AN ADVISORY SERVICES PROGRAM REPORT Gulf Coast...

A N A D V I S O R Y S E R V I C E S P R O G R A M R E P O R T

Gulf Coast HousingFinance Forum

Urban LandInstitute$

Gulf CoastHousing Finance ForumRecommendations for the Mississippi Gulf Coast Renaissance Corporation

April 10–11 and May 16–18, 2007An Advisory Services Program Report

ULI–the Urban Land Institute1025 Thomas Jefferson Street, N.W.Suite 500 WestWashington, D.C. 20007-5201

An Advisory Services Program Report2

The mission of the Urban Land Institute is toprovide leadership in the responsible use ofland and in creating and sustaining thrivingcommunities worldwide. ULI is committed to:

• Bringing together leaders from across the fieldsof real estate and land use policy to exchangebest practices and serve community needs;

• Fostering collaboration within and beyondULI’s membership through mentoring, dia-logue, and problem solving;

• Exploring issues of urbanization, conservation,regeneration, land use, capital formation, andsustainable development;

• Advancing land use policies and design prac-tices that respect the uniqueness of both builtand natural environments;

• Sharing knowledge through education, appliedresearch, publishing, and electronic media; and

• Sustaining a diverse global network of localpractice and advisory efforts that address cur-rent and future challenges.

Established in 1936, the Institute today has morethan 38,000 members from 90 countries, represent-ing the entire spectrum of the land use and develop-ment disciplines. Professionals represented includedevelopers, builders, property owners, investors,architects, public officials, planners, real estatebrokers, appraisers, attorneys, engineers, financiers,academics, students, and librarians. ULI reliesheavily on the experience of its members. It isthrough member involvement and informationresources that ULI has been able to set standardsof excellence in development practice. The Insti-tute has long been recognized as one of the world’smost respected and widely quoted sources of ob-jective information on urban planning, growth,and development.

About ULI–the Urban Land Institute

©2007 by ULI–the Urban Land Institute1025 Thomas Jefferson Street, N.W. Suite 500 WestWashington, D.C. 20007-5201

All rights reserved. Reproduction or use of the whole or anypart of the contents without written permission of the copy-right holder is prohibited.

3Gulf Coast, April 10–11 and May 16–18, 2007

The goal of ULI’s Advisory Services Programis to bring the finest expertise in the realestate field to bear on complex land use plan-ning and development projects, programs,

and policies. Since 1947, this program has assem-bled well over 400 ULI-member teams to helpsponsors find creative, practical solutions forissues such as downtown redevelopment, landmanagement strategies, evaluation of develop-ment potential, growth management, communityrevitalization, brownfields redevelopment, mili-tary base reuse, provision of low-cost and afford-able housing, and asset management strategies,among other matters. A wide variety of public,private, and nonprofit organizations have con-tracted for ULI’s Advisory Services.

Each panel team is composed of highly qualifiedprofessionals who volunteer their time to ULI.They are chosen for their knowledge of the paneltopic and screened to ensure their objectivity.ULI’s interdisciplinary panel teams provide aholistic look at development problems. A re-spected ULI member who has previous panelexperience chairs each panel.

The agenda for a panel assignment is intensive. Itincludes an in-depth briefing composed of a tour ofthe site and meetings with sponsor representa-tives; interviews with community representatives;and work sessions for formulating recommenda-tions. On the final day on site, the panel makes anoral presentation of its findings and conclusions tothe sponsor. At the request of the sponsor, a writ-ten report is prepared and published.

Because the sponsoring entities are responsiblefor significant preparation before the panel’s visit,including sending extensive briefing materials toeach member and arranging for the panel to meetwith key local community members and stake-holders in the project under consideration, partici-pants in ULI’s panel assignments are able to makeaccurate assessments of a sponsor’s issues and to

provide recommendations in a compressed amountof time.

A major strength of the program is ULI’s uniqueability to draw on the knowledge and expertise ofits members, including land developers and own-ers, public officials, academics, representatives offinancial institutions, and others. In fulfillment ofthe mission of the Urban Land Institute, thisAdvisory Services panel report is intended toprovide objective advice that will promote the re-sponsible use of land to enhance the environment.

