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The latest in industry news with the insight of Dominion Due Diligence Group (D3G) President, Rob Hazelton

 

The Revitalization of Lynchburg, Virginia's Historic Krise Building

When you're in the business of Housing Preservation, it's certainly always cool when a project that you've supported helps to preserve and revitalize a 100+ year old building. Our work included everything from the ESA to SEDI to Radon testing and NGBS Green Verification Services. 

https://www.benzinga.com/pressreleases/18/09/r12413590/walker-dunlop-provides-4-million-construction-loan-for-the-revitalizat

 

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RAD Celebrates 100,000 Units Preserved

What an awesome milestone in housing preservation! D3G is proud to have been at the forefront of the RAD process and to see so many of our projects through to successful completion.

http://d3g.com/images/other_media/RAD/RAD_100000_Homes_2018.pdf

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Jenn Krieher Joins D3G as Housing Preservation Manager

D3G is excited to announce and welcome Jenn Krieher as Housing Preservation Manager. The Housing Preservation Services (HPS) department was recently created to support the widened scope of services that D3G provides. Jenn will be responsible for providing technical assistance for RAD and SAC Section 18 programs, as well as overseeing portfolio wide reviews for our PHA clients. She’ll manage the D3G relationship with PHA’s and their development teams, performing RAD transaction liaison and owner representative services for clients. 

“I’ve known Jenn for the past eight years and am thrilled to have her on board here at D3G. Her talent, and especially her HUD experience, will add to our unprecedented affordable housing knowledge,” said Rob Hazelton, President of D3G

Jenn joins D3G from HUD, where she was part of the innovative Office of Recapitalization, during the early days of HUD’s green programs. She brings with her a strong housing preservation background, existing relationships with key players in housing across the country and deep knowledge of RAD & SAC, having been a RAD Transaction Manager.

 

 

Opportunities for Developers and Stakeholders within HUD’s Rental Assistance Demonstration (RAD)

The HUD Rental Assistance Demonstration (RAD) began as a limited pilot program in 2012, focused on accessing capital to address the backlog of deferred physical needs within public housing.   According to a HUD 2010 study, the backlog of repairs was estimated at $26B within the public housing stock.   More recent estimates place the backlog repair cost at greater than $35B.  The underlying premise of RAD is to remove the restrictive covenants on the property, better known as a “Declaration of Trust” which previously hindered the ability for public housing entities to leverage and redevelop real estate assets. Unencumbered real estate, combined with the transfer of public assistance from the Section 9 platform to the Section 8 platform allows for public housing to receive long term Housing Assistance Payment contracts and operate more like conventional affordable housing.  A few current stats on the viability and success of the program:

a.       RAD is a no-cost program to the Government involving a transfer of Public Housing capital and operating funds to the stable Multifamily Section 8 platform.   All residents have the right to return post-transformation, and long-term affordability is protected by renewable 20-year Section 8 contracts. 

b.       RAD has overwhelming bipartisan support, as evidenced by the recent increase in statutory authority from the previous 185,000 units to 455,000 units of public housing.  Also worthy of noting is that the Senate requested elimination of the cap altogether, which would allow conversion authorization for all 1.2million units of public housing.

c.       The initial 85,000 units of RAD conversion has generated greater than $5.8B investment in public housing, with a private to public capital ratio of 9:1.  Based upon current HUD Section 9 subsidy levels, it would have taken 47 years of appropriations to invest the same amount of capital for repairs, renovations and replacement.

Recent Policy Improvements:

RAD, though still considered a demonstration program, has advanced far beyond the original 60,000 units of authority.   HUD’s Office of Recapitalization has demonstrated strong leadership and a willingness to both streamline the process, as well as encourage deeper rehabilitations and/or disposition/demolition of functionally obsolescent property.   Subsequently, at the beginning of Q2 2018 HUD released a housing guidance document (PIH 2018-04 (HA)) which provides greater flexibility, new opportunities and streamlined initiatives within RAD; including:

a.       Small PHAs under 50 units can transfer to the Section 8 platform under a simplified process.  These units would obtain project-based voucher (PBV) contracts and be transferred to a non-profit entity.

b.       Scattered site assets, defined as non-contiguous 4-unit or less buildings, can be “disposed” of by a public housing agency via: (i) Section 8 contract transfer; (ii) fair market value (FMV) sale; or (iii) transfer of ownership to public housing residents.

c.       PHAs with excess land and commercial buildings have a streamlined method for (i) FMV sale; (ii) transfer to a non-profit demonstrating commiserate public benefit; or (iii) leverage and housing construction using RAD. 

d.       PHAs intending to use 4% LIHTC bonds to address advanced capital needs may apply for a 25%-75% SAC/RAD rental assistance split, whereby 25% of the units can be granted HUD Section 18 Tenant Protection Vouchers (TPV).  This new financing structure provides greater rent levels and timing of rental assistance payments, substantially enhancing LIHTC 4% bond proceeds.

Opportunities:

The following HUD graphic details adoption rates of RAD by region in the United States.  The Southeast has been an early adopter of RAD and continues to show rapid acceptance of the program.

 

 

The following discussion points detail opportunities about the potential role of Developers and Stakeholders within RAD transactions:

1.       RAD works and works well, supported by the evidence and success of early adopters, and increasing interest by some of the largest affordable housing developers in the country.   They all cannot be that wrong!

2.       RAD is best when combined with other sources of capital, equity and grant funds; for this reason, affordable housing developers with affordable and mixed financing experience find themselves in a unique opportunity to assist with public housing transformation.

3.       PIH Notice 2018-04 provides a prescriptive process for determining functional and cost obsolescence on older properties.  New guidance encourages demolition of larger public housing projects and replacement with multiple smaller, regionally diverse, new construction projects.  Single large PIH projects will be encouraged to be divided into multiple transactions, deconcentrating demographics. 

4.       PIH Notice 2018-04 provides mechanisms for commercial property, vacant land, and low-density land to be repurposed, and either sold at FMV, transferred to a non-profit, or placed under a land-lease with a private developer. 

5.       PIH Notice 2018-04 provides a method for public housing transformation where residents may become home buyers.   It is estimated that more than 200,000 single family homes are within the public housing portfolio, and recent HUD guidance encourages transfer of ownership to residents.   

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Federal Home Loan Bank of Atlanta Announces New Advisory Council Members

ATLANTA, Feb. 15, 2018 (GLOBE NEWSWIRE) -- Federal Home Loan Bank of Atlanta (FHLBank Atlanta) announced today that it has appointed two members to its Affordable Housing Advisory Council.

New Members:

Rob Hazelton has vast experience with multi-family housing preservation as it relates to capital needs, architectural design, construction cost estimation, energy conservation, and environmental issues. Mr. Hazelton has worked in all 50 states for the preservation of multifamily and senior housing under the LIHTC Qualified Allocation Plans. He has been involved with the HUD Multifamily Accelerated Process Guide since inception, and is proficient in the FHA-HUD multifamily mortgage insurance markets. Frequently asked to provide technical services for HUD’s many pilot and demonstration programs, Mr. Hazelton is currently working with the LIHTC Pilot, the Rental Assistance Demonstration, Moving to Work, and self-managed Energy Performance Contracting. He was appointed to the Virginia Statewide Independent Living Council by former Gov. Mark Warner, and he continues to support local organizations which service the senior and disabled communities. Mr. Hazelton is an active board member of a Richmond Regional Energy Alliance, focused on bringing energy awareness and efficiency to disadvantaged communities. He is a graduate of Bucknell University and resides in Richmond, Virginia.

Christie V. Smith is executive director of Neighborhood Housing Services of Richmond, Inc. (NHSR), a community development corporation and community development financial institution. NHSR’s mission is to present opportunities for low- and moderate-income families preparing to purchase affordable homes, and to strengthen communities in Richmond and other areas of Virginia. Ms. Smith has served in a variety of capacities at NHSR, including as Homeownership Manager, Housing Counselor, and CRA Officer. She is currently active with the Virginia Association of Housing Counselors (VAHC), the National Association of Professional Women, the National Credit Union Association, and the African-American Credit Union Coalition. Ms. Smith holds a certificate of completion from the Mosley-Flint School of Real-Estate, is a certified FHA Direct Endorsement Underwriter, is certified under the VA’s Lender Appraisal Processing Program, is a VAHC certified Housing Counselor, is a HUD certified Default Counselor, and is a Virginia Housing Development Authority Train the Trainer facilitator. She develops underwriting guidelines for CRA products and NHSR loan products, and she approves, funds, and sells mortgage loans to the secondary markets. Ms. Smith holds a Bachelor of Arts degree in Business Administration and Criminal Justice, and a Master of Business Administration degree from the University of Richmond.

About the Affordable Housing Advisory Council 
FHLBank Atlanta’s Affordable Housing Advisory Council comprises 15 representatives from a diverse group of community and nonprofit organizations actively involved in providing or promoting low- and moderate-income housing and community lending within FHLBank Atlanta’s district. The Advisory Council provides advice to FHLBank Atlanta’s board of directors regarding ways in which the Bank can enhance the effectiveness of its housing finance and community lending mission.

About the Federal Home Loan Bank of Atlanta
FHLBank Atlanta offers competitively-priced financing, community development grants, and other banking services to help member financial institutions make affordable home mortgages and provide economic development credit to neighborhoods and communities. The Bank's members—its shareholders and customers—are commercial banks, credit unions, savings institutions, community development financial institutions, and insurance companies located in Alabama, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, and the District of Columbia. FHLBank Atlanta is one of 11 district banks in the Federal Home Loan Bank System. Since 1990, the FHLBanks have awarded approximately $5.4 billion in Affordable Housing Program funds, assisting more than 827,000 households.

For more information, visit our website at www.fhlbatl.com.

 
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