The Need for Affordable Housing Year-Round Housing Units: 2,828,592 Subsidized Units: 250,863 *as of Dec. 2014 from DHCD Subsidized Housing Inventory Rental Households with Worst Case Housing Needs: 240,875 (Below 30% AMI with gross rent ≥ 50% of income) Data from DHCD Subsidized Housing Inventory (as Dec. 2014) and U.S. Census Bureau, 2005-2014 1-Year ACS Estimates

The Need for Affordable Housing Year-Round Housing Units: 2,828,592 Subsidized Units: 250,863 *as of Dec. 2014 from DHCD Subsidized Housing Inventory Rental Households with Worst Case Housing Needs: 240,875 (Below 30% AMI with gross rent ≥ 50% of income) Our system for producing affordable housing can address only a small percentage of this demand: Over the past 10 years, DHCD-awarded state subsidy has supported over 30,000 affordable units – or 3,000 annually – and only 12,600 new production units. Data from DHCD Subsidized Housing Inventory (as Dec. 2014) and U.S. Census Bureau, 2005-2014 1-Year ACS Estimates

Affordable Housing Development with State Awards 2007-2016 Total Projects: 622 Production: 357 (57%) Preservation: 265 (43%) Total Units: 34,311 Production: 12,651 (37%) Preservation: 21,660 (63%) Total Affordable Units: 31,642 (94%) Below 30% AMI: 14,456 (53%) Below 50% AMI: 2,685 (6%) Below 60% AMI: 9,614 (18%) Median Project Size: 35

9% LIHTC 4% LIHTC State LIHTC AHTF TCX/ TCAP HOME Affordable Housing Development Subsidy Sources, 2007-2016 WAP TOD HPSTF CATNHP CIPF CBH/FCF HIF HSF AHTF State LIHTC HOME TCX/ TCAP 4% LIHTC 9% LIHTC Subsidy Source Average Annual Amount (MMs) 9% Tax Credits $133.5 4% Tax Credits $123.7 State LIHTC $17.0 AHTF $11.3 HSF $54.6 TCX $30.8 HOME $18.0 HIF $10.7 FCF $9.8 TCAP $3.8 CBH $2.5 CIPF $1.2 CATNHP/TOD $0.5 WAP $0.2 Total $417.5 Federal Sources State Sources

Project Distribution by City and Town Affordable Housing Development with State Awards 2007-2016 Project Distribution by City and Town 1 10 100

Affordable Housing Development with State Awards 2007-2016

How can we stretch scarce subsidy resources farther? Increasing development costs  Higher demand for scarce subsidy In the past 5 years, new production in Metro Boston has required an average of $240,000 of state subsidy per affordable unit 20% of these projects have required more than $300,000 per affordable unit This does not include subsidy from local municipalities or other sources Cost Distribution for Metro Boston New Production Projects TDC/Unit State Subsidy/ Affordable Unit 400K+ 17 1 300K-399K 22 9 200K-299K 13 28 100K-199K 11 50k-99K 3 1K-49K

2016 Qualified Allocation Plan (QAP): Many Objectives, Competing Priorities Among the rental housing issues DHCD intends to address during 2016, through its allocations of credit and subsidy funds, are the following: The need to better manage project costs; The need to produce more units for extremely low-income (ELI) and homeless families and individuals; The need to produce more mixed-income housing; The need to produce more housing opportunities for persons with disabilities; The need to continue promoting thoughtful and strategic efforts to affirmatively further fair housing in every community in the Commonwealth. Funding Priority Categories: ELI units (≥ 20%) Investment in distressed and at-risk neighborhoods Preservation of existing affordable housing New production for families in high-opportunity neighborhoods http://www.mass.gov/hed/docs/dhcd/hd/lihtc/2016qap.pdf

2016 Qualified Allocation Plan (QAP): Many Objectives, Competing Priorities Threshold Requirements: Meet at least 1 of 4 Priority Funding Categories Quality of site Local support or processing Creditworthiness of sponsor/owner Evidence of site control Identification of all financing sources Compliance status of other tax credit projects Good standing with other state housing programs 30-year commitment to affordability Tenant supportive service plan ELI units (10-15%) Consistency with principles of sustainable development Fair housing narrative Scoring System: Fundamental Project Characteristics (100 pts) Financial feasibility Design Development team Marketability Readiness to proceed Special Project Characteristics (82 pts), including: Part of neighborhood planning effort MBE/WBE development team members Non-profit sponsorship Special needs tenant population Market rate units High opportunity area Local support Environmentally friendly design Transit accessibility http://www.mass.gov/hed/docs/dhcd/hd/lihtc/2016qap.pdf

