1. Housing Commission FY 13/14 Annual Plan & RAD WWW.hud.gov/RAD
City of Ann Arbor February 11, 2013
Jennifer Hall
Executive Director
Ann Arbor Housing Commission

2. Agenda Recent AAHC Improvements AAHC Funding Challenges
HUD funding solution through the Rental Assistance Demonstration (RAD) Program
Annual Plan
Family Self Sufficiency program

3. Improvements in 2012 Unit Turns Maintenance/New Occupant Occupancy
Previously 190+ days average to turn & occupy
Currently 21 day average to turn
Currently 45 days average to turn & occupy
Occupancy
Currently 99% (1-5 vacant units)
Previously 95% (12 – 20 vacant units)
Hired Facility and Maintenance Manager
Received Family Self Sufficiency Grant

4. Policies and Procedures
Hired Consultant
Every policy and procedure for public housing and voucher program reviewed and revised
Ensure compliance with HUD, Fair Housing, landlord/tenant laws etc.
Maximize efficiency and standardization
Updated Lease
Created Preventive Maintenance Plan
Updated Maintenance Policy
Working on Tenant and Staff Manuals for Public Housing Units
Working on Disaster Response and Emergency Response Plan

5. Technology Implemented Mobile Maintenance
Maintenance Techs use mobile devices to access work orders and enter completions
Implemented On-line Waitlist for Vouchers
Open for 48 hours
Over 15,000 applications
Pulled 500 names by random lottery to be on the waitlist
Laptops for public housing management staff so that they can hold office hours at remote sites
Working on option of on-line payments for tenants and electronic payments for vendors

6. Positive Impact No Longer in Troubled Status
REAC Physical Inspection Score
Increased score from a 78 to a 81 on the East side
Increased score from a 64 to a 86 on the West side
Eligible for new HUD grants

7. Maintenance Duct cleaning all sites Gutters cleaned and fixed
Retaining walls and landscaping
Sidewalk grinding and concrete replacement
Fire Stops above stoves to prevent stove fires
Footing drain disconnects
Roof replacement
Marmoleum flooring (similar to linoleum)
Tuck pointing (brick exterior of buildings)
Jetting sewer lines
Boiler and A/C maintenance

8. Replace Carpet with Marmoleum
Baker Lounge
Tenants voted for color scheme

9. Replace Carpets with Marmoleum
Installed in 2012/2013
Funding through HUD Capital Funds
$96,000 all common areas at Baker and Miller

10. Replaced Asphalt Roof with Steel
New Steel Roof installed in 2013
Funding provided by the Downtown Development Authority
Initial bid $246,000. Extensive rafter damage increased cost to $305,000

11. Green & Energy Efficiency
LED and photocell exterior lights
Energy Star appliances
Water sense bath fixtures and toilets
Wrapping duct work and water pipes
DTE direct install program for units
CFL lighting, aerators and showerheads
DTE rebate program
Common area energy improvements
Low VOC paint
Tank-less water heater (pilot) at N. Maple
Demand circulating hot water pump
Boiler control valve to sequence boilers at Miller
Started insulating attic spaces
Started replacing windows

12. Additional Needs Air Conditioning all units Roofs and Windows
Health as well as security ($300,000 - $375,000)
Roofs and Windows
Security Cameras ($200,000 - $300,000)
Security Guards ($80,000 - $300,000/year)
Energy Efficiency ($900,000 +)
Some sites need to be demolished and rebuilt
Age, functionally obsolete, flooding

13. Two Funding Problems Annual Operating Subsidy Capital Re-investment
Maintenance
Staffing
Capital Re-investment
Replacing major systems like roof, furnaces etc.

14. Federal Funding Historical decline in Congressional support for HUD
1976 HUD’s budget was $86.8 billion
2012 HUD’s budget was $41.7 billion
HUD losing 10,000-15,000 public housing units/year due to disrepair requiring demolition

15. AAHC Capital Needs • National HUD study AAHC Capital Needs Assessment
Immediate capital repair needs in excess of $25.6B across HUD public housing portfolio, or $23,365/unit
Capital Accrual 20–year projection of $82,125/unit
AAHC Capital Needs Assessment
A 2009 AAHC Capital Needs Assessment indicated $40,337/unit in capital needs over next 15 years
At current HUD rates, AAHC will get $18,000/unit
Which is $22,000/unit shortfall in capital repair funding

16. Decreased Funding Public Housing
Operating Fees (rent subsidy)
In 2012 HUD reimbursed the AAHC at 95% of the operating fees owed
$62,700 less than owed
In 2013 HUD is reimbursing the AAHC at 81% due to sequestration
Estimated at $262,000 less than owed
Capital Funds (building improvements)
2010 Capital Funding from HUD $557,000
2012 Capital Funding $440,478
2013 Capital Funding TBD (sequestration)

