Tool Kit Offers Strategies for Preserving Affordable Housing

Unsub­si­dized afford­able small- to medi­um-scale mul­ti­fam­i­ly rental units are a vital source of hous­ing for fam­i­lies of col­or that is being threat­ened amid the coro­n­avirus pan­dem­ic as investors buy prop­er­ty from finan­cial­ly bur­dened own­ers. Tip­ping the Scale from Enter­prise Com­mu­ni­ty Part­ners, a tool kit pro­duced with sup­port from the Annie E. Casey Foun­da­tion and oth­er fun­ders, edu­cates non­prof­its, fun­ders and devel­op­ers on pre­serv­ing the country’s sup­ply of these afford­able units.

Afford­able hous­ing and the pandemic

To be con­sid­ered afford­able, hous­ing in the Unit­ed States can­not cost more than 30% of a household’s income. Unfor­tu­nate­ly, as rent and home prices con­tin­ue to climb, low- and mod­er­ate-income house­holds often strug­gle to find hous­ing that meets this def­i­n­i­tion. The pan­dem­ic has spurred addi­tion­al finan­cial pres­sures for many fam­i­lies and could cause as many as 15 mil­lion mort­gage defaults. In antic­i­pa­tion, pri­vate equi­ty firms are rais­ing mon­ey to buy dis­tressed prop­er­ties like homes and apart­ment build­ings. These out­side invest­ments could increase home and rent prices in low-income neigh­bor­hoods, which are dis­pro­por­tion­ate­ly com­posed of house­holds of col­or.

Now, the preser­va­tion of afford­able hous­ing is even more crit­i­cal — par­tic­u­lar­ly the preser­va­tion of small- to medi­um-scale mul­ti­fam­i­ly (SMMF) rental units. SMMF prop­er­ties (res­i­den­tial build­ings with two to 49 units) are an impor­tant part of unsub­si­dized afford­able hous­ing, rep­re­sent­ing 54% of the nation’s rental stock. The tool kit specif­i­cal­ly tar­gets prop­er­ties that don’t receive project-lev­el sub­si­dies but often still accept ten­ant-based rental assistance.

Pro­mot­ing afford­able hous­ing in low-income communities

Accord­ing to the tool kit, com­mu­ni­ty part­ners can pro­mote invest­ment in low-income neigh­bor­hoods and strength­en local economies by acquir­ing and restor­ing these prop­er­ties. New con­struc­tion usu­al­ly costs 30% to 50% more than restor­ing exist­ing SMMF prop­er­ties, mak­ing preser­va­tion a cost-effec­tive path for grow­ing the sup­ply of afford­able housing.

The tool kit out­lines best prac­tices in:

