housing economics - david kunhardt

Sustainable San Rafael – Housing Choices in MarinSan Rafael, CASeptember 17, 2014

Affordable Housing Economics

David Kunhardt

The Housing Continuum

    0 60%

Home Ownership

*2014 Median Income for a family of four is $97,100, per County Housing Element Update.

Served by LIHTC Program

Supportive Housing SolutionsRental Housing

Extremely Low $0 to $33k

Very Low $33k to

$55kLow $55k-$89 Moderate Income

$89k to $126k

Percent of Area Median Income*

30% 50% 80% 100% 120%

Federal Tax Support for Housing (Billions)

LIHTC Capital Gains Deferral

Property Tax Deduction

Mortgage Int. Deduction

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$8 $20

$28

$85

Federal Tax Support for Housing (Billions)

LIHTC Capital Gains Deferral

Property Tax Deduction

Mortgage Int. Deduction

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$8 $20

$28

$85

Homeowners / Renters Subsidies = 17- to – 1

National vs. Marin Home Ownership Ratio

65.5%

34.5%Owner Renter

National Homeowner Ratio = 2/3rds

75%

25%

Marin Homeowner Ratio = 3/4ths

National vs. Marin Home Ownership Ratio

65.5%

34.5%Owner Renter

National Homeowner Ratio = 2/3rds

75%

25%

Marin Homeowner Ratio = 3/4ths

Therefore, Marin uses a disproportionately high level of tax subsidies -- for homeowners on the high end

Public Housing Authorized 1937 Great Society programs in 60’s & 70’s provided boost to private-

sector housing production via loans and loan guarantees. Circa 1972, “syndication” launched to raise private equity 1974: CDBG, and Section 8 in Project-Based & Tenant Vouchers About 1.6 million families receive tenant-based assistance And about 2 million units of private housing produced…so far

Short History of Affordable Housing

In 1986, Tax Reform Act passed: Removed incentives to invest in real estate Initiated Low Income Housing Tax Credit (LIHTC) Codified syndication to raise private equity for housing

1987 to 2013, +/- 2.4 million of LIHTC housing units Housing for people with jobs in our high-service economy:

Retail, Food Service, Car Service, Health-Care, Day-Care

New Evolution in Affordable Housing

Relative Quantities of Affordable Housing

0

0.5

1

1.5

2

2.5

PublicHousing

Sec 202 &811

HUD $Private

Tenant-Based Sec

8

Sec 42LIHTC

Federally Subsidized Units (Millions)

Shift in Housing Leadership Focus

WAS

Federal Agenda-Setting: HUD Public Agency Action HUD compliance Federal Funds Availability Emphasis on cheaper One size fits all

BECAME

State Agenda-Setting (QAP) Private Action, supported Private compliance, reviewed Lender & Investor Initiatives Emphasis on Market Quality Celebrate Diversity

Credits Mean More Equity, Less Debt

Debt, 75%

Equity, 25%

Other0%

Traditional Finance

Debt25%

Equity65%

Other10%

Section 42 - "9%" LIHTC

Affordability With Lower Leverage: Incentive is Equity, not Debt:

Affordable – Rotary Valley Senior Village

LIHTC relies on recorded Regulatory Agreement and Section 42 Regulatory Agreement sets forth:

Term of affordability Depth of affordability (maximum household income) Maximum rents Other service commitments Penalties for noncompliance Unresolved noncompliance ...Means credit recapture

Warner Creek Senior Homes, Novato:

What Makes Housing Affordable?

How Long are Property Restrictions?

Tax credits claimed over 10 years, but compliance period is >15 years Extended use period runs from years 16 through 30 – in CA, 55 years

Creekside in Hamilton Field

Key Ratios for LIHTC

Spend more, get more Credits (up to cost limits) = Quality Credits approx. 85% of project hard cost (over 10 yrs) Equity paid for Credits can be 100% = Efficient And Debt is less More Credits when more low income households served Rents @30% of Low- and Very-Low Income (30% to 50% of AMI) Rents at least 10% under market (Investor standard) Expensive land major drag on feasibility density.

Affordable Apts. at Drakes Way, Larkspur

Affordable properties more handsome than Luxury

Equal to Superior Amenities

Affordable Community Benefits

Non-profit managers work:

Education programs

Scholarships

Special needs

Family support

HomeownershipComputer Center at San Clemente Place

The Housing Continuum & Transportation

    0 60%

Home Ownership

Served by LIHTC Program

Supportive Housing SolutionsRental Housing

Extremely Low $0 to $33k

Very Low $33k to

$55kLow $55k-$89 Moderate Income

$89k to $126k

Percent of Area Median Income

30% 50% 80% 100% 120%

Own fewer cars; drive less Own more cars; drive moreBest located near town & transit Can be disbursed—with cost

Action Steps – What Can I Do?

Pass City & County Housing Element Updates Affirm support for projects that have been in local plans:

Marinwood Plaza Fairfax Housing Element Properties Whistlestop in San Rafael Seminary in Strawberry

Affordable homes complete the community, economically Support Habitat for Humanity and First-Time-Buyer

Homeownership programs

Time for Panel Interaction, then Q&A

Edgewater Place - Larkspur