4/19/10 Board of Commissioners Planning Session Scott Jepsen, EJP Consulting, LLC Eric Novak, Praxis Consulting Group, LLC April 23, 2010 Review Findings to Date (5 minutes) Review Goals/Principles (5 minutes) Issues of Concern (60 minutes): ◦ Issue#1: Self-Develop vs. Procure a 3 rd -Party Owner/Developer ◦ Issue#2: Ownership Structure ◦ Issue#3: Disposition Proceeds ◦ Issue#4: Homeownership ◦ Issue#5: Splitting Portfolio ◦ Issue#6: Reconfiguring Portfolio Review Critical Path Schedule / Transition Issues (10 minutes) Wrap Up / Next Steps (10 minutes) EJP/Praxis 1
4/19/10 Work Completed To Date: Capital Needs Assessment: April 2009 LIPH / RHCP Strategic Plan July 2009 Community / Resident Meetings: October – December 2009 Property Appraisals: November 2009 Inventory Removal Application / Preliminary Relocation Plan: December 2009 Board Establishes Goals / Principles for Disposition: January – February 2010 Environmental Review Submission: March 2010 Findings: Small portfolio consisting of all 3- and 4- bedroom units; 75 LIPH/RHCP units on 15 properties (3.62 acres total) LIPH program operates at a loss annually of about $106K; BHA operating costs of about $8,533/unit annually Extremely difficult portfolio to own and manage: ◦ Inefficient size; all large-family units; no on-site presence ◦ Bound by same HUD regulations as larger PHAs ◦ “Troubled” status since 2007 ◦ Have tried many management models since inception. EJP/Praxis 2
4/19/10 Findings (continued): LIPH units (built 1989) 21 years old RHCP units (built 1983) 27 years old High level of deferred maintenance. Estimate of $4.5 million in hard costs to repair and modernize 75 units ($60,405 per unit) BHA receives about $131K annually from HUD for LIPH capital repairs. (27.5 years to address capital repairs) The RHCP units are older and in poorer condition. The RHCP program does not provide funds for capital replacement. Still, the LIPH and RHCP stock is a valuable public resource… Townhouse configuration with front and back doors, yards, and off-street parking. Good infill locations, near schools, transit and services. Large family rental units still in demand. Units need significant renovation, but are still functional. Would cost at least $250K/unit to replace new. Berkeley housing market extremely tight—near 0% rental vacancy rates, high rents, new production expensive and difficult. City Housing Element cites need for Large Family Units (Policy H-23) EJP/Praxis 3
4/19/10 BHA public housing has operated as a “closed system”… Many long-time residents No LIPH/RHCP re-housing options for “empty nesters” RELOCATION REQUIREMENTS PER BHA ACOP—LIPH UNITS ONLY REMAIN IN TO NON- TO CURRENT PORTFOLIO PORTFOLIO UNIT POST CATEGORY REHAB UNIT UNIT OVER-HOUSED 22 14 0 UNDER-HOUSED 0 1 0 OVER INCOME 4 0 0 APPROPORAITELY HOUSED 0 0 13 TOTAL 26 15 13 Goals/Outcomes: Preserve 75 units of affordable housing Maintain at least 75 units on the existing sites Serve same household income population (up to 50% AMI) by providing a Section 8 voucher or Project Based assistance Optimization of financial compensation to BHA * adopted by BHA Board February 2010 EJP/Praxis 4
4/19/10 Principles for Process – what BHA is committing to our current residents: Ensure the diversity of the population of those who will live in the units after repositioning/ disposition process Least possible displacement/disruption to current residents Residents are offered/receive the information, services, and housing they need Residents continue to pay 30% of adjusted income – no minimum income requirement Principles for Process (Continued) – what BHA is committing to our current residents: Transparency – communicate openly about what we’re doing and why Existing residents have 1st priority for rehabbed units Residents are integral part of planning/ relocation process EJP/Praxis 5
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our Development Models: A. Private/Non-Profit Owner/Developer B. Fee-Based Developer (Turn-Key) C. PHA Partners w/ Developer D. PHA at Developer …And Many Variations in Between EJP/Praxis 6
4/19/10 What does an affordable housing developer do? Assembles development team (architect, engineers, lawyers, property manager, general contractor) Conceptualizes project (location, units, amenities, market) Oversees design Obtains zoning and permits Obtains financing Covers the cost of predevelopment out of own pocket Provides financial guarantees to lenders Oversees construction and lease-up Manages property and ensures regulatory compliance …and receives a developer fee at the end if the project is successful A. Private/Non-Profit Owner/Developer What is it? BHA capacity to carry out: BHA procures 3 rd -party private Since all of the development owner/developer to develop, own, and activities are procured, need relatively manage portfolio. little in-house capacity BHA role limited to development BHA would require legal and contract, provider of rental assistance, development assistance to negotiate potentially land owner contracts and monitor performance Advantages: Disadvantages: Developer responsible for completion Developer gets entire fee (more later) (assumes all risk) While not carrying out the work, BHA No BHA ramp-up of internal capacity needs to vigilantly monitor owner/ required developer performance. BHA can still exercise control through contracts Operating efficiencies of folding units into larger owner portfolio Once procured, developer not subject to state and Federal procurement rules EJP/Praxis 7
4/19/10 B. Fee-Based Developer (Turn-Key) What is it? BHA capacity to carry out: 3 rd -Party developer carries out BHA would require legal and redevelopment for a fee and then development assistance to negotiate hands property back to BHA to contracts and monitor performance. operate. BHA would need to address operating inefficiencies. Advantages: Disadvantages: Developer responsible for construction Developer gets entire fee (more later) completion (assumes all risk) BHA left with existing operating No ramp-up of internal capacity inefficiencies required for development phase Turn-key model more typical of capital Relies on expertise of 3 rd -party grant projects—probably wouldn’t work developer for construction with Project-Based Section 8 financing. BHA retains full control of portfolio post-renovation Once procured, developer not subject to state and Federal procurement rules C. PHA Partners with Developer What is it? BHA capacity to carry out: BHA is a co-owner of project with BHA would require legal and 3 rd -party developer. Typically, the development assistance to negotiate developer retains managing control of contracts and monitor performance. project in return for carrying out BHA might need to create spin-off most of the work and providing entity in order to partner. financial guarantees. Advantages: Disadvantages: Developer still assumes most risk May scare away some developers Little BHA ramp-up of internal capacity Entails modest time commitment and required risk BHA a party to most contracts—more Developer fees contingent on control successful performance—usually don’t Operating efficiencies of folding units come until project completion into larger owner portfolio Entity may be subject to state and BHA potentially would build capacity to Federal procurement rules take on future projects Possibility of developer fee EJP/Praxis 8
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