Download - 1.4 Holly Denniston
Development 101
Holly Denniston
Senior Program Manager
Corporation for Supportive Housing
June 13, 2011
www.csh.org
Our Mission
CSH is a national non-profit organization and
Community Development Financial
Institution that helps communities create permanent housing
with services to prevent and end homelessness.
Founded in 1991, CSH advances its mission
by providing advocacy, expertise, leadership,
and financial resources to make it easier to create and operate supportive housing.
Types of Permanent
Supportive Housing
Types of PSH
Single-Site, Single-
Purpose Development
Projects
Master Leased Housing
Projects
Scattered-Site Housing
Projects
Single-Site, Integrated
Supportive Housing
Development Projects
Types of PSH
All units in a property are required to be
dedicated to PSH with an extended use or similar
agreement
Developed either through new construction or
acquisition/rehabilitation
Size of such projects varies widely
Many CSH-sponsored projects fit this model
Sin
gle
-Sit
e, S
ing
le P
urp
ose
Types of PSH
Projects with a mix of units dedicated for
supportive, affordable and/or market rate
housing as secured by an extended use or
similar agreement
Developed either through new construction or
acquisition/rehabilitation activities
The size of such projects varies widely
CSH prioritizes working with projects that
dedicate at least 10% of the units as supportive
housing for CSH’s target or priority populations
Sin
gle
-Sit
e, In
teg
rate
d H
ou
sin
g
Types of PSH
Under this strategy, supportive housing
providers lease several units within a
development, a floor within a building, an entire
building or development, or units in a number of
buildings, from the owner(s) in order to provide
PSH
The supportive housing provider then subleases
the units to eligible tenants, and serves as the
landlord for the tenants.
Ma
ste
r L
eased
Ho
usin
g P
roje
cts
Types of PSH
Households (usually using tenant-based
subsidies) directly lease individual units from
landlords
Units are not dedicated to PSH through any
extended use or similar agreements
Sca
tted
Sit
e H
ou
sin
g P
roje
cts
Scattered versus Single Site
Pros Cons
Sin
gle
Sit
e
Enhances ability to provide
centralized, intensive
services
Sponsor has control over
housing environment
Community-building activities
are easier to organize
Community opposition
Certain clients may prefer more
integration
Tenants may be less likely to form
relationships outside the building
Sca
tte
red
Sit
e Developer and
property/asset management
skills are not needed
Easier to achieve geographic
diversity
Lack of space to deliver services
Lack of control over where tenants
rent units
Neighbors can display a negative
attitude toward client
Isolation of client
Types of
Development
Types of Development
Acquisition
Acquisition/Rehabilitation
New Construction
Development Options
Turnkey
Master Leasing Service Contract
Co-Development
Ownership versus Leasing
Pros Cons
Ow
ners
hip
Extended Use Agreement
Sponsor controls budgets
New construction enables control
over how the building is designed
Acquisition and rehabilitation may
be positively received in
community
Developers Fee
Time, money and dedicated
staff
Need for housing development
and property/asset manager
expertise
Le
as
ing
Units can quickly be brought
online
Developer and property/asset
management skills are not
needed
Easier to achieve geographic
diversity
Leases will be short-term
Tenancies can be jeopardized
if rental subsidy amount
doesn’t keep pace with market
rents
May be difficult to find quality
vacant units
Role of Owner,
Developer, Property
Manager and Service
Provider
Development Team Roles
Owner
Service Provider
Developer
Property Manager
Roles and Responsibilities:
Memorandum of Understanding
Supportive service plan
Target population and tenant selection plan
Roles and responsibilities of partners
Ongoing communication
Project policies and procedures
Property management plan
Two Key Project Goals:
Recruiting supportive housing tenants:
Tenant Selection plan stipulates how property manger
will market to potential tenants and will vet tenants with
credit and background checks to ensure that homeless
households are screened in.
Embracing goal of housing stability:
Property management plan includes system of
coordination between property manager and service
provider to promote housing stability
Three Types of
Budgets:Capital, Operating and Services
Capital Operating
Funding Differences between
Supportive Housing and Affordable
Affordable
Capital Operating
PSH
Services
Three Types of Budgets:
Capital
Land, buildings,
new
construction,
soft costs of
development,
capitalized
reserves.
Operating
Property
operations such
as management
staff,
landscaping,
utilities,
reserves.
Services
Delivery of
supportive
services to
tenants.
Capital Financing
Predevelopment
Construction
Permanent
Development Sources
Grants Soft Debt
Low Income
Housing Tax
Credit Equity
BondsConventional
Debt
Developing PSH
Frequently require longer development timeline
Sponsors are often a partnership of agencies
Projects typically have little or no hard debt
Desire to see committed operating and services
funding
Need for early stage financing
Sources and Uses
Combines costs with the financing sources
Total $
Amount Trust Fund HOME
Historic Tax
Credit Equity AHP
Tax Credit
Equity
Deferred
Developer
Fee
Acquisition $1,200,000 $1,200,000
Construction $8,000,000 $750,000 $1,800,000 $5,450,000
Soft Costs $2,250,000 $600,000 $1,650,000
Reserves $250,000 $250,000
Developer’s
Fee $1,200,000 $800,000 400,000$
Other $0
Total $12,900,000 $750,000 $1,200,000 $1,800,000 $600,000 $8,150,000 400,000$
80
$161,250
Total # of development units
Total Development Cost per Development Unit
Fifteen Year Operating Budget
2012 Per
12 Rates Unit 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
1 BR 2.00% 8,400 672,000 685,440 699,149 713,132 727,394 741,942 756,781 771,917 787,355 803,102 819,164 835,548 852,258 869,304 886,690
Gross Residential Income 2.00% 672,000 685,440 699,149 713,132 727,394 741,942 756,781 771,917 787,355 803,102 819,164 835,548 852,258 869,304 886,690
Gross Income 2.00% 0 672,000 685,440 699,149 713,132 727,394 741,942 756,781 771,917 787,355 803,102 819,164 835,548 852,258 869,304 886,690
Vacancy/Collection Loss (7.00%) (47,040) (47,981) (48,940) (49,919) (50,918) (51,936) (52,975) (54,034) (55,115) (56,217) (57,341) (58,488) (59,658) (60,851) (62,068)
Effective Gross Income 2.00% 0 624,960 637,459 650,208 663,213 676,477 690,006 703,806 717,883 732,240 746,885 761,823 777,059 792,600 808,452 824,621
Administration 3.00% 350 28,000 28,840 29,705 30,596 31,514 32,460 33,433 34,436 35,470 36,534 37,630 38,759 39,921 41,119 42,353
Management Fee 2.30% 750 60,000 61,380 62,792 64,236 65,713 67,225 68,771 70,353 71,971 73,626 75,320 77,052 78,824 80,637 82,492
Payroll 3.00% 3,000 240,000 247,200 254,616 262,254 270,122 278,226 286,573 295,170 304,025 313,146 322,540 332,216 342,183 352,448 363,022
Taxes & Insurance 3.00% 800 64,000 65,920 67,898 69,935 72,033 74,194 76,419 78,712 81,073 83,505 86,011 88,591 91,249 93,986 96,806
Maintenance 3.00% 1,200 96,000 98,880 101,846 104,902 108,049 111,290 114,629 118,068 121,610 125,258 129,016 132,886 136,873 140,979 145,209
Utilities 3.00% 500 40,000 41,200 42,436 43,709 45,020 46,371 47,762 49,195 50,671 52,191 53,757 55,369 57,030 58,741 60,504
Reserves 3.00% 300 24,000 24,720 25,462 26,225 27,012 27,823 28,657 29,517 30,402 31,315 32,254 33,222 34,218 35,245 36,302
Total Expenses 2.93% 6,900 552,000 568,140 584,755 601,858 619,464 637,588 656,245 675,451 695,222 715,575 736,526 758,095 780,298 803,156 826,686
Net Operating Income 72,960 69,319 65,454 61,355 57,013 52,419 47,562 42,432 37,019 31,311 25,296 18,964 12,302 5,297 (2,064)
Total Principal
Total Interest
Total Loan Payments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Debt Coverage Ratio #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Cash Flow 72,960 69,319 65,454 61,355 57,013 52,419 47,562 42,432 37,019 31,311 25,296 18,964 12,302 5,297 -2,064
Show projection of income and expenses
Service Budget Components
Personnel – Majority of Budget
Other Expenses to support staff and office
Permanent
Supportive Housing: An Operating Cost
Analysis101
Is Permanent Supportive
Housing a Good Investment?
Enterprise Community Partners and CSH conducted study to look at property level information to provide analysis of individual operating costs.
The major finding of this report confirms that permanent supportive housing is financially solid.
Methodology
Study analyzed 10 affordable and 10
permanent supportive housing projects from Enterprise’s portfolio.
CSH analyzed annual revenue, expenses and cash flow for
each project in 2007, 2008 and 2009.
CSH conducted interviews with
representatives from permanent supportive
housing projects.
Key Findings
1. Occupancy was strong for both sets of projects.
• The primary difference in revenues is attributable to rental income, including subsidy, which is higher in affordable properties.
• Vacancy loss in general comparable
Key Findings
2. Although operating expenses are 11 percent higher for supportive housing projects, they are able to secure operating subsidies to cover the
difference.
• Legal, administration, security payroll/contract and property management expenses averaged 53% higher in supportive housing compared with affordable housing.
• Accounting/bookkeeping, real estate taxes and insurance expense averaged 37% lower in supportive housing compared with affordable housing.
Key Findings
3. Cash flow after debt service and replacement reserve deposit is higher for supportive housing projects. The net
operating income is 46 percent lower for supportive housing projects than for affordable projects. This is offset by the
structure of having lower debt service.
• Summary Comparison Supportive Housing Affordable Housing
• Total Revenue $7,686 $8,360
• Total Expenses $6,180 $5,567
• Net Operating Income $1,506 $2,793
• Annual Replacement Reserve Deposit $ 327 $ 356
• Annual Must Pay Debt Services $ 171 $1,790
• Cash Flow $1,008 $ 647
Key Findings
4. Permanent supportive housing projects successfully maintain operating subsidies
and offer services over time.
• Funding agencies are invested in the long term success of their projects.
• Permanent supportive housing owners and service providers often have the infrastructure in place to secure additional funding from philanthropy.
Conclusion
This survey provides powerful evidence that permanent supportive housing is a safe investment.
“These projects are complicated and layered, but they are with the investment.”
Bill Hobson, Executive Director, Downtown Emergency Service Center, Seattle, Washington
Housing Credit
Policies in 2011 that
Promote Supportive
Housing
Why Should I Care?
QAP: Qualified Allocation
Plan
54% of projects
use LIHTCs
$945 million
Current Trends
Set Asides: In 2011 Alaska and Arizona added set-asides for supportive
housing projects. Now 18 QAPs have set-asides for
supportive housing.
Integrated Housing: Continued growth in
threshold, set-asides and scoring incentives for
projects that mix affordable and supportive housing.
Basis Boost: Six QAPs allow basis boost for either
permanent supportive housing projects or
projects dedicating units to very low-income tenants.
Keys to Successful Use of the Credit
Creation and stabilization of sufficient operating and service reserves.
Assurance of coordination between owner, property manager, and service provider.
Tracking of supportive housing units over time.