1 FEDERAL HOME LOAN BANK OF PITTSBURGH BLUEPRINT COMMUNITIES HOUSING DEVELOPMENT SEMINAR DEVELOPMENT AND FUNDING OPTIONS OCTOBER 19, 2005

2 Pride of Carlisle: Background Began in 1997 Began in 1997 Neighborhood plagued by drug activity & violent crime Neighborhood plagued by drug activity & violent crime Poor image perception & self-perception Poor image perception & self-perception Supported by existing neighborhood organizations, business community and nonprofit organizations Supported by existing neighborhood organizations, business community and nonprofit organizations

3 Pride of Carlisle: Background cont. Overarching goal – improve stability of neighborhood by dealing with root causes of neighborhood decline. Overarching goal – improve stability of neighborhood by dealing with root causes of neighborhood decline. Total project cost to date: $5+ million Total project cost to date: $5+ million

4 Pride of Carlisle: Background cont. Project partners: Project partners: Borough of Carlisle Redevelopment & Housing Authorities Carlisle Housing Opportunities Corp. County of Cumberland Banks PA Department of Community & Economic Development Federal Home Loan Bank of Pittsburgh

5 Project Case Study: Pride of Carlisle Acquisition and rehabilitation (for resale) of houses in declining neighborhood. Acquisition and rehabilitation (for resale) of houses in declining neighborhood. Rehabilitation of owner-occupied properties/rehabilitation of public housing/rehabilitation of deteriorated rental housing. Rehabilitation of owner-occupied properties/rehabilitation of public housing/rehabilitation of deteriorated rental housing.

6 Project Case Study: Pride of Carlisle Demolition of dilapidated properties – construction of infill (new construction) housing Demolition of dilapidated properties – construction of infill (new construction) housing Street trees, park improvements, police station Street trees, park improvements, police station Complementary economic development & empowerment programs Complementary economic development & empowerment programs Formation of neighborhood association Formation of neighborhood association

7 Acquisition and Rehabilitation (for Resale) of Houses 30 houses acquired/rehabilitated & sold to first-time buyers 30 houses acquired/rehabilitated & sold to first-time buyers Homeowner counseling required Homeowner counseling required Acquisition cost (per unit) $40,000 - $60,000 Acquisition cost (per unit) $40,000 - $60,000 Rehabilitation cost (per unit) $40,000 - $100,000 Rehabilitation cost (per unit) $40,000 - $100,000 Selling prices (per unit) $40,000 - $70,000 Selling prices (per unit) $40,000 - $70,000

8 Rehabilitation of Existing Owner-Occupied/Public Housing/ Vacant Properties Forgiveness loans to income-eligible owner-occupants (Home funds) Forgiveness loans to income-eligible owner-occupants (Home funds) Façade/Landscaping upgrades in public housing Façade/Landscaping upgrades in public housing Rehabilitation of vacant/deteriorated housing for rent Rehabilitation of vacant/deteriorated housing for rent

9 Demolition of Dilapidated Properties Demolished properties sold off to adjoining owners or to nonprofits (Habitat) Demolished properties sold off to adjoining owners or to nonprofits (Habitat) Constructed new for-sale (housing) targeted blighted properties Constructed new for-sale (housing) targeted blighted properties Redevelopment Authority used spot blight (eminent domain) powers to acquire Redevelopment Authority used spot blight (eminent domain) powers to acquire

10 Street Trees, Park Upgrade, Construction of New Police Station Street trees soften streetscape & absorb noise (CDBG-funded) Street trees soften streetscape & absorb noise (CDBG-funded) Park improvements ($250,000) included new splash pad, gazebo, upgraded equipment, landscaping (CDBG-, borough- funded) Park improvements ($250,000) included new splash pad, gazebo, upgraded equipment, landscaping (CDBG-, borough- funded) New police station constructed 2004 New police station constructed 2004 Railroad station renovated (CDBG-funded) Railroad station renovated (CDBG-funded)

