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HomeMy WebLinkAbout12-11-23 Public Comment - N. Nakamura - Support for Municipal Housing AuthorityFrom:Natsuki Nakamura To:Agenda Subject:[EXTERNAL]Support for Municipal Housing Authority Date:Monday, December 11, 2023 8:48:28 AM Attachments:11_27_23 social housing convo.pdf CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless you recognize the sender and know the content is safe. Dear Commissioners, I am writing in support of the establishment of a municipal housing authority. According to Montana State code, when there is a lack of safe and sanitary housing accessible to residents, it is in the public interest for the city to address the issue by establishing a public housing authority to serve persons of low income. "Persons of low income" is defined (7-15-4402) as, “persons or families who lack the amount of income that is necessary, as determined by the authority undertaking the housing project, to enable them, without financial assistance, to live in decent, safe, and sanitary dwellings without overcrowding.” With our current state in housing, even people earning 80-120% AMI (the “missing middle”) struggle to find housing and need financial assistance, such as $1.6 million TIF assistance from the City for the 50 units serving 120% AMI in the fire station property. Residents of Bozeman petitioned for the establishment of a housing authority in 1982. Mr. Kent Mollohan of the State Department of Commerce at the time stated, “a community should consider the creation of a housing authority if more than five unsafe or unsanitary units exist,” and that with a housing authority, “there is little or no financial burden to the taxpayer.” Despite this, the City Commission voted down creating a housing authority 5-0 on May 24, 1982. Thirty years later, residents of Bozeman are petitioning again to establish a housing authority because our housing crisis has only deepened. Safe and stable housing is not accessible to long-time residents and newcomers alike. In the 2020 Community Housing Action plan, Public Sector Development is listed as a potential “future strategy,” but there was a concern about “financial risk.” A public housing authority is actually a financially stable and a fiscally responsible investment, especially since the City of Bozeman is already investing substantial resources to address affordable housing - TIF, grants to nonprofits, staff and Commissioner time, etc. As the public housing authority adds new affordable housing projects to the pipeline, mixed-income rent would be calculated to cover operation & management and some surplus to fund more housing, without further burdening the taxpayer. Comparable communities like Park City / Summit County in Utah are moving forward with a new housing authority to address their housing crisis. The task force there saw many advantages of a housing authority, including efficiency and stability. Mr. Daniel Nackerman, the ED of the SLC Housing Authority, is supportive of more communities having a housing authority, stating, “officials should consider creating such an organization because housing authorities actually reduce poverty and stimulate units, help support local businesses by providing workforce housing and improve quality of life.” Both Mr. Nackerman of Utah and Mr. Mollohan of Montana stated that there is some initial startup cost for the first year or two, but then a housing authority is financially self-sufficient as it grows. The benefit of a municipal housing authority acting as an independent entity from the City Commission is that it can efficiently focus on creating safe, enduring, and affordable housing - rather than changing City Commissioners that have to learn and manage many things to keep the city running, beyond how to develop affordable housing. The municipal housing authority can develop in a way that aligns with our priorities and sustainability goals laid out in our plans, have control in where density is placed, and develop on our own timeline. Public-private partnerships are important, but right now we are getting the worst of both worlds: government tries to encourage better development by implementing regulations, but private developers find them to be stifling and cost-prohibitive to building quality affordable housing; meanwhile, public subsidies going to private entities (in the form of housing vouchers or LIHTC) mean all profits go to the private entities rather than being reinvested in more affordable housing. Instead, with a housing authority, we can leverage private partners with development expertise, but use public funds to build public ownership, meaning that the funds are invested directly and efficiently in the housing we need and want the most in our community, and that housing pays for itself and forward to future affordable housing. Taking a longer-term vision can be challenging when we are in a housing crisis, but an investment will have long-term returns in stabilizing housing and retaining our workforce and residents. Investing