1. MassHousing’s Workforce Housing Program NCSHA Meeting October 2017

2. MassHousing’s Workforce Housing Program Investment of $100 million to create rental housing affordable to households earning more than 60% of AMI and up to 120% of AMI. Funding is provided to owners in the form of subordinate debt with an affordability restriction in place for a minimum of 30 years.

3. Program designed to address the different challenges communities face:
In Greater Boston, the goal is to secure affordability in markets that are already or are becoming out of reach for middle-income households.
In the places like Massachusetts’s “Gateway Cities” the goal is to be a catalyst to grow local economies and help attract middle-income households.
Gateway Cities are municipalities with a population greater than 35,000 and less than 250,000, a median household income below the commonwealth's average and a rate of educational attainment of a bachelor's degree or above that is below the commonwealth's average.

4. The Case for Workforce Housing
Affordability Rankings
Determining the most affordable states
“The top-five Best States for affordability are dominated by Great Lakes and Plains states…Hawaii ranks lowest in affordability, with the highest cost of living and least affordable housing in the nation…California ranks 49th, while coastal states New York, Massachusetts… and Alaska round out the bottom five states for affordability.”

5. The Case for Workforce Housing
While much more work needs to be done, Massachusetts has realized success in addressing the housing needs of extremely low income renters:
Suffolk county has seen the largest increase in meeting the needs of ELI renters, and is now the best in the country
Massachusetts boasts five of the top six counties for ELI renter housing supply 5

6. The Case for Workforce Housing
Report: Boston Ranks No. 1 For City Income Inequality
In 2013 Boston’s 95/20 ratio was 15.0, and it was then the third most unequal big U.S. city.
From 2013 to 2014, Boston’s poor got poorer, and its rich got richer.
There has been a reduction in middle-income Bostonians while lower-income and upper-income residents have grown dramatically 6

7. The Case for Workforce Housing
“Greater Boston will need more housing if it is to attract and retain the workforce that its growing economy demands.”
-Building for the Middle: Housing Greater Boston’s Workforce
Urban Land Institute/Boston/New England
The report highlighted these challenges:
Loss of middle income households in Greater
Boston between
More middle-income households in Boston and the
surrounding area are cost-burdened (paying
more than 30% of their income on rent) than their
counterparts living in the rest of the region.
Metro Boston will require more than 800,000
new workers by 2030, which will require 200,000
additional units, including 21,000 for middle income
households.

8. The Case for Workforce Housing
ULI recommended that policymakers:
Increase low- and middle-income housing options in wealthier suburbs
Make Gateway Cities more appealing for middle-income households; and
Increase housing production at all levels, particularly in core communities that are losing middle- income households at a faster rate.

9. Opportunity Fund
In March 2016, the MassHousing Board voted to approve and capitalize the Opportunity Fund with $160 million, to support the Agency’s efforts to confront the housing challenges facing the Commonwealth.

10. Workforce Housing Initiative
MassHousing set aside $100 million from the Opportunity Fund for Workforce Housing, and the goals of the initiative include:
Creating more housing options, especially for those not served by traditional affordable housing programs – younger professionals, teachers, healthcare workers, researchers
Incentivizing production of new units of housing
Addressing needs in Boston, Gateway Cities and wealthier suburbs
Other important goals include:
Partnering with the State to spur development on state-owned land, and to develop in communities that have embraced the Housing Development Incentive Program (HDIP)
Reaching a variety of communities across the Commonwealth
Creating workforce units in otherwise entirely market-rate developments
Engaging with new borrowers 10

11. Policy Considerations & Development Process
How can we make the program attractive to both market and affordable housing developers?
How do we determine the appropriate level of affordability in different markets?
How do we craft requirements that are easy to implement and oversee?
Should we fund workforce housing units required by inclusionary zoning?
How do we create clear guidance, but leave room to modify the program as we learn more, or identify transformative projects that don’t fit neatly within the framework?
Policy Development Process:
Internal cross department working group
Business Development, Rental Underwriting, Rental Management, Legal, Finance, Communication and Government Affairs
Developer Feedback
Property management company input 11

12. Program Highlights
Restricted to those earning more than 60% of AMI and up to 120% of AMI, with rents 10% below market and higher than LIHTC
New Production, consideration for existing projects at risk of conversion to market
Soft debt in an amount up to $100,000 per workforce housing unit; with $5 million project limit, with consideration for increases including in communities with inclusionary zoning to incentivize the creation of units above the minimum requirement
Restrictions are in place for the longer of 30 years or the outstanding term of the loan
Income recertification every other year
Set-aside $25 million for transformative projects, i.e. leverages state-owned land, TOD, housing in neighborhoods of opportunity 12

13. Where Are We Now? As of October 2017:
$46.3 million in commitments approved by MassHousing Board
21 total projects
1,742 total units (492 WFH units)
New production developments range in size from 6 to 180 units (largest preservation deal is 287 units)
Number of Workforce Housing units per project range from 3 to 86 units
Projects are located in 12 cities and towns

14. Affordability Mix
Developments funded through the Workforce Housing program will help address the need for new housing at all income levels. Nearly all developments are mixed income:
Most have three tiers including affordable (up to 60% AMI), workforce, and market
Others have an affordable or market tier with a workforce tier; there is one workforce only development

15. Where are We Now?
Consistent with the goals of the program, 16 of the 21 transactions involved new units (new construction or adaptive re-use); of the remaining five, four were mission-oriented preservation deals and one was a conversion of unrestricted units.

16. Preservation Opportunities
Preservation transactions allowed us to preserve developments with expiring use restrictions. Provided an opportunity to partner with our State housing agency.
13A transaction – Burbank Gardens, Boston-Fenway
40T transaction – Glen Meadow, Franklin

17. Business Opportunities
The Workforce Housing program has facilitated engagement with new borrowers – as well as borrowers who haven’t worked with MassHousing in years.
Of the 21 deals closed or committed, 10 of the developers were new to MassHousing.
112 Rantoul – a market-oriented transaction with a new developer

18. Business Opportunities
Key program element is for MassHousing to be involved in the permanent financing:
Traditional financing when there is already deep affordability
Tax-exempt or taxable financing, insured through HUD/HFA Risk Sharing
New partnerships and creative structures for transactions that are small and/or not eligible for Risk Share (minimum affordability at 80% of AMI)
Partnership with CBRE
Using Freddie Mac or Fannie Mae
JV Partnership agreement
Fee-sharing
Participation in a permanent loan
Borrower working with local lender for construction financing
MH will purchase the participation in permanent loan

19. What We Have Learned
There is demand for this type of housing and this type of resource – from developers and communities
The program is providing an opening to engage new development borrowers and business partners, i.e. local banks
The program is allowing us to partner in a meaningful way with State partners to further the Commonwealth’s priorities
Launching a new program has been exciting and rewarding – though not without its challenges, which include:
Defining workforce affordability – particularly in more depressed markets
Meeting different objectives with one program
Being simple, isn’t always simple
The flexibility of the MassHousing Board provided has enabled us to be creative and support projects that meet our objectives.