Nonprofit Developers Examine ‘Sustainability,’ Population Groups at Novogradac Conference
Sustainability–in various forms–is a major issue for nonprofit affordable housing developers. During a session Dec. 2, 2021, at the Novogradac 2021 Tax Credit Housing Finance Conference in Las Vegas, the issue took center stage.
The Nonprofit Issues panel included Waldon Swenson, vice president of corporate affairs of Nevada HAND, a Las Vegas-based construction, development, property management, resident services and assisted living company. Swenson said his organization’s primary view of sustainability is the ability to keep properties affordable.
“We’re in this for the long run,” said Swenson. “Even when the affordability period ends, we want to keep the projects affordable. We are very active in the legislative process. Every other year, we have a state session and there is legislation to make it a requirement to let individuals know when properties end affordable periods so we can keep them affordable. We’re always thinking about sustainability for resyndication and rehabilitation. As we grow and these properties age, we want to keep them affordable and tap into tools that really make sense.”
Amy Case, chief financial officer for the Jefferson County Housing Authority, doing business as Foothills Regional Housing in Colorado–which develops and manages more than 1,200 affordable units and 1,800 rental assistance vouchers–said project-based vouchers play a critical role in project feasibility for public housing authorities (PHAs) and their landlord/developer partners.
“I would say something that’s always a hot topic for developers and PHAs is availability of project-based vouchers,” Case said. “Vouchers are an incredibly scarce resource. Many housing authorities can’t even fully lease to the number of vouchers that they have in their awarded baseline–having a set number of vouchers doesn’t necessarily mean that you can assist that number of families. How many you can assist is based on the number you can afford to assist. As the per-unit cost increases with increasing rents that outpace family income growth, it costs us more to assist each family. That’s made a scarce resource even more scarce.”
Another definition of sustainability–being eco-friendly–was also top of mind to panelists.
“From our perspective, sustainability is rooted in our mission and process,” said Welton Jordan, chief real estate development officer at EAH Housing, a nonprofit development and management organization that operates more than 200 properties in California and Hawaii. “We’re looking to add solar hot water and solar [photovoltaic] on our properties.”
Jordan said EAH’s long-term operating philosophy–he said EAH has never sold a property–leads to consideration of the benefits of green energy and overall operating expenses.
“We’re here for perpetuity,” Jordan said. “Because of that, we also need to address the operating expenses, which have been skyrocketing due to several factors, especially the high cost of insurance. Whether you’re looking at a new development or renovating an older community, maintaining stability in operating expenses is important.”
He said renewable energy helps stabilize those figures.
Mike Finn, chief financial officer at National CORE, a national development, construction, property management and resident services organization, said his company is always looking at going green.
“We’ve got 55 to 60 solar projects right now in our existing portfolio,” said Finn. “A lot of times, if you can’t show significant improvement in cash flow, you’re not able to refinance those properties [at the 15-year mark]. The energy component is key in refinancing a lot of our deals.”
Swenson said that to successfully rehabilitate and refinance a property, green energy is often necessary.
“The only way to make sense in rehabilitation is to increase income and decrease expenses,” said Swenson. “Solar is how to do that, because it provides savings down the road. For anyone looking to get into the industry, [green energy is] the right approach to go. Not only is it environmentally good, but the savings aspect is tangible.”
Swenson said environmental sustainability is crucial to the bottom line.
“One thing about sustainability is it should always be a focus,” said Swenson. “You should project into the future and be forward-thinking in business operations.”
Case discussed her agency’s participation in leveraging solar resources without upfront cash investment via enrollment in community solar garden subscriptions.
Panelists also addressed the fact that nonprofit developers often serve targeted populations. They focused on permanent supportive housing (PSH).
“We serve a variety of populations,” said Jordan. “We serve families, seniors, farmworkers, students, you name it. Three or four years ago, PSH was a smaller part of our portfolio, but now it’s maybe 10%. That may go up to 15% or 25% due to the current political climate and funding. Part of that is mission-based and part of it is political backing from supporters to provide PSH in almost everything we do.”
Jordan said PSH requires extra work.
“It took the past few years to bring on people into our organization with operational experience with it,” he said. “We have a great property management team and services team.”
Finn pointed out the difficulty in serving specific populations, highlighting a National CORE property for homeless veterans with families who resided in specific ZIP codes and were HIV-positive or had AIDS.
“It was almost impossible to find residents [for that property], despite spending a lot of money to find them,” he said. “Ultimately, we were able to relax some of the requirements, but it took a year and half to get to that.”
Finn said that PSH is receiving a lot of financing in California, which leads developers to consider that option. He said developers should expect operating expenses to double or triple in PSH development.
“It requires a different skill set than regular property managers,” Finn said.
Panelists discussed Project Homekey, a California program that creates partnerships between the state and municipalities to purchase and rehabilitate hotels and motels to house people experiencing homelessness.
EAH Housing completed one Project Homekey development.
“We partnered with a local housing authority, did project development, found an architect and did zoning changes,” said Jordan. “It turned out to be very challenging. There are so many things to understand in moving from transitory use to permanent use. Fortunately, we weren’t on forefront of that. We’re glad the housing authority was able to work through that.”
National CORE is also doing two developments with Project Homekey, according to Finn.
Jordan said the idea is a good one, but difficulties are inherent.
“It’s a great idea, but it’s now when policy meets reality,” said Jordan. “It’s a good idea to give those properties a light rehab. It’s a way to address homeless almost immediately, rather than building a new PSH development because it generally takes four or five years to build a [standard] homeless project.”
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