ULI Program StaffMarta V. GoldsmithSenior Vice President, Community Group

Thomas W. EitlerDirector, Advisory Services

Cary SheihSenior Associate, Advisory Services

Matt RaderSenior Associate, Advisory Services

Carmen McCormickPanel Coordinator, Advisory Services

Romana KernsAdministrative Assistant Advisory Services

Nancy H. StewartDirector, Book Program

Lise Lingo, Publications Professionals LLCManuscript Editor

Betsy VanBuskirkArt Director

Martha LoomisDesktop Publishing Specialist/Graphics

Craig ChapmanDirector, Publishing Operations

About ULI Advisory Services

An Advisory Services Program Report4 An Advisory Services Program Report4

On behalf of the Urban Land Institute, thepanel would like to thank the following in-dividuals and groups who were instrumen-tal in the success of this initiative: from the

board of the Gulf Coast Renaissance Corporation,Chairman Anthony J. Topazi (president and chiefexecutive officer [CEO], Mississippi Power), ViceChairman Gerald H. Blessey (president, TraditionProperties, Inc.), Treasurer D’Auby H. Schiel (CEO,Community Bank), Secretary J. Reilly Morse (at-torney, Mississippi Center for Justice), DirectorRoy Anderson III (president and CEO, Roy An-derson Corporation), and directors John P. Baxter(senior vice president, Hancock Bank), HerbertT. Dubuisson (partner, Coldwell Banker AlfonsoRealty), Martha W. Murphy (president and CEO,Coastal Land & Drilling, LLC), Dorothy D. Shaw(director, State and Local Affairs, Northrop

Grumman), and Karen K. Sock (general manager,Grand Casino).

Special thanks go to the corporation’s presidentand CEO, Laura L. Davis. Without her leadershipand involvement, this panel would not have beenpossible.

Special thanks also go to Sherry Lesher of Missis-sippi Power for arranging logistics and ensuringthat the Biloxi visit went smoothly. Finally, thepanel wishes to thank the citizens and businessesof the city of Biloxi and the Mississippi Gulf Coastfor contributing to the panel process and provid-ing their special version of hospitality during thepanel visit.

Acknowledgments


ULI Panel and Project Staff 6

Executive Summary 7

The Panel’s Assignment 10

Recommendations 12

Conclusion 20

Contents


Steve LeeperCincinnati Development CorporationCincinnati, Ohio

Jeffrey LubellExecutive DirectorCenter for Housing PolicyWashington, D.C.

Kevin J. McCormackPresidentMcCormack Baron SalazarSaint Louis, Missouri

Douglas J. MoritzPresidentDOMO Consulting LLCWashington, D.C.

Mark SchneiderManaging PartnerFourth River DevelopmentPittsburgh, Pennsylvania

Mary ReillyBrophy Reilly LLCColumbia, Maryland

Marvin SiflingerChairmanHousing Partners Inc.Watertown, Massachusetts

ULI Project StaffMelissa FlocaResearch Associate, Initiatives

Carmen McCormickPanel Coordinator, Advisory Services

Panel ChairsJohn K. McIlwainSenior Resident Fellow, ULI/J. Ronald Terwilliger Chair for Housing

ULI–the Urban Land InstituteWashington, D.C.

Thomas MurphySenior Resident Fellow, ULI/Klingbeil Family Chair for Urban Development

ULI–the Urban Land InstituteWashington, D.C.

Panel MembersKermit BillupsCapmark Finance Inc.Vice President–Managing DirectorWashington, D.C.

Bill BrownFannie MaeKansas City, Missouri

Richie ButlerVice PresidentCityViewDallas, Texas

Laura Lynne DavisPresident and CEOGulf Coast Renaissance CorporationGulfport, Mississippi

Anthony S. Freedman PartnerHolland & Knight LLP Washington, D.C.

Thomas HoworthPrincipal ArchitectHoworth & Associates ArchitectsOxford, Mississippi

Randall W. KahnCapmark Finance, Inc.Washington, D.C.

ULI Panel and Project Staff

7

Despite the provision of billions of dollars infederal recovery aid for the Gulf Coast, thecombination of insurance, construction, andlabor costs has made rebuilding prohibi-

tively expensive for many working families. Thefocus of the Gulf Coast Renaissance Corporation—a private, not-for-profit organization—is remov-ing barriers to the reconstruction of permanentworkforce housing in the three coastal counties ofMississippi. The Urban Land Institute (ULI), atthe request of the Renaissance Corporation, for-mulated a strategy by which the corporation canleverage $100 million in Community DevelopmentBlock Grant (CDBG) monies with private invest-ment and private donations to effect the develop-ment of approximately 10,000 units of housing, or$2 billion in total development. The panel’s recom-mendations are outlined here.

