NCHMA Finding Profitable Opportunities and Financing Affordable Housing Summit Mini Market Update: Transportation Oriented Development March 30, 2017
Transit-Oriented-Development • TOD is a neighborhood (re)development which includes a mix of housing, office, retail, other employment-based land uses, and public buildings/amenities in a walkable, compact neighborhood within 0.5 miles of a high-quality transit station. (Adapted from CTOD – Center for Transit Oriented Development) • “Began” in late 1980s – although StreetCar Suburbs dominant in 19th century 2
Market Realities • Demand for housing near high-quality transit is growing but supply is not keeping up. Prices are escalating (Reconnecting America) • High-quality TOD development is difficult, time-consuming, and expensive • Public agencies and investment require value-capture, ROI and hope to leverage investments • Transit ridership projections may require capturing “choice” commuters vs. existing transit-dependent households 3
Equitable TOD Challenges • 75 percent of HUD-subsidized affordable housing units near transit stations have expiring subsidy contracts in next 5 years • Only a small proportion of LIHTC developments built within ½ mile of high-quality transit station • Nearly half of new transit stations are built in neighborhoods where affordable housing already located • Land costs not part of “eligible basis” for LIHTC. Therefore, higher -cost in TODs = larger gap financing needed 4
Equitable Transit-Oriented-Development (ETOD) Well-planned and implemented development near transit that accounts for the needs of low- and moderate- income people, largely through the creation or preservation of affordable housing* Equitable Transit-Oriented-Development Can: • Preserve and create affordable housing units near transit • Prevent or reduce gentrification • Preserve or develop access to transit for low- and moderate-income individuals • Connect people to employment, health care, child care, education, stores, food, and critical services • Reduce cost of living, promoting economic mobility (low income families often spend > 75% of income on housing & transportation, with transportation their 2 nd highest expense) • Improve transportation system performance, local and regional economies, municipal finance, the environment and public health for all residents and rider regardless of income* * Promoting Opportunity Through Equitable Transit Oriented Development (ETOD): Making the Case; Enterprise Community Partners; April 2015 5
Equitable Transit-Oriented Development • Goal: stable, affordable, diverse, mixed-income housing near high-quality transit stations in high-opportunity areas. • Strategies – Preserve existing affordable housing near planned transit stations. – Fund pre-development and land acquisition for affordable housing providers in TOD areas. – Mandatory or incentive-based mixed-income housing for projects with public subsidy or discretionary land-use approvals – State Housing Finance Agencies (HFAs) include transit-oriented policies and points in LIHTC QAP (Qualified Allocation Plan) 6
The Denver TOD Model
Structure: A Blend of Risk/Return | The Denver Model Non Profit Equity Urban Land Conservancy $1.5 Million City & County of Denver - First Tier Capital (0% Return, Non-Recourse) $2.5 Million Enterprise Community Partners MacArthur Foundation Second/Third Tier Capital Colorado Housing and Finance Authority $5.5 Million Rose Community Foundation (<2% Return, Non-Recourse) Enterprise Community Loan Fund Senior/CDFI Capital US Bank $5.5 Million Wells Fargo First Bank 8
The Denver Results Borrower Equity $1.5 Million First Tier Capital $2.5 Million Acquisition Loans 3-5 Year Term Second/Third Tier Capital 3.4% Interest Only $5.5 Million 60% Non-Recourse Expedited Approval Senior/CDFI Capital $5.5 Million 9
The Denver TOD Impacts (2009-2013)* New and Rehabilitated Subsidized Rental Apartments: • 910 apartments • $108.7 million in local income one year • $10.9 million taxes and other revenue for local governments one year • 1,469 local jobs one year $598 million in local income and 7,345 local jobs cumulative over 5 years *Results from metro Denver study, conducted by Chief Economist Elliot Eisenberg, Ph.D., of the economic consulting firm GraphsandLaughs, LLC. For a copy of the full study, please contact Christi Craine, Urban Land Conservancy, ccraine@urbanlandc.org 10
The Indianapolis ETOD Model ADVANCING COMMUNITIES Reliable quality service for over 20 years
The Indianapolis ETOD Loan Fund: Goals • $15 million Acquisition Fund to preserve or develop affordable housing near planned transit stations before escalating property values put those sites out of reach • Utilize public resources to leverage private and philanthropic resources • Gather and structure capital to make loans not traditionally available • Finance the purchase and holding of properties until the sites are ready for development or rehabilitation and permanent financing is secured 12
Structure: A Blend of Risk/Return ($15M Loan Fund)* Non Profit Equity INHP Borrower ** $1.5 Million City & State (0% or Low Interest/Non First Tier Capital Recourse/Credit Enhancement) $XX Million Philanthropic, Foundations, Government Agencies & Bank Second/Third Tier Capital Grants (Low Interest/Non Recourse) $XX Million Banks (EQ2) Senior/CDFI Capital $XX Million *Structure keeps cost of capital low & reduces/shares risk **Source of funds: The Lilly Endowment transformative 13 13 grant to INHP, December 2015
Loan Fund Terms Borrower Equity For the Fund to maximize its $1.5 Million impact, attractive terms are being pursued in order to offer the following loan terms to the Fund’s borrower : First Tier Capital $XX Million Second/Third Tier Capital $XX Million Senior/CDFI Capital $XX Million 14 14
Loan Parameters • Multifamily rental housing – mixed income, with an emphasis on Project Types affordable housing • Mixed-use projects that are complementary to community needs • Vacant/underutilized land or properties that will be acquired for the purpose of producing either of the above • Acquisition of affordable housing near transit, preserving it for that use Development Located primarily within ¼ mile of a transit stop Parameters • Acquisition loans Loan Terms • Up to $3 million, higher with consent of a committee of investors • Maximum of 5 years • Loan-to-Value up to 90% of the lesser of the as-is appraised value or the purchase price • Interest rate - fixed-rate; interest rate to be determined based upon mix of investment in the Loan Fund, with a maximum expected interest rate of 3.50% 15
Joe Hanson Executive Vice President, Capital Development & Strategic Initiatives Indianapolis Neighborhood Housing Partnership l inhp.org 317-610-HOME (4663)
INHP’s ROLE Comprehe hens nsive View Preserve/Develop affordable housing • Economic opportunities through access to transit • and therefor jobs, education, healthcare, etc. Prevent gentrification • Buy/H /Hold/S d/Sell – INHP will not become a developer but will use site control to encourage equitable development l inhp.org 317-610-HOME (4663)
INHP’s INVESTMENT 10% Equi uity ty Investme tment nt – First t Loss Pre-de developm pment Resour urces Interest Carry • Site Assembly • Re-zoning • Brownfield Remediation • Research h for Strate tegic/Effi /Efficient Deployment l inhp.org 317-610-HOME (4663)
RISKS No known n take-out ut / could d take years • Expectati tation n for discoun unte ted price – not t susta taina nable • Pre-de developm pment costs ts may not be recoverable • Inte terest t carry may limit t utilizati zation • l inhp.org 317-610-HOME (4663)
RESEARCH Suppl ply • Possible preservation of expiring tax credit compliance • Assessment of risk that property will convert to market rate • Avoid concentrations of poverty Demand nd • Greater than supply • LMI families want access to jobs, food, healthcare, education l inhp.org 317-610-HOME (4663)
RESEARCH (Continued) Best t Practice tices Policies affecti ting ng developm pment nt pote tenti ntial • Zoning density and parking requirements Take out t fina nanci ncing – availability ty impa pacts ts depl ployment nt optio tions ns and timing ng • LIHTC Qualified Allocation Plan (QAP) • FHLB • Other Resul ult: t: Scorecard d to guide de site te selectio tion l inhp.org 317-610-HOME (4663)
Contact Us Mark McDaniel President and Chief Executive Officer Cinnaire 517.364.8900 | mmcdaniel@cinnaire.com Joe Hanson CFO and EVP Strategic Initiatives Indianapolis Neighborhood Housing Partnership 317.610.4680 | jhanson@inhp.org
Cinnaire – Fund Sponsor (formerly GREAT LAKES CAPITAL FUND) ADVANCING COMMUNITIES Reliable quality service for over 20 years
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