How can we stretch scarce subsidy resources farther? Status Quo - Past 5 Years $100,000,000 in state subsidy awarded annually in Metro Boston $240,000 state subsidy/affordable unit 417 new, affordable units per year

How can we stretch scarce subsidy resources farther? Status Quo - Past 5 Years $100,000,000 in state subsidy awarded annually in Metro Boston $240,000 state subsidy/affordable unit 417 new, affordable units per year If we can reduce subsidy needs by 5% $228,000 state subsidy/affordable unit 439 new, affordable units per year – 22 additional units

How can we stretch scarce subsidy resources farther? Status Quo - Past 5 Years $100,000,000 in state subsidy awarded annually in Metro Boston $240,000 state subsidy/affordable unit 417 new, affordable units per year If we can reduce subsidy needs by 5% $228,000 state subsidy/affordable unit 439 new, affordable units per year – 22 additional units If we can reduce subsidy needs by 10% $216,000 state subsidy/affordable unit 463 new, affordable units per year – 46 additional units

How can we stretch scarce subsidy resources farther? Goal: Reduce state subsidy needs Levers: Reduce development costs Acquisition Construction Soft Costs Leverage non-state resources Local funding Grant resources Increase supportable debt Increase operating income Decrease operating expenses

How can we stretch scarce subsidy resources farther? Budget Basics Development Budget Sources: Debt State Subsidy Local Subsidy Other Subsidy Developer Equity Deferred Fee Uses: Acquisition Construction Hard Costs Soft Costs Construction Soft Costs Financing Legal Marketing/Lease-Up Consulting & Dev. Fees Reserves Total Sources must equal Total Uses!

How can we stretch scarce subsidy resources farther? Budget Basics Development Budget Sources: Debt State Subsidy Local Subsidy Other Subsidy Developer Equity Deferred Fee Uses: Acquisition Construction Hard Costs Soft Costs Construction Soft Costs Financing Legal Marketing/Lease-Up Consulting & Dev. Fees Reserves Total Sources must equal Total Uses! Operating Budget Income: Rental Income Less Vacancy Commercial Income Other Income (Laundry, Parking) Expenses: Administrative & Management Maintenance Utilities Taxes Insurance Replacement Reserves Resident Service Net Operating Income (NOI) = Income – Expenses Debt Service NOI/Debt Service must be greater than 1.00! (1.10-1.20 depending on lender/source of capital)

How can we stretch scarce subsidy resources farther? Fellow Thinkathon Project Summary You work for the Boston Neighborhood CDC and recently submitted a 50-unit, 100% affordable, new construction project to DHCD for award consideration. The budget that you submitted assumed a total development cost of $400,000 per unit and a state subsidy amount of $250,000 per unit. DHCD is willing to fund the project at the TDC of $400,000 per unit or less, but can only allocate $225,000 in state subsidy for each affordable unit. What changes will you make to the project to reduce its subsidy needs by $25,000 per unit? Project Details 50 units, 100% affordable (10% at 30% AMI, 90% at 60% AMI) Mix of 1, 2, and 3 BR units, with 750 average sq. ft. Project is urban infill and adjacent to transit, but site requires $2MM acquisition Building includes 1,500 sq. ft. of common/community space Construction will be to the minimum green/energy efficiency standards as required by DHCD Parking is provided on-site, with ½ surface and ½ underground spots Operating budget includes $100,000 per year in resident services

How can we stretch scarce subsidy resources farther? Options You can make any of the following changes to the project. Each change affects the development cost, supportable debt, and/or non-state subsidy available. The sum of your changes must result in a reduction of state subsidy by at least $25,000 per unit. Total development cost cannot exceed $400,000. Changes may affect local support for your project; increase the chances of your project moving forward by minimizing negative impacts to local support. Budget Impacts ($ per unit) Impact on State Subsidy Change in Local Support Project Changes Development Cost Supportable Debt Local or Other Subsidy 1 Defer portion of developer fee -5,000 2 Provide outdoor community space +5,000 +1 3 Reduce resident services -1 4 Reduce underground parking -10,000 5 Select less transit-oriented site 6 Increase number of ELI units +10,000 7 Increase number of market rate units 8 Use less costly interior finishes 9 Use less costly exterior finishes 10 Reduce unit square footage 11 Reduce number of 3-bedroom units 12 Add energy efficient utility features 13 Add green building features (non-utility) 14 Reduce indoor common space