11 Complementary Economic Development and Empowerment Projects Assisted business in acquiring properties (example: print shop, TV repair & sales) Assisted business in acquiring properties (example: print shop, TV repair & sales) Developed neighborhood computer center (The Cyberspace) Developed neighborhood computer center (The Cyberspace) Developed comprehensive service program to organize job training, family savings account, health advocate programs Developed comprehensive service program to organize job training, family savings account, health advocate programs

12 Formation of Neighborhood Association Essential agreement for success Essential agreement for success Residents need to buy in and take responsibility for solutions Residents need to buy in and take responsibility for solutions Sharing of information (among & between residents) helpful Sharing of information (among & between residents) helpful

North West Street: Case Study Rehabilitation of extremely deteriorated structure into 5 efficiency apartments for persons transitioning out of short-term shelter Rehabilitation of extremely deteriorated structure into 5 efficiency apartments for persons transitioning out of short-term shelter FHLBank AHP funds used ($40,000) FHLBank AHP funds used ($40,000)

14 BEFORE

15 AFTER

North Hanover Street: Sources of Funds FHLBank AHP$ 40,000 FHLBank AHP$ 40,000 County (Act 137)$ 40,000 County (Act 137)$ 40,000 Bank Loan$ 20,000 Bank Loan$ 20,000 Neighborhood Assistance Program$ 40,000 Neighborhood Assistance Program$ 40,000 Housing Authority Grant$ 23,000 Housing Authority Grant$ 23,000 Housing Authority Loan$ 46,630 Housing Authority Loan$ 46,630 Total Sources$209,630 Total Sources$209,630

North West Street: Uses of Funds Acquisition$ 0 Acquisition$ 0 Rehabilitation$203,630 Rehabilitation$203,630 Soft Costs$ 6,000 Soft Costs$ 6,000 Total Uses$209,630 Total Uses$209,630

18 West Street Pride: Case Study Acquisition and rehabilitation of 5 houses on 400 block of North West Street Acquisition and rehabilitation of 5 houses on 400 block of North West Street Construction of 3 new houses on infill sites Construction of 3 new houses on infill sites $132,000 FHLBank AHP $132,000 FHLBank AHP

19 West Street Pride: Sources of Funds HOME (DCED/PHFA)$ 429,425 HOME (DCED/PHFA)$ 429,425 FHLBank AHP$ 132,000 FHLBank AHP$ 132,000 Construction Loan$ 169,500 Construction Loan$ 169,500 County (Act 137)$ 385,000 County (Act 137)$ 385,000 Bank Loan$ 100,000 Bank Loan$ 100,000 Housing Authority Grant$ 11,675 Housing Authority Grant$ 11,675 Total Sources$1,227,600 Total Sources$1,227,600

20 West Street Pride: Uses of Funds Acquisition$ 283, Acquisition$ 283, Rehabilitation/New Construction$ 746, Rehabilitation/New Construction$ 746, Infrastructure (street trees)$ 2, Infrastructure (street trees)$ 2, Developer Fee$ 60, Developer Fee$ 60, Delivery Costs$ 15, Delivery Costs$ 15, Administration/Audit$ 25, Administration/Audit$ 25, Soft Costs Soft Costs Settlement – Acquisition$16,000 Settlement – Acquisition$16,000 Settlement – Sale$16,000 Settlement – Sale$16,000 Marketing Expenses$ 8,000 Marketing Expenses$ 8,000 Insurance/Taxes$ 9,500 Insurance/Taxes$ 9,500 Construction Interest$30,000 Construction Interest$30,000 Operating Costs$15,000 Operating Costs$15,000 Subtotal – Soft Costs$ 94, Total Uses of Funds$1,227, Total Uses of Funds$1,227,600.00

