A Transformative New Solution for Affordable Housing

Transcription

1 A Transformative New Solution for Affordable Housing

2 WHY DO WE NEED AFFORDABLE HOUSING? THE CASE FOR MORE HOUSING Housing affordability is a core issue that impacts every corner of our region, every ethnicity, gender, and age group. Stable housing is a key to education success, job advancement, and food security. A stable home is the foundation for a prosperous community and local economy. $770 Affordable and safe housing is important to the well-being and health of people and families. Without adequate housing, families have trouble managing their daily lives. When this happens, their health suffers. Average rent for a one-bedroom apartment in hrs #1 1 in 5 You need to work 100 hours a week at minimum wage to afford a twobedroom apartment. The number one reason for family homelessness is a lack of affordable housing. There is only one affordable apartment unit available for every five needed. PEOPLE WHO NEED AFFORDABLE HOUSING Seniors The average social security income is $733 per month. Families with Children $2,614 is the mean renter s wage per month. Who lives in REACH homes? At REACH I have clean, comfortable, affordable housing where I can visit my children and grandchildren and also have them visit me and feel safe while they are here. -Mark, Retired Veteran Veterans The average veterans pension is $1,593 per month. Working Adults $1,603 is the monthly wage for someone working full-time at minimum wage. Average rent for a one-bedroom apartment in 2016 That s a 75% increase in rents! $1,350

3 THE AFFORDABILITY BOTTLENECK WHO CAN T AFFORD HOUSING? Not enough permanent homes Eroding naturally affordable homes Homeless Seniors NO HOUSING Veterans Minimum-Wage Workers Families AFFORDABLE HOUSING UNAFFORDABLE HOUSING Rapidly rising rent Stagnant Wages MARKET-RATE HOUSING WHO IS REACH? REACH provides much more than a safe, affordable place to live we help our residents grow personally and professionally while providing solutions focused on stabilizing and enhancing the neighborhood. REACH is one of the region s largest and most successful affordable housing developers and a national leader in affordable green building. Established in 1982 by Southeast Portland neighbors and community activists, REACH believes strongly that innovative community partnerships are essential to the accomplishment of our mission. REACH has never sold rental property and we are now stewards of over 2,200 units of affordable rental housing across the Portland metropolitan region and Southwest Washington. Largest Nonprofit Developer in the Metro National Leader in Green Building 35 Year History of Success Supporting the Portland Metro and SW Washington 30+ Awards, and Counting

4 TAX CREDIT FUNDING ROAD BLOCKS LOCAL FUNDS Developer must secure local funds before applying for competitive tax credits. There are two federal tax credit programs that REACH can use to fund a development: LOCAL FUNDS Developer must secure local funds before applying for noncompetitive tax credits. WHAT IS PREVENTING US FROM SOLVING THIS? Affordable housing costs the same as market-rate housing to build. To keep the rents affordable developers can only borrow a small amount, creating a financing gap that cannot be covered by Low-Income Housing Tax Credit Equity (LIHTC) and private bank financing. This financing gap must be filled by competing for oversubscribed local public funds, adding significant time, cost, and uncertainty. ROAD BLOCKS TO DEVELOPMENT Developer secures additional gap funds. COMPETITIVE TAX CREDITS These tax credits are awarded to competitive projects and cover approx. 70% of the cost of development (9%/LIHTC*). Tax credits are converted to cash by selling them to for-profit companies (e.g. banks) that typically purchase for less than face value (approx. 90 /$1). NON-COMPETITIVE TAX CREDITS These tax credits are granted once local funds are secured and cover 30% of the cost of development (4%/Bond). Market Volatility Tax Credit pricing and demand is highly volatile and subject to changes in market conditions, corporate tax rates, and interest rates. Time It can take 2-3 years to piece together financing. Overly Restricted Funding One deal could be over funded, and another underfunded, but you can t swap public funding between two projects. Money There are more projects than funds available. $709,616,783 in Non-Competitive Tax Credits (since 2015) were left on the table in Oregon because the state lacked adequate gap funding. Developers take out small mortgage to keep rents low. *Low-Income Housing Tax Credit REACH builds affordable housing and guarantees low rents for 60+ years (filed on deed). I m blessed to live in an affordable apartment surrounded by a supportive community made up of At neighbors REACH I have and REACH clean, comfortable, staff. affordable housing in the South Waterfront where I can visit. -Yolanda, REACH Resident -Mark, retired veteran

5 WHAT WOULD IT TAKE TO BUILD MORE? Sole reliance on public subsidies has created an artificial speed limit to how much and how fast we can build. THE POWER OF A NEW MODEL This new model accelerates the rate and scale of production, addressing the significant shortfall in the production rate of affordable housing in relation to the staggering need. I have always believed that the only way to cope with a cash crisis is not to contract but to try to expand out of it. -Sir Richard Branson LIVES CHANGED 800 new affordable apartments in the next 3 years GOING TO SCALE 2.5 times higher than our average production rate LESS TIME = MORE HOMES Reduce pre-development times by 1-2 years We have a proven model that can put donations to use right away in an innovative structure. Our new model will allow us to deploy donations quickly, exactly when and where it is needed, to build faster. In addition to speeding up production during the housing crisis, this model also recaptures funds over time to be reinvested back into future development. Our community needs quality affordable homes today for our seniors, families, veterans, teachers, and all those that make the Northwest a great place to live. We are ready to grow to build more homes, faster. MONEY ON THE TABLE Flexible funding to take full advantage of all federal resources currently under used UN CERTAINTY Better able to weather the highly volatile tax credit market that is subject to changes in tax policy and market conditions Been Building 1... Now We Can Build 7! FLEXIBILITY Allows us to direct funds where and when they are needed the most OR Speeding Up the Development Timeline Project timeline with initiative funds SECURE FUNDING PRE-DEVELOPMENT CONSTRUCTION Project timeline under the current system SECURE FUNDING PRE-DEVELOPMENT CONSTRUCTION YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

6 TRANSFORMATIVE NEW SOLUTION JOIN THE FUNDING HOMES INITIATIVE 100% of donations go to REACH projects REACH HOUSING DEVELOPMENT FUNDS Initiative is funded through philanthropic donations We already have over $166 million in public and private investments waiting to be applied towards our $176 million goal. Now all we need is you to start building now. We invite you to be a part of REACH s initial $10 million Funding Homes Initiative. With your support, this new and innovative model will transform affordable housing development in the Northwest. Our goal is to quickly address the housing crisis. We have seven inaugural investment projects that will create 800 new affordable apartment homes. Through the combined power of public, private, and philanthropic partnerships, your support will revolutionize the scale at which we can build, creating a new paradigm for funding affordable housing and change lives! Give Today. Build Today. Repeat. STRATEGIC PLACEMENT Money is loaned to new REACH housing projects to cover project gaps Repayments are put back into fund to be used for future projects REACH: $4 million Tax Credits: $62 million Initiative Goal: $10 million Goal: $176 Million Mortgage: $65 million $166 MILLION IN PUBLIC AND PRIVATE FUNDS Additional Local Gap: $15 million State & Local: $82 million 800 New Apartments Small interest charged to maintain funds with inflation PAYBACK Properties pay back funds with excess cash flow, typically over 15 years I sincerely feel that REACH played an active role in making the impossible, possible. -Christy, Former REACH Resident

7 More homes. More people. More quickly. Building communities where all people live in quality, affordable, sustainable homes empowered to achieve goals, and enjoying a strong sense of community. More Information Anthony Petchel Director of Philanthropy apetchel@reachcdc.org reachcdc.org