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5 posts from August 2011

August 30, 2011

Partner Profile: Homes for America – How Do Affordable Housing Organizations Thrive With Less Funding?

By My Trinh

We asked Nancy Rase, President of Homes for America (HFA) about the new challenges for affordable housing organizations and how they can still be sustainable.

Affordable housing developers are facing greater competition for fewer resources. How is your organization affected, and how are you responding?

Maryland used to award 8-10 projects per round, and now it’s 3-4 projects. We’ve gone from developing 3-4 projects a year to 1-2 projects a year, and we’re making the appropriate adjustments. Our focus has been two fold:

  • Making sure our existing portfolio is operating at optimum performance. Interest rates are low, so it’s a good time to refinance debt. And we’ve seen dramatic savings through energy retrofits that don’t require comprehensive rehab.

  • Exploring different ways to finance housing. We’re finding that we can finance 15-year lease purchase projects with limited resources. There are also opportunities to purchase and develop single-family homes from builders who can’t proceed because of the current market.

With our focus on the portfolio, developers are working closely with asset managers on project refinancing and energy conserving improvements. We’ll come out of this with a more well-rounded, cross-trained staff.

What business systems have been helpful?

Our go/no-go procedures for undertaking new developments are crucial. We also revisit the decision more frequently and analyze more thoroughly. If a project might take four rounds to get funded, it doesn’t make sense for us to begin incurring costs. 

What recommendations do you have for housing organizations? 

  1. Take a hard look at the way you do business. Is it still possible to implement your business plan? Rely on your staff. This should be a bottom-up process.

  2. Watch the money. We run a month by month 24 month projection, and it’s not income and expenses. It’s cash in the door and cash out the door. Our board has actually asked us to project for 36 months. It’s really important right now to be sensitive to taking on continuing obligations when there’s less reliability in the cash flow stream. In our business, we have three- year lag, so if you don’t plan for the change, it really catches you when it’s too late to adjust.

  3. Examine organizational sustainability in Year 15 decisions. Does it make sense to recapitalize? Does it make sense to buy out the investor partner? We’re looking at that not just from a physical perspective, but also an economic perspective. In a prior year we may have bought out the investor on a project in good physical condition, but are resyndicating now to generate new revenues. Some projects that we thought we would operate in perpetuity may need to be sold to good stewards because they undermine the organization’s long-term strength.

This is a challenging period, but it’s going to get better. We’ll all grow out of this as stronger leaders with better organizations and more well-rounded staff.

Learn more about improving organizational sustainability in Building Sustainable Organizations for Affordable Housing and Community Development Impact. Visit the Enterprise website next month for more on go/no-go decisions.

August 23, 2011

What’s the Role of Housing When People Are Living Longer?

By Cheryl Gladstone

The senior population is set to double by 2030. As a recent New York Times post about men living longer reminds us, both men and women are healthier and living longer than ever before. Excellent news, but are we ready?

Seniors require more in- or close-to-home care and services as they age, while their incomes continually decline. Take Atlanta for example. There, seniors represent just 8.6% of the total population, but of those seniors, an astonishing 41% are low-income.

So how can the housing industry prepare for an expanding senior population whose incomes are rapidly shrinking?

It’s so much more than a numbers game of building more affordable housing for seniors aging in place. We also need cost effective strategies for connecting housing to social, health and mobility services at levels that their resident incomes can support.

By serving as a hub for service delivery, affordable housing is, and will be, a key element in addressing the impending “silver tsunami” by:

  • Helping to reduce system-wide healthcare costs by keeping people in quality, healthy housing, and out of long-term care and emergency rooms.

  • Reducing the financial, emotional, and career burden on caregivers, who statistically tend to be female family members.

  • Providing a setting where medications can be taken regularly, where changes in condition can be regularly monitored and where preventative care can be administered, directly improving the health of residents

New capital models, healthcare reform, technology integration, innovative service delivery models—these are all ways we are addressing the needs of seniors aging in place. Check back next month to see profiles of inspiring seniors whose lives have changed in part due to a stable home and services.