21 FEDERAL HOME LOAN BANK OF PITTSBURGH BLUEPRINT COMMUNITIES HOUSING DEVELOPMENT SEMINAR DEVELOPMENT AND FUNDING OPTIONS Presented by: Christopher Gulotta Executive Director Executive Director Redevelopment and Housing Authorities Redevelopment and Housing Authorities of the County of Cumberland of the County of Cumberland 114 North Hanover Street 114 North Hanover Street Carlisle, PA Carlisle, PA website: cchra.com website: cchra.com

22 Homeownership Choice Program PHFA program PHFA program Purpose is to encourage for-profit homebuilders/ developers to build for-sale housing in urban communities Purpose is to encourage for-profit homebuilders/ developers to build for-sale housing in urban communities Provides flexible financing with less restrictions than other financing Provides flexible financing with less restrictions than other financing Local municipality must match Local municipality must match PHFA and local funding provide the much- needed gap in costs versus sales price PHFA and local funding provide the much- needed gap in costs versus sales price Projects must be > 50 units in large cities, > 25 units in smaller cities Projects must be > 50 units in large cities, > 25 units in smaller cities

23 Homeownership Choice Program: Project Example Federal Hill, Northside, Pittsburgh Federal Hill, Northside, Pittsburgh 60 units for sale new construction along Federal Street in Pittsburgh 60 units for sale new construction along Federal Street in Pittsburgh URA is providing 75% of property through redevelopment process URA is providing 75% of property through redevelopment process URA is providing $2.2 million in soft financing to defray construction development costs URA is providing $2.2 million in soft financing to defray construction development costs PHFA, via HCP, providing a $1.8 million loan that is flexible in its reuse PHFA, via HCP, providing a $1.8 million loan that is flexible in its reuse Remainder of financing from local lenders, funding about ½ of the housing cost Remainder of financing from local lenders, funding about ½ of the housing cost Homes to sell from $100,000 to $185,000 Homes to sell from $100,000 to $185,000

24 Development and Funding Options Rental Housing Rental Housing

25 Sources of Financing Development Financing Pennsylvania Housing Finance Agency (PHFA) Pennsylvania Housing Finance Agency (PHFA) Low-income housing tax credits (LIHTC) Low-income housing tax credits (LIHTC) Rehabilitation/New construction Rehabilitation/New construction Acquisition on existing buildings Acquisition on existing buildings Private activity bonds (4% credits) Private activity bonds (4% credits) Penn Homes loans, 0%, 30-year loan Penn Homes loans, 0%, 30-year loan State HOME program State HOME program Local government - HOME, CDBG or Act 137 funds (Trust funds from the county) Local government - HOME, CDBG or Act 137 funds (Trust funds from the county) Historic tax credits Historic tax credits Federal Home Loan Bank Affordable Housing Program Federal Home Loan Bank Affordable Housing Program Other sources Other sources DCED/PHFA financing DCED/PHFA financing Brownfields funding Brownfields funding Housing Authority capital funding Housing Authority capital funding

26 Ongoing Operational Funding Tax abatements (during construction & operations) Tax abatements (during construction & operations) Section 8 subsidy - can charge higher rents with Section 8 covering difference Section 8 subsidy - can charge higher rents with Section 8 covering difference Tax incremental financing Tax incremental financing

27 Challenges in Financing Very competitive financing Very competitive financing Difficult to layer financing, both in timing and different funding requirements Difficult to layer financing, both in timing and different funding requirements Who wants to be the first in? Who wants to be the first in? Leveraging the financing while keeping your site in place and costs down Leveraging the financing while keeping your site in place and costs down NIMBYism of affordable housing NIMBYism of affordable housing All funding types have restrictions All funding types have restrictions LIHTC requires rents to be affordable to households < 60% area median income LIHTC requires rents to be affordable to households < 60% area median income FHLBank requires energy efficiency modeling (may result in higher construction costs) FHLBank requires energy efficiency modeling (may result in higher construction costs) Federal and state funds may also require Davis Bacon, MBE/WBE requirements Federal and state funds may also require Davis Bacon, MBE/WBE requirements