17. Three Options to Fund AAHC Properties
No Change
Negative impact on units, tenants & neighborhood due to lack of funding, continued deterioration of units
City of Ann Arbor provide annual gap funding
Cover the gap between HUD funding and shortfall
Approximately $500,000/year for capital needs
If Sequestration permanent, much greater problem
Convert Public Housing to Project-Based Vouchers with private funding reinvestment
Immediate rehabilitation of all properties
Long-term operating subsidy from different HUD program that has more stable funding by Congress

18. Rental Assistance Demonstration (RAD)
HUD’s goal is to convert 60,000 public housing units to Project Based Vouchers
NEW rent subsidy with vouchers (Operations)
NEW access to capital funding
Reinvest in physical structures
Leverage private capital to preserve assets

19. How RAD rent/operating subsidy will be determined
At conversion, PHAs will convert funding to a Section 8 rent subsidy (HAP)
Public Housing
Voucher

20. AAHC RAD Rents First year limited to current per unit funding
Annually re-evaluated by HUD and increased (based on operating adjustment factor)
Will never be less than first year
No longer subject to public housing decreases
Bedrooms
AAHC EAST
AAHC WEST 1
$466
$470 2
$567
$572 3
$713
$719 4
$734
$741 5
$844
$852

21. Rehabilitation Physical Condition Assessment must be completed
20 year schedule
all replacement costs in replacement reserve
Rehab budget determined by architect/engineer and actual bid
Minimum 10% rehab contingency
Market competitive upgrades (a/c) must be included
Must use energy efficient products as finances allow
Must use general contractor

22. Pre-Development Work Issued Request for Proposal Surveys
Co-Developer and Development Consultants Selected
Surveys
Environmental Reviews
Radon, Lead, Asbestos
Physical Needs Assessment
Energy Audit
Title Search
Appraisals
Architectural Analysis and Scope of Work

23. Development Team Dykema Gossett Recap Real Estate Advisors
Legal Counsel
Recap Real Estate Advisors
RAD Consultant
Avalon Housing
Supportive Housing Consultant
Norstar Development
Co-developer
O’Brien Construction
General Contractor
Mitchell and Mouat
Architect
Equity Investor/Equity Partner
TBD

24. How will Construction be financed?
• Equity from Low Income Housing Tax Credits
• Grants
HOME
Community Development Block Grant
Federal Home Loan Bank
AAHTF
DDA
Private Foundations
MSHDA Community Development Funds
Corporation for Supportive Housing
• Debt

25. Low Income Housing Tax Credits (LIHTC)
Created in 1986 pursuant to the Internal Revenue Code Section 42
Incentivize private sector to invest in housing
Single largest funding source for affordable rental housing development
Tax Credits allocated to States
Developers compete for 9% tax credits
Developer sells tax credits to private sector
Creates Cash (Equity) for affordable property
10 years of tax credits to Equity Investor

26. LIHTC Continued Credit is a dollar for dollar credit -10 years
Compliance Period of Affordability is minimally 15 years under Section 42
Extended Low-Income Use Period can be greater time period … up to 99 years
Limited Partner or Equity Investor will remain partner for that initial compliance period
Governed by a MSHDA Regulatory Agreement – a recorded document

27. Legal Structure
IRS requires Equity Investor to be part of the ownership structure
known as equity limited partner or equity member
Create a limited partnership or limited liability company with developer/owner
known as general partner or co-general partners/ co-members
Must be single purpose entity
Purpose is to utilize tax credits to invest in a specific property (or group of properties)
No cross collateralization & liability with other properties/businesses
Under RAD, HUD requires permanent affordability

28. How does current structure work?
City of Ann Arbor
AAHC
Property manager
deed
HUD funding & regs
Public Housing

29. How will new structure work?
City of Ann Arbor
AAHC
Co-General Partner/
Co-Developer
Nonprofit
General Partner/
Managing Partner
Equity Partner/
Limited Partner
HUD funds & regs
Limited Dividend Housing Association, LP or LLC
15 year limited partnership
Affordable Housing

30. Phase I Properties
Convert under RAD and rehabilitate using Low Income Housing Tax Credits (LIHTC) if awarded in December 2013
Baker Commons
Miller Manor
Green/Baxter
Hikone
S. Maple

31. Phase I Properties
Convert under RAD and rehabilitate using existing AAHC funds in 2014
Mallets Creek
Hillside Manor
S. Seventh
Upper Platt (Colonial)

32. Phase I Properties De minimis or Section 18 disposition Evelyn Court
one 3-bedroom single family home
W. Washington
1 bedroom units - duplex
Oakwood
three 5-bedroom single family homes
Continuing analysis on whether to dispose of by selling or converting to project based vouchers using AAHC existing vouchers, not RAD vouchers