in an efficient revolving housing production fund like has been done in Montgomery County, MD provides stable and predictable funding for new affordable housing projects, and reduces the struggle of looking for gap financing for each project or needing to get approval on a case-by-case basis from an outside fund such as Gallatin Impact Fund. In our conversation with Chief Real Estate Officer of the housing authority in Montgomery County, Mr. Zachary Marks talked about how we are used to affordable housing financing being really complicated, but their housing production fund is actually quite simple - municipal finance is put into a fund that is used in the construction phase of projects that create public ownership. (I have attached my notes from the conversation with Mr. Marks that the petitioning organization facilitated because Mr. Mark Bond of One Valley asked me to take and send these notes, but they were not included in the City’s packet.) I ask all of our hard working City Commissioners to please vote yes on establishing a housing authority so that we are not here again in another 30 years in a greater housing crisis. Sincerely, Natsuki Nakamura Notes from 11/27 conversation with Zachary Marks, Ken Silverman, and Robert Struckman Zachary Marks (Chief Real Estate Officer) and Ken Silverman (Vice President of Government Affairs) of the Housing Opportunities Commission of Montgomery County, MD ●This is model that is very applicable and flexible depending on the specific factors in your local market ●Montgomery County is huge, 1 million people and 500 square miles ○High rents, high cost of living ○Pretty consistent employer (federal government) ●HOC started out as traditional public housing authority, now doesn’t have traditional public housing (section 9) because converted all units ●HOC is somewhat unique in that it has a lot of authorities & capabilities for affordable housing under one roof: housing authority (administers vouchers), finance agency (issue bonds and finance own projects), and public developer (utilizes tax credits and other tools for affordable housing) ●The ownership piece is the key in thinking how to apply their model to Bozeman ●HPF has gotten a lot of attention recently, but HOC has been doing mixed-income for a long time (they own market-rate units) ●HPF (Housing Production Fund) was created as an answer to how the Commission could help them do more ●HOC is the owner of most of the subsidized housing in the county ●HOC utilizing LIHTC and all the other affordable housing development tools, but also develops mixed-income projects ●Lindley project wasn’t a LIHTC project, the HOC basically did it with their own cash and partnering with another investor ○51% belongs to HOC, but rest didn’t, so HOC lost out on those units ●HPF was born to be able to do more projects like this, but own all of the building so that rent and appreciation stays with the us (the government) ●HPF is actually quite simple - municipal finance put into a fund that HOC then uses to create ownership in its projects, used in the construction phase of projects ●County council approved $50 million then an additional $50 million (because HPF so successful) ○County pays principal and interest for the 20-year bond ●HPF controlled by HOC, loaned into projects at 5% interest rate ○This replaces the typical LIHTC or private equity ○Private equity usually 15-20% interest - much more expensive ○Private equity investors gets pretty much all of the returns that come out (rather than the returns benefiting a government fund) ●New project is stabilized and refinanced at the 5 year mark ●HOC happens to be finance agency - it could be a separate entity but whoever it is needs to be ready to provide the permanent financing to the stabilized property ●Permanent financing built in to include paying back the HPF in predictable way and revolve every 5 years ●The HPF comes with affordability requirements (HOC can and does achieves higher) ●Creating the HPF wasn’t a philosophical legislative piece, but more of a budgeting decision to support this tool ●Laureate project - project funded by HPF and will probably stabilize early ●Hard to finance in private market, creates conservative investment in housing pipeline ●HPF guarantees financing up-front, so can add projects to the pipeline more aggressively ●HPF better applied to large, transit-orientated projects (250-400 units) ○Doesn’t have to be, but this is because HOC’s goals is to get as many units out as fast as possible (focus on production) ○A fund like HPF can be adapted based on development needs ○With the mixed-income model, about the same or maybe less “affordable” units result compared to a mid-sized LIHTC project, but basically getting an additional tax credit deal (in terms of new affordable units available) without cannibalizing any of the typical limited resources (eg. soft funding, volume cap, tax credits) ○All pieces important - big goal with HPF was to not take away affordable housing resources from other groups ●Housing trust funds often help