Employer-Assisted Housing Program

The employer-assisted housing (EAH) programwould assist at least 1,000 new and existing home-owners who are at or below 120 percent of areamedian income (AMI). The program would bringthe cost of homeownership within the reach offamilies employed by participating companies byproviding an average of $70,000 per family in as-sistance, through a combination of a forgivablemortgage funded by employer contributions and a silent mortgage funded by CDBG monies lever-aged with New Markets Tax Credits (NMTCs).The homeowner would be required to repay thesilent mortgage upon resale, thereby generatingfunds to help other workers. State legislation en-abling an employer-assisted housing tax creditwould greatly enhance the program, allowing iteither to serve more families or to require lessCDBG funding.

Gulf Coast, April 10–11 and May 16–18, 2007

Gap Financing for HomeownersThe gap financing program is geared toward as-sisting 1,000 homeowners earning less than 100percent of AMI who need assistance to rebuildbeyond that provided by programs such as thestate’s Homeowner Assistance Grants. On aver-age, each family would receive a $20,000 loan. Halfof each loan would be funded by CDBG moniesand repaid with no interest at the time of sale orrefinancing. The other half would be funded byprivate market capital in the form of a silent mort-gage to be repaid in full, along with a percentageof the property’s appreciation.

Rental ProgramIn the rental program, $15 million in CDBG monieswould be set aside first to make grants to projectsthat have been awarded Low-Income Housing TaxCredits (LIHTCs), to transform them into mixed-income rental developments. A further $5 millionwould be used to complement the state’s SmallRental Program by providing predevelopment,acquisition, and construction financing. In total,the rental program would create approximately2,000 units of rental housing.

Site Acceleration FundA $48 million fund for land acquisition would becreated with $8 million in private equity, $20 mil-lion in credit from local lenders and Fannie Mae,and $20 million in CDBG monies. After reviewingcurrent community development plans, the Re-naissance Corporation would use the Site Acceler-ation Fund to acquire parcels with potential forcorridor projects, flagship mixed-use projects, andinfill development. Approximately 3,000 units ofhousing would be developed on the land acquiredunder this program.

Executive Summary


Renaissance Builder/Developer GuildThe Guild would certify members who commit toachieving specific standards in their developmentsin key areas: energy, wind, sustainable design andconstruction, and mixed-use and mixed-incomedevelopment.

Developer AssistanceA $4 million fund would be created with privatedonations to provide predevelopment loans to de-velopers. A further $4 million in private fundswould be set aside to enhance credit for acquisi-tion and construction loans. NMTCs would be used

Figure 1Funding Requirements

NMTCs LIHTCs Private Bank PrivateCDBG Equity Plus Debt Donations Debt2 Investment

Program1 Units ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) $ Total

Employer-Assisted Housing 1,0000 50.00 18.0 –0 10.00 97.6 24.40 200.0 million

Gap Financing for Homeowners 1,0000 10.00 –0 –0 ––0 144.0 46.03 200.0 million

Rental Program 2,0000 20.00 –0 25.0 –00 280.0 75.00 400.0 million

Complementary 1,6870 5.04 –0 –0 –00 265.0 67.50 337.5 million

CDBG Piggyback 3135 15.00 –0 25.0 –00 15.0 7.50 62.5 million

Land Acquisition 3,0006 20.00 –0 –0 –00 460.0 120.00 600.0 million

Developer Assistance 3,0000 –00 –0 –0 8.00 –.0 –.0 600.0 million

Predevelopment Loans 2,9007 –00 –0 –0 4.00 –.0 –.0 580.0 million

Credit Enhancement 08 –00 –0 –0 4.00 –.0 –.0 4.0 million

Small Developer Loan Fund 1000 –00 3.0 –0 –00 16.0 1.00 20.0 million

Total 10,0000 100.00 21.0 50.0 18.09 1277.6 38.00 2.0 billion

* Note: CDBG = Community Development Block Grant; NMTC = New Markets Tax Credit; LIHTC = Low-Income Housing Tax Credit.1 The numbers in this chart are only suggestive of how the corporation might allocate its funds and how the activities of the corporation may leverage additional private investment and mortgage funds from the private

sector.2 It is assumed in all of the programs, except where noted, that the breakdown between bank debt and private investment is 80 percent and 20 percent, respectively, meaning that homeowners and developers alike would

need to invest, on average, 20 percent of the remaining development costs in equity in each unit. 3 Of the total, $10 million would come from employer contributions and the remaining $36 million would be recouped home equity.4 The $5 million in CDBG funding to complement the state’s Small Rental Program would reduce the necessary bank debt for rental owners by at least $5 million. 5 Of the total number of units, 40 percent (125) would be LIHTC units and 60 percent (187.5) would receive supplemental CDBG funding. LIHTC units would be funded by bank debt and equity from tax credits,

