Message #119 From:
TheMachine Date: April 15, 2009 12:14:51 AM
INTK Stock : 90-Degree Turn: Stimulus Package Redirects Housing Efforts to Affordable rentals - Could this effect Nansulate sales?
Published: April 14, 2009
By Eugene Gilligan, Multifamily Editor, Commercial Property News
The American Recovery and Reinvestment Act of 2009 is now law and
on task to kick-start the moribund U.S. economy, including a
re-dedication by the federal government to developing and
rehabilitating affordable housing.
This sharper focus comes at an opportune time, given investors and
developers' difficulty finding financing in today's capital-constrained
environment. Not to mention state and city budget shortfalls and
dropping revenues among some related federal programs.
The George W. Bush and, to some degree, Bill Clinton
administrations turned their attention to increasing home ownership
among poor and middle-class residents more than to developing and
refurbishing affordable multifamily stock. "The Bush administration was
very hands off (on affordable housing)," says Phoenix Realty Group
managing director Ron Orgel. He concedes that the lack of attention
also owed partially to a homebuilding boom that many assumed would
serve constituencies in the low- and moderate-income brackets.
But the Obama Administration is clearly embarking on a new path,
having telegraphed its intentions early, pre-inauguration, through the
appointment of Shaun Donovan as Secretary for Housing and Urban
Development. Donovan previously served as head of New York City's
Department of Housing Preservation and Development, spearheading a $7.5
billion plan to build or rehabilitate 165,000 units of affordable
housing. The department recently announced that it has completed half
those units. The government has backed up Donovan's federal appointment
with cash, devoting $13.6 billion of the $800 billion stimulus package
to HUD. States, localities, owners and developers will bid on $3.6
billion, and the department has already allocated the remaining $10
billion based on a predetermined formula.
For example, the states will collectively receive $2.3 billion
through the Tax Credit Assistance Program. State housing agencies will
distribute the funds, giving priority to shovel-ready projects. The
initiative is intended to restart rental housing projects that garner
financing from Low-Income Housing Tax Credits. According to the
National Council of State Housing Agencies, the LIHTC program annually
funds 90 percent of all affordable rental housing produced, but
investment in the program has fallen from $9 billion in 2007 to between
$4 billion and $5 billion last year.
"We've seen many projects that have stalled or stopped," says
Judith Calogero, CEO of the New York Housing Conference, a coalition of
for- and not-for-profit groups involved in affordable housing ownership
and development. She notes that Fannie Mae bought $2 billion of these
tax credits a year, and Freddie Mac was also a major player. But
government-sponsored enterprises are unlikely to be major players in
this area in the near term. Banks like Citibank N.A. and Bank of
America Corp. also invested heavily in LIHTCs, but Citibank has cut
back sharply on its buying.
Another piece of the federal stimulus package allows states to
exchange a portion of their LIHTC authority for grants. That would put
immediate—this year—money into projects that cannot otherwise attract
much capital in a constricted lending environment.
HUD also is allocating $3 billion to 3,134 public housing agencies
to develop, finance and modernize housing in their communities. Much of
these funds will go toward making existing public housing units more
energy efficient. The Obama administration anticipates that this
retrofit program will benefit both affordable housing and the economy,
says Gary Painter, associate professor for the University of Southern
California School of Policy, Planning, and Development. "They see a
strong cost-benefit ratio. These are projects that can be started
quickly and can help stimulate the economy."
Appreciated Attention
All this aid will be greatly appreciated, according to Whiton
Street Associates L.L.C. CEO Mike Russo, whose company has broken
ground on a Jersey City, N.J., mixed-use project using state and city
funding. Of the property's 120 apartments, slated for delivery in 2010,
20 percent will serve as affordable housing. "The credit crunch has
made the environment very challenging."
Michael Lappin, president & CEO of The Community Preservation
Corp., however, sees opportunity in the slowdown. Falling land and
construction costs and favorable interest rates could boost affordable
housing development and rehabilitation, he said. In addition, some
overleveraged commercial properties may reenter the market at a
discount as candidates for repositioning. The opportunity to retrofit
properties to make them more energy efficient also adds to their
long-term affordability. "There is a great opportunity to tie these
things together," Lappin notes.
The single-family meltdown has prompted policymakers to renew their
focus on affordable rental housing, says Enterprise Community Partners
Inc. senior policy director Peter Lovinger. "There has to be more
diversified housing product than single-family housing, and part of
that is affordable rental housing." (This article first appeared in the April 2009 issue of Commercial
Property News, an MHN sister publication. You can reach Eugene Gilligan at eugene.gilligan@nielsen.com) http://www.multihousingnews.com/multihousing/content_display/features/e3i15e445736daf50e4dd77dba59d50e8af