with gap funding, but HPF can stretch a lot farther because not just a one time gap fund ●Why public ownership? ○Affordable units never expire ○Can set own policies with residents, including capping rental increases ○Can incorporate resident services and resources (eg. access to rec centers) ○Can build to other development priorities and goals (eg. sustainability goals, permanent supportive housing) ○Equity is captured to ensure reinvestment in future units and maintenance of existing units ○Can have control on how & which communities economically develop by taking the first step with what housing is built where ●Fund revolves every 5 years, funding a new project each time. ○After 20 years, the bonds are paid off and there is no further cost to the County, but the fund will continue to revolve ○As compared to each LIHTC which subsidizes only 1 project ●By starting a revolving fund now, huge long-term stability and don’t have to constantly look for more funding ○Don’t need to keep adding more money to the fund forever, because it will continue to revolve and create enough housing and ownership equity ○20-30 years feels far away, but the impact HOC is able to do now is a testament of how investments decades ago pay off (ie. HOC actually owning market-rate property rather than losing that value to the private sector) Robert Struckman, AFL- CIO Senior Western Field Representative, Northern Rockies and Alaska ●Unions deal with more than just contracts for their workers and have huge impacts on the community as a whole ●Unions have retirement accounts that are managed by pension boards ●Housing Investment Trust (HIT) is a mutual fund made up of pension dollars from union members, specifically invested into housing ○Housing built by HIT is union-built and almost always affordable housing ●Whenever someone goes to the lower bidder for an affordable housing project, they are actually exacerbating the problem while claiming to alleviate it if all of the workers on the project are not getting paid enough to be able to live there ●HIT is investing in a project in Billings with High Plains Architect, 12-story apartment tower ○It will be built to the highest environmental standards, affordable, and all union-built and as much as possible union-sourced ●Also working on building housing in more rural areas (eg. Roundup) where there isn’t housing for the workforce especially teachers ○Problem in these areas is that it can be hard to get a project financially backed because banks won’t back if there is no comparable ○Working to turn an old school into housing units, which will also be built to the highest standards ○School district will own the building ●If our unions are going to build market share in housing, we have to gain skills and be the best at building the housing of the future ●Biggest hurdle is the construction loan ○Unions (through HIT) are putting up the money up front for the construction loan ○Then when project is stabilized, get returns back and can back a new project ●Goal is to build a system that can be replicated Questions & Answers: Can public housing authorities only serve the lowest income? Did HOC have hurdles in doing their mixed-income model? ●Maryland code allows serving low and moderate income, so able to creatively implement mixed-income housing ●Each area different, and tools missing might be different or have different limitations based on their local code ●Atlanta is creating a new development subsidiary of their housing authority ●PHAs can create a non-profit arm, which has pros and cons ●There might be reasons to use existing entities or not use an existing entities Where did the money for the housing finance agency come from? ●Finance agency doesn’t have a set pot of money ●Authorized to make loans, with some requirements to protect against defaults ●HOC being a state HFA is not necessary, but does make it a lot easier and quicker for HOC to finance their projects Where did the $50 million come from? ●Bond issuance - paying for $50 million over 20 years ●$50 million appropriation from an annual budget budget would be a heavy lift. Instead, County agreed to pay the principal and interest (around $3 million a year) for 20 years. ●Then did it again for an additional $50 million ○Interest rate has gone up since, but still only about $4.5 million for the county ●HOC then loans that money in their own projects with 5% interest, which is paid back into the housing investment fund ○HOC wanted to ensure light impact on county’s housing investment fund, so committed and built into their project costs paying back this interest ○With this, the net cost to County around half million a year (for first $50m) and $1.5 million a year (for second $50m) for 20 years and then the bond is fully paid off and there is no further cost to the county ●Cool to see that AFL-CIO basically came to same conclusions and mechanism with their HIT fund How is it not a General Obligation? / Did it have to go to the voters? ●With the HPF, didn’t have to go to voters and doesn’t have to compete with