while the mix of debt to CDBG to equity should be 40 percent debt, 40 percent CDBG funds, and 20 percent equity.6 The $20 million in CDBG funds would reduce necessary bank debt by $20 million, to a total of $460 million. Of the $120 million in private investment, $8 million would come from outside investors such as pension

funds investing in the ability of the Renaissance Corporation to add value by assembling land. 7 Over ten years, $4 million in private donations would be loaned out in seven cycles. Approximately 26 projects would each receive a $150,000 loan for predevelopment costs in each cycle. Assuming that each project

has 16 units, the predevelopment loan fund would help create approximately 2,900 units over ten years.8 Credit enhancement will be provided for the same projects that receive predevelopment funding.9 The $4 million provided for predevelopment loans and the $4 million provided for credit enhancement would not necessarily reduce the cost of development and is therefore not included in the totals of $18 million or

$2 billion. This assistance would help developers overcome disincentives to development, to break ground on 2,900 units over ten years.


to create the Small Developer Loan Fund to pro-vide acquisition, predevelopment, and developmentfunding to small developers building between 5and 20 units of single-family housing. In total, theseprograms would provide assistance to developersin creating 3,000 units of primarily for-sale housing.

In addition to the programs outlined above, theRenaissance Corporation should roll out an educa-tion, information, and advocacy campaign in sup-port of the core values that the corporation sees asunderpinning the redevelopment process. Educa-tion is needed to inform communities about mixed-income and mixed-use development, modularhousing, smart growth, and workforce housing.In addition, the Renaissance Corporation shouldensure that all the development in which it is in-volved adheres to design principles that create asense of place, incorporate sustainability and en-ergy efficiency, and ensure high-quality designand construction.

The structure of the corporation will be crucial toits success. A professional staff will be hired in theshort term that includes a chief operating officer, a chief financial officer, a director of planning andcommunity relations, a director of programs, and a general counsel. In addition, the corporation’srelationship with state and local governments willbe critical to achieving its goals. The state mustrecognize the corporation’s business plan as wellas formally designate the Renaissance Corpora-tion as an implementing agent in the redevelop-ment process. The Renaissance Corporation shouldalso sign accords with local governments and othernonprofits in order to explicitly define roles andresponsibilities going forward.

In the short term, the Renaissance Corporationwill be able to leverage CDBG monies with pri-vate investment and donations to kick-start theredevelopment of housing for working families onthe Gulf Coast. The CDBG monies will either re-volve back over time to the Renaissance Corpora-tion to be used to meet future housing needs or beused to create housing that will remain affordableto the region’s workforce over the long term. Thehousing development created through these ef-forts will be a tangible sign of hope for the resi-dents of the Mississippi Gulf Coast.

Bank PrivateDebt2 Investment

($ Millions) ($ Millions) $ Total

97.6 24.40 200.0 million

144.0 46.03 200.0 million

280.0 75.00 400.0 million

265.0 67.50 337.5 million

15.0 7.50 62.5 million

460.0 120.00 600.0 million

–.0 –.0 600.0 million

–.0 –.0 580.0 million

–.0 –.0 4.0 million

16.0 1.00 20.0 million

1277.6 38.00 2.0 billion

leverage additional private investment and mortgage funds from the private

0 percent, respectively, meaning that homeowners and developers alike would

y at least $5 million.

. LIHTC units would be funded by bank debt and equity from tax credits,

e investment, $8 million would come from outside investors such as pension

0 loan for predevelopment costs in each cycle. Assuming that each project

t of development and is therefore not included in the totals of $18 million or


The Gulf Coast RenaissanceCorporationIn the wake of Hurricane Katrina, top leaders onthe Mississippi Gulf Coast formed the Gulf CoastBusiness Council to provide a unified, regionalplatform from which to promote public policyaimed at improving the economic vitality andquality of life on the coast. The organization hasgrown to include more than 180 of the top busi-ness and economic leaders in the three coastalcounties of Mississippi. Prominent small businessowners serve alongside mayors and presidents ofthe county boards of supervisors, military basecommanders, economic development profession-als, chambers of commerce executives, regionalplanning directors, and port and airport directors.The Business Council is organized into commit-tees that focus on issues associated with economicdevelopment, tourism, military and defense indus-tries, transportation, leadership development,building, and land use.