33. Phase II Properties Demolition and new construction LIHTC
N. Maple Estates and Duplexes
Lower Platt
Evaluating whether demolition and new construction or rehabilitation LIHTC
Broadway
White/State/Henry
LIHTC application in 2014

34. Impact Reinvestment in properties $25 - $45 Million economic impact
Increased energy efficiency
Remedy structural problems
Higher quality living conditions for residents
$25 - $45 Million economic impact
Construction, professional services, tenant jobs
Diversifies & Stabilizes AAHC revenue
More stable source of rent (operating) subsidy
AAHC staff continue to manage properties

35. Impact on Tenants Improved units
AAHC pays for any short-term or long-term relocation if needed to fix up unit
Lower utility costs (unless rates increase significantly)
Tenants still pay 30% of income on rent
Still permanently affordable, cant turn into market rate units

36. Impact on Tenants
AAHC cannot re-screen tenants, must allow current tenants who are compliant with lease to stay in units
Public Housing type grievance policies which are more favorable to tenants
Continue to receive services
Peace, CSTS, ROSS, CAN etc.
Can continue to have Resident Councils
$25/unit stipend if follow HUD rules

37. PBV – Project Based Vouchers
Tenant can voluntarily request a tenant-based voucher after 1 year of residency
100% of units will be designated as receiving services
HQS inspections – focus on inside of units
Termination notification consistent with public housing requirements

38. Next Steps Feasibility Analysis of every property Resident Meetings
Phase I projects - Scope of work
Phase II - Rehab or demo & new construction
Resident Meetings
Council approval of PILOT
Council approval of a Resolution to transfer the properties to AAHC, with contingencies
Apply for financing

39. Examples of Norstar, O’Brien, and Avalon Affordable Housing Projects
Partnerships with Public Housing Authority & non-profits using
Low Income Housing Tax Credits

40. Carrot Way Apartments 30 units & Community Center
$5.5 million Total Cost
Tax credit syndication: Great Lakes Capital Fund, limited partner equity
MSHDA HOME Funds
City of Ann Arbor HOME Funds
Religious Action for Affordable Housing
Federal Home Loan Bank Affordable Housing Program
General Partner Equity
Avalon Housing Developer, Owner, Property Manager

41. Arbordale Apartments 39 units $4.6 million Total Cost
Tax credit syndication: National Equity Fund, limited partner
MSHDA HOME Funds
City of Ann Arbor HOME Funds
Ann Arbor Housing Trust Funds
General Partner Equity
Federal Home Loan Bank Affordable Housing Program
Washtenaw County General Funds
Avalon Housing Developer, Owner, Property Manager

42. BEFORE: Herman Gardens Public Housing – Detroit MI

43. AFTER: Garden View Estates 490 Rental Units $109.5 million Total Cost
Tax credit syndication: Great Lakes Capital Fund & Bank of America, limited partner equity
HUD Hope VI Funds
Neighborhood Stabilization Funds
MSHDA Tax Exempt Loan
Brownfield Tax Credits
MSHDA HOME loan
NORSTAR Developer hired by Detroit Public Housing Commission
O’Brien Construction

44. BEFORE: 1630 Dewey Ave – Rochester NY
Former Dry Cleaning Factory – view from the front

45. AFTER: 1630 Dewey 80 Rental Units $16 million Total Cost
Tax credit syndication: Goldman Sachs, limited partner equity
NYS Homes and Community Renewal Urban Initiative
NYS Housing Trust Fund Corporation
NYS Homeless Housing Assistance Program
City of Rochester HOME Funds
HUD Continuum of Care Grant
Federal Home Loan Bank
JP Morgan Chase Bank
NORSTAR Developer hired by Common Ground Nonprofit

46. Risks/FAQ’s Unable to secure capital funds to make project work
Continues as public housing instead of converting to Project Based Vouchers
Cost of pre-development activities absorbed by AAHC
Co-developer and AAHC disagree on …
Master Developer Agreement executed regarding roles & responsibilities
Equity Partner wants to remove AAHC from partnership
AAHC cannot be removed unless egregiously fail to perform per contract
Same as current situation with HUD. HUD can remove if egregiously fail to perform

47. Risks/FAQ’s Continued
Co-developer or Equity Partner want to convert to market rate
Cannot be done. HUD has regulatory agreement that precedes all other agreements and financing. MSHDA also has LIHTC regulatory agreement
Construction costs exceed budget
Use contingency, secure additional funds, change scope of work, or costs paid for from developer fee
Construction problems cause delay
Norstar provides construction and LIHTC completion guarantees
Liquidated damages in general contractor agreement to share in costs