What else can the housing industry do? What do you think about the quality of senior housing today, and how must it evolve?



August 17, 2011

Deciphering the Debt Deal

By Jeanie Shattuck

At the beginning of August, Congress passed the Budget Control Act of 2011, a bill which increases the debt ceiling and requires definitive action to reduce the national deficit. Though the myriad details of the deal are still emerging, we’re going to break down the elements of the plan that we do know and briefly discuss the potential impact on the groups and programs we care about.

First and foremost, the deal raises the debt ceiling by $900 billion in the short term, avoiding the risk of defaulting on the national debt. To ensure that we do not come this close again, the ceiling will be raised again by $1.2 trillion to $1.5 trillion—depending on how the deficit reduction and balanced budget amendment scenarios play out.

The bulk of the bill focuses on spending and deficit reduction, divided into two stages. The first stage is fairly simple—the bill implements spending cuts and caps, resulting in $917 billion in overall cuts by 2021. The annual reduction will impact both defense and domestic spending, and the amount will increase each year, starting at about $44 billion in Fiscal Year 2012 (FY12). In the end, defense spending will bear about 40% of this reduction at $350 billion.

The second stage is less straightforward. The debt ceiling will be raised by $1.5 trillion if:

A twelve-member bipartisan committee introduces a detailed proposal to achieve at least $1.5 trillion in deficit reduction by November 23, and passes this legislation by December 23, 2011


Congress passes a balanced budget amendment between October and December 2011.

If neither of these occurs, the debt ceiling will be raised by $1.2 trillion, and an automatic $1.2 trillion sequester (or across-the-board cut) will go into effect, impacting defense and domestic discretionary spending equally. This option, referred to as the “trigger,” is designed to motivate the two parties to compromise, as there are unappealing outcomes for each.

What does this mean for housing and community development—particularly lower income households?  In the near term, there is some good news. The bill requires greater balance in the cuts to domestic discretionary and defense spending, but the House budget resolution (passed earlier this year) cut far more from domestic discretionary. Therefore, an estimated $20-30 billion will be restored to the domestic discretionary budget for FY12. The precise amount is yet to be determined, but the allocation for Transportation, Housing and Urban Development (THUD) will receive a bump up, relieving some pressure on housing and community development programs.

In addition, there is comfort in the fact that if a deal cannot be reached and the trigger is set off, a list of critical programs for low-income individuals and families are exempted from the undiscriminating cuts. Included on this short list are Medicaid, Social Security, unemployment insurance and food stamps. Recipients of Medicare will be protected, but not providers. No HUD programs have been exempted.

Stay tuned—every day, we’re gaining a clearer picture of the Budget Control Act of 2011 and how it will impact housing and community development and the people we seek to serve. If you’re hungry for more information now, the Center for Budget and Policy Priorities has done robust, comprehensive analyses of the plan from numerous angles, and we recommend checking it out. 

August 9, 2011

Carbon Offsets for Housing

By Esther Toporovsky

If you recycle, conserve energy, and maybe even use mass transit or bike, it is still hard to be "carbon neutral" on your own. One way is to offset the emissions we cannot eliminate through the Voluntary Carbon Market.

What is the Voluntary Carbon Market and how does it work?

When an institution invests money to reduce the CO2 that would otherwise be produced, that reduction can be quantified, certified, and sold. This commodity is known as a “carbon offset” because it is usually purchased by an individual, company, or event that is trying to compensate for, or offset, its carbon emissions.

Carbon offsets can be created by various types of projects, including tree planting, renewable energy generation, energy-efficiency, and others. Currently there is not a robust voluntary market for the residential sector. However, a few industry leaders (Enterprise operates a one of kind Offset Fund) around the country are leading the way in creating programs to cut emissions in the residential sector through voluntary carbon programs.

Why are Carbon Emission Reductions important in housing?

Energy use from residential buildings accounts for nearly 22 percent of carbon dioxide emissions in the U.S. - which totals over one billion tons a year. In addition, the homes where millions of low-income Americans live are highly inefficient, severely straining family budgets. Improving their energy efficiency can deliver substantial benefits to families as well as the environment. Projects that result in more energy efficient homes provide a triple bottom line benefit: environmental, social, and economic.

For example, in North Philadelphia, 58 families and individuals are now living in LEED Gold and Green Communities Certified-renovated historic apartments, developed by the 1260 Housing Development Corporation and the CPM Housing Group. 822 metric tons of carbon emissions reductions from this project will be retired, measured and verified over the next ten years. In this video I took of residents, some residents talk about how they are spending less money on their utility bills, giving them a little more to spend on their kids, or healthier food options. The residents feel healthier too – they’re noticing less incidence of asthma and the kids are playing outside.

Without the additional funding from the carbon offsets – and this is the key in the Carbon Offset Market - this project would have been a nice, historical renovation. However, it would not have all the green features it now has:

  • drought-tolerant landscaping
  • a cool roof system which deflects sunlight
  • low-E windows and extra insulation
  • low-flow plumbing fixtures
  • low-VOC paints
  • Energy Star light fixtures
  • owner and resident education for operations and maintenance of green items

Carbon Offsets won’t solve our entire problem – but I think they are a step in the right direction to improve both  the environment and people’s lives. How much farther along do you think the Carbon Market gets us?  Is there a substantial difference in the residential versus commercial markets in terms of process or outcomes?

If you are interested in learning more and engaging in a discussion about the Offset Market in the U.S., join me for our webinar on October 26, 2011. We’re featuring case studies from various residential offset projects and programs across the country. Hope to hear from you !

August 2, 2011

Expand “Pay for Performance” Community Development Tools?

By Scott Hoekman

In a time of constricting government spending, how do we help ensure that we are taking care of the most vulnerable people and communities among us - and at the same time spur economic development? Leveraging to achieve private sector investment has been one model of success.  President Obama’s proposed 2012 budget contains $100 M for Pay for Success Bonds (PSBs), also known as Social Impact Bonds. PSBs are a newly emerging financial tool that proposes to use private capital to pay for social sector outcomes that save public sector dollars and use a portion of those savings to repay the investors their principal plus interest. If the outcome and savings are not achieved as defined in the bond, then the issuer of the bond does not pay the investor.

If you’re in the field of affordable housing and community development, this concept will sound familiar. A similar tool has been successfully up-and-running for 25 years:  the Low Income Housing Tax Credit (LIHTC). In addition, the New Markets Tax Credit (NMTC) has been in operation for 10 years. While the LIHTC and NMTC programs spur equity investments rather than bond purchases, they share key features with PSBs—most notably, their “pay for performance” characteristics.

The federal government enables investors to claim LIHTCs for affordable rental developments only after they are built and occupied by qualified low-income households. In other words, the private sector takes on the risks of developing and leasing up the rental development. If that doesn’t happen per the rules of the program, the investor can’t claim tax credits, no matter how much he or she may already have invested in the project. In addition, if the unit falls out of compliance with program rules over a 15-year period, the government takes back the tax credits via a process known as “recapture.” As a result, the investor, in protecting his or her investment, monitors progress and ensures accountability – a welcome side effect for a government program.

Pay for Success Bonds aim to extend these key concepts of payment on delivery to other social goods, including the delivery of social services. There are a number of challenges to PSBs maturing into a viable and commonplace investment vehicle for banks and other financial institutions. These include: aligning outcomes with savings, quantifying those savings, measuring and validating the outcomes, and minimizing transaction costs so that the bulk of savings does not get eaten up with overly bureaucratic systems designed to prevent fraud or unintended outcomes.

However, we can take some comfort in the 25 years of success in LIHTC, and recognize that there is no reason why “pay for performance” can’t be extended to finance other social outcomes – such as a much broader set of community development outcomes like better results from our schools. Call it the “Community Development Tax Credit.” In the process we could break down some of the silos that keep us from having a fully integrated, high-impact approach to the creation of thriving communities.

What’s your perspective on this Pay for Success tool?