28 Sample Project - Negley Neighbors 49 units of renovation, new construction and historic rehabilitation in East Liberty. 49 units of renovation, new construction and historic rehabilitation in East Liberty. Negley Neighbors is a scattered-site project in East Liberty and Highland Park. A portion of the sites is in a Qualified Census Tract. Negley Neighbors is a scattered-site project in East Liberty and Highland Park. A portion of the sites is in a Qualified Census Tract. S&A partnering with East Liberty Development, Inc. (ELDI), the local CDC. S&A partnering with East Liberty Development, Inc. (ELDI), the local CDC. Goal of the project was to target vacant and rundown properties on the private market. Goal of the project was to target vacant and rundown properties on the private market. Partnership purchased 15 properties from private owners, city and ELDI. Partnership purchased 15 properties from private owners, city and ELDI. Properties are in varied forms of condition, from substantial demolition to selective demolition to new construction. Properties are in varied forms of condition, from substantial demolition to selective demolition to new construction. Will have 1-, 2-, 3-bedroom units, with rents from $400 to $800 per month. Will have 1-, 2-, 3-bedroom units, with rents from $400 to $800 per month.

29 Sources & Uses for Negley Sources Citizens Bank Citizens Bank 7%, 30-year term 7%, 30-year term $800,000 $800,000 Urban Redevelopment Authority Urban Redevelopment Authority $800,000, 0%, 30-year term, second mortgage $800,000, 0%, 30-year term, second mortgage FHLBank AHP FHLBank AHP $175,000 grant to ELDI $175,000 grant to ELDI Equity from sale of LIHTC Equity from sale of LIHTC $485,000 per year, 10 years $485,000 per year, 10 years $4.8 million in credits x 96 cents per credit = $4.6 million in equity $4.8 million in credits x 96 cents per credit = $4.6 million in equity Historic tax credit equity Historic tax credit equity $300,000 $300,000Uses Construction cost - $6 million Construction cost - $6 million Acquisition cost - $600,000 Acquisition cost - $600,000 Soft costs - $775,000 Soft costs - $775,000

30 Other Factors in Financing Portion of site is in a QCT = increase of our credits by 30% for about 45% of the project. Portion of site is in a QCT = increase of our credits by 30% for about 45% of the project. Used acquisition credits on portion of properties. Only eligible on buildings that have been owned by the same owner for > 10 years. Used acquisition credits on portion of properties. Only eligible on buildings that have been owned by the same owner for > 10 years. Cannot double up on historic tax credits, acquisition credits and QCT - must make sure you are taking all into consideration. Cannot double up on historic tax credits, acquisition credits and QCT - must make sure you are taking all into consideration.

31 Keys to Successful Rental Affordable Housing Developments Private and public participation - both in design and funding Private and public participation - both in design and funding Work with a developer that understands the local needs and desires Work with a developer that understands the local needs and desires Understand that the developer is also making a profit on this project Understand that the developer is also making a profit on this project Projects take 2 years to complete, with almost a daily commitment. What may seem like a lot of money is not always the case Projects take 2 years to complete, with almost a daily commitment. What may seem like a lot of money is not always the case Costs are going to be higher than what you may have seen on other projects Costs are going to be higher than what you may have seen on other projects Federal, state and local funds bring good news and bad news Federal, state and local funds bring good news and bad news Dont let your real estate knowledge play a role in interpreting this project Dont let your real estate knowledge play a role in interpreting this project In simple words - these projects do not make economic sense, that is why the LIHTC, HOME funds, etc. In simple words - these projects do not make economic sense, that is why the LIHTC, HOME funds, etc. Leverage your funds - make sure the development team uses their skills to secure as much funding from as different sources as possible Leverage your funds - make sure the development team uses their skills to secure as much funding from as different sources as possible Rental housing is a need in every community in Pennsylvania - you are fulfilling an important piece of your community puzzle Rental housing is a need in every community in Pennsylvania - you are fulfilling an important piece of your community puzzle