• Rela­tion­ship build­ing. Strong part­ner­ships with own­ers and bro­kers are cen­tral to mov­ing SMMF hous­ing preser­va­tion projects through devel­op­ment, but there aren’t many exam­ples of such part­ner­ships. With­out expe­ri­ence and estab­lished routes of action, part­ners often have to nav­i­gate new ter­ri­to­ry together.
• Prop­er­ty iden­ti­fi­ca­tion. Unsub­si­dized afford­able SMMF hous­ing is not reg­u­lat­ed, which makes it dif­fi­cult for devel­op­ers to rec­og­nize prop­er­ties with poten­tial. The tool kit shows how to eval­u­ate prop­er­ty char­ac­ter­is­tics, project fea­si­bil­i­ty, neigh­bor­hood mar­ket con­di­tions and neigh­bor­hood access when decid­ing whether to invest in a property.
• Secur­ing financ­ing. The tool kit lists a num­ber of resources for financ­ing unsub­si­dized afford­able SMMF prop­er­ties. It also con­tains an inter­ac­tive mod­el­ing tool that fun­ders and non­prof­its can use to deter­mine if their restora­tion projects are feasible.
• Nego­ti­a­tion and deal clos­ing. There are a few com­mon obsta­cles when clos­ing on unsub­si­dized afford­able SMMF prop­er­ties — for exam­ple, appraisal gaps and evi­dence of haz­ardous mate­ri­als on the prop­er­ty. To avoid such snags, the tool kit pro­vides guid­ance on how to iden­ti­fy poten­tial issues and nego­ti­ate major deal points early.
• Reha­bil­i­ta­tion. Unsub­si­dized afford­able SMMF prop­er­ties tend to be old­er and in need of main­te­nance. The tool kit guides fun­ders on fac­tors that affect reha­bil­i­ta­tion — for exam­ple, zone and build­ing codes, health and safe­ty needs, ener­gy effi­cien­cy and dis­as­ter resilience. Res­i­dents and com­mu­ni­ty mem­bers can also pro­vide vital insight into risks asso­ci­at­ed with cer­tain prop­er­ties and help with gov­ern­ment approval.
• Prop­er­ty man­age­ment. Sta­ble occu­pan­cy and rent pay­ments are crit­i­cal for main­tain­ing unsub­si­dized afford­able SMMF prop­er­ties, but rental income often can’t cov­er a full-time prop­er­ty man­ag­er. The tool kit shows how part­ner­ing with oth­er prop­er­ty own­ers, invest­ing in durable mate­ri­als and min­i­miz­ing com­pli­ance require­ments for ten­ants can low­er the cost bur­den of maintenance.

The tool kit close­ly exam­ines fac­tors spe­cif­ic to SMMF prop­er­ties in Mia­mi, Flori­da, and Atlanta, Geor­gia, where Enter­prise Com­mu­ni­ty Part­ners gath­ered local data on SMMF prop­er­ties and income lev­els. In both cities, plan­ners have already includ­ed the preser­va­tion of unsub­si­dized afford­able SMMF hous­ing in their afford­able hous­ing strategies.

Ongo­ing efforts to restore low-income communities

Safe, sta­ble hous­ing is one of the cor­ner­stones to thriv­ing com­mu­ni­ties. A recent case study details the Casey Foundation’s efforts to revi­tal­ize and pre­serve afford­able homes in Atlanta’s Pitts­burgh neigh­bor­hood, which has faced some of the high­est pover­ty and unem­ploy­ment rates in the state. As part of this ini­tia­tive, which began in 2009 in the wake of the Great Reces­sion, the Foun­da­tion and its part­ners ren­o­vat­ed 43 homes, while also advanc­ing mul­ti­fam­i­ly preser­va­tion through tech­ni­cal assis­tance to prop­er­ty own­ers, sup­port­ing acqui­si­tion financ­ing and pro­vid­ing con­sult­ing sup­port to a local hous­ing task force.

The lessons from this long­stand­ing effort and the new tool kit on mul­ti­fam­i­ly hous­ing are par­tic­u­lar­ly rel­e­vant now that the coro­n­avirus pan­dem­ic has caused new threats to hous­ing sta­bil­i­ty, par­tic­u­lar­ly for fam­i­lies of col­or. ​“Afford­able hous­ing can be pre­served through sus­tained and tar­get­ed action,” says Natal­lie Keis­er, a senior asso­ciate at Casey who leads the Foundation’s com­mu­ni­ty devel­op­ment efforts in Atlanta. ​“The Tip­ping the Scale Toolk­it is a resource for tak­ing effec­tive action to retain small mul­ti­fam­i­ly hous­ing — a crit­i­cal com­po­nent of inclu­sive, equi­table communities.”

To learn more about the Tip­ping the Scale Toolk­it and its finan­cial mod­el­ing tool, reg­is­ter for one of Enter­prise Com­mu­ni­ty Part­ners’ free webi­na­rs on pre­serv­ing afford­able mul­ti­fam­i­ly hous­ing in Mia­mi and Atlanta. The Mia­mi webi­nar will take place at 1 p.m. ET on Aug. 19 and the Atlanta webi­nar is sched­uled for 10 a.m. ET on Aug. 21.

Read more about the Casey Foundation’s work on housing