other needs (eg. schools, renovations) maxing out bonding limits ●It is technically subject to appropriations, but mostly secure based on strong political support for this fund and AAA rating of county ●Key is political will and flexibility to figure out who can get the funding and finish a project What do we need to key in on to replicate the successes? ●Question to start with is “how much production do you actually need?” If the need is smaller/short-term, maybe don’t need a robust and revolving production fund ●HOC works with the private sector all the time on new construction deals ●The stability of utilizing the HPF means the HOC can have a lot of additional impacts on the community including keeping people employed, implementing rental caps, incorporating other residential services, controlling economic development ●Most important thing is fund; other parts can be outsourced ○Could rely on high quality and trusted developers; can have 3rd party property management ○First HPF project was to help finish financing of stalled project in exchange for public ownership by HOC ○Can use the best contractors for management and construction - we just keep the ownership ●We call it public ownership (vs social housing) because very non-partisan - just working towards housing solutions ●Don’t have to start with too much, can utilize private partnership Would we need to do it under the umbrella of a housing authority? ●HOC is a successful 40 year business model - logical vehicle for implementing HPF ●Where are the right people and what is most politically expedient? ○Could be a new state-chartered PHA, could be the county itself, could be school district ●City and county have bonding authority and have land - good starting place to start building housing ●Atlanta created a new public non-profit to be the owner entity that is funding projects to implement a similar model, with like 4 staff members and leveraging public-private partnerships ○Atlanta Urban Development Corporation ●It makes sense for the developer to be a government entity (or a really trusted private non-profit), because front-loading control and decision making power on how the fund will be used ○Trust that the entity will strive for the most affordability and meet other community priorities ○Public entity is permanent, can’t run off with the money, have built-in controls ○More efficient than having an external trust fund that evaluates and approve applicants on a case-by-case basis on who should receive the funds ○PHA specifically useful if want to access other federal housing funds Does the HOC pay back to the General Fund of the county? Do either the commercial or residential properties pay any property taxes? ●As a government agency, HOC has an inter-governmental contract that spells out funding agreement ●HPF is funded out of Montgomery County’s housing trust (HIF) ○HOC already draws on it - but with the HPF, can be less reliant on it and leave those resources for other projects/partners ○Interest payments from HOC pays back into the HIF (not general fund) ●Some projects have commercial properties in addition to residential; commercial properties typically pay taxes while residential tax-exempt ●Can create your own rules on how much to pay back Is the revenue bond collateralized in any way? ●No, just backed by the county’s promise to pay ●Bonds not connected to real estate, basically based on credit score of city/county/finance agency ●HPF is not subject to tax-exempt volume cap of bonding for private activity because governmental entity for governmental use ●Loaned to then bond finance specific housing project ○Project -specific bond financing will need to be collateralized, but bond financing to create HPF does not need to be How can public financing help buffer against the impacts of recessions? ●Private deals cannot finance, projects stall, construction costs increase ●A lot of talented trades people left in 2008 and never came back ●Stability of a publicly financed revolving fund can guarantee work, retain talented trades people, and smooth out the peaks of the boom/bust cycle by having continuous work ●Even the private sector benefits because not competing over a smaller pool of talented trades people ●After construction picked up again after the recession, a lot of construction contracts went to lower-paying, non-union labor ●With 08 recession, there were less people in union labor trade careers because hard to justify investing in self if no guarantee of good-paying jobs ●The AFL-CIO Housing Investment Trust did the same volume work before, during, and after the 2008 recession - people still needed a place to live ○AFL-CIO HIT became 2nd largest low-income housing builder around 08 not because they increased, but because so many other people slowed down and shrank when they didn’t want to invest ○HIT approach to investing in long-term housing that pays back steady returns didn’t change ○Not excited when market is hot, not scared when things get cold - just building good housing because it is needed and builds unions