Housing is a critical concern for the BusinessCouncil. The most significant hurdle in the re-building process on the coast is the availability ofaffordable and safe housing for the region’s work-force. To address this issue, the council formed aseparate, not-for-profit, private corporation—theGulf Coast Renaissance Corporation. The Renais-sance Corporation was envisioned as an organiza-tion that would be able to effect the developmentand redevelopment of single-family and multi-family housing units on the coast by developingstrategic partnerships with national foundations,community-based organizations, corporations,financing institutions, governments, builders, landdevelopers, and other stakeholders. The visionand mission statements of the Renaissance Corpo-ration, and its goals, are as follows.

The redevelopment of the Mississippi GulfCoast will be the legacy of today’s officialsand citizens. The Gulf Coast RenaissanceCorporation enlisted ULI’s help in creating

a set of recommendations to help it maximize itsefforts on the Gulf Coast. ULI convened a panelof 15 national housing experts with the followingobjectives:

• To provide a formula and framework for the useof CDBG funds, private funds, LIHTCs, NMTCs,and other funds in an effort to maximize thenumber of workforce housing units producedand to ensure that the development of theseunits reflects the best and most responsibleland use practices in the creation of sustainablecommunities;

• To provide a framework for the structure of thecorporation, to maximize the efficiency of deliv-ery of the programs while ensuring the integrityof the programs and underwriting process;

• To engage other entities to ensure complemen-tary efforts by strengthening existing programsand offering programs that are not currently inplace; and

• To ensure fairness and transparency in theprocess.

The ULI Panel Process for the ForumThe panel met in Washington, D.C., on April 10–11,2007, to review briefing materials prepared by theRenaissance Corporation. Panel members thentoured the Gulf Coast several times and met andinterviewed more than 50 community leadersfrom both the public and the private sectors. Afterconvening for a three-day work session on theGulf Coast, the panel presented the recommenda-tions contained in this report at a public meetingon May 18, 2007.

The Panel’s Assignment


VisionTo serve as the capstone organization in the re-building of the Mississippi Gulf Coast by removingobstacles to redevelopment, creating partnerships,and stimulating investment in order to create vi-brant, diverse, sustainable communities that offerresidents the highest quality of life.

MissionTo facilitate the development of mixed-income com-munities that provide safe, high-quality, afford-able housing for the workforce of the MississippiGulf Coast.

GoalsThe corporation has six goals:

• To effect the development of 10,000 homes bypartnering with the public sector, nonprofit, andfor-profit developers.

• To remove existing barriers to development byinstituting an aggressive plan of land acquisi-tion and gap funding.

• To ensure efficient development patterns by fo-cusing on opportunities in close proximity to ex-isting employment centers in the three coastalcounties.

• To foster the redevelopment of communities asenvironmentally, economically, and socially sus-tainable through responsible land use practices,with a particular focus on mixed-use and mixed-income communities.

• To create efficiencies through open competitionfor development opportunities.

• To achieve a total capitalization of $120 millionin public funds ($100 million) and private funds($20 million).

The Rebuilding GapDespite the provision of billions of dollars in fed-eral recovery aid for the Gulf Coast, many resi-dents continue to struggle with the financial bur-den of rebuilding owing to a host of factors thathave made housing costs soar. Construction andlabor costs in the region are higher than theywere before Hurricane Katrina hit. In addition,

new elevation requirements add thousands of dol-lars to the cost of rebuilding. The cost of propertyinsurance has doubled or tripled for many residents,while coverage has been reduced. Less fortunateresidents have seen policies canceled completely.For families that need new policies, comprehen-sive coverage must come from three sources: theNational Flood Insurance Program, the StateWind Pool, and a homeowners insurance policyfrom a private insurance company.

The substantial increase in housing costs contrastsstarkly with the ample supply of moderately pricedhousing that was available to working families be-fore Katrina. The focus of the Gulf Coast Renais-sance Corporation is the rebuilding of permanentworkforce housing in the three coastal counties.Workforce households are defined as householdswhose income is too low to afford to pay marketprices for homes or apartments in the communi-ties where they work, but too high to qualify forsignificant federal housing subsidies. In the case ofthe Mississippi Gulf Coast, the targeted house-holds are those earning between 60 percent and120 percent of area median income (AMI), which iscurrently $50,400 for the Gulfport–Biloxi Metro-politan Statistical Area.

Employees must have housing options they canafford within a reasonable distance of their work-place. A top employer on the Mississippi GulfCoast is the gaming industry; ten casinos employmore than 11,000 people. Northrop Grumman, aglobal defense and technology company, also hasmore than 11,000 employees. There is a criticalneed for housing to be developed for