are expiring. Owners have new options to continue their
participation or to withdraw from providing affordable housing.
Congress has set new limits on contract terms and subsidy payments
for many properties. HUD’s staff is being dramatically reduced,
and much of its regulatory role may soon be transferred to other
state and local public agencies, or to private contractors working
with the public sector. These changes will affect hundreds of
thousands of units and residents nationwide over the next few
years.
The National Low Income Housing Coalition (NLIHC)
provides a basic introduction to the sometimes bewildering maze
of recent changes affecting developments with expiring contracts
under the project-based Section 8 program. Their site contains
a variety of materials, including:
- Basic guides for tenant and community groups;
- Training materials; and
- Analyses of the legal and budgetary issues, and their implications
for developments, residents and surrounding communities.
The NLIHC
site also has links to other helpful sites with Housing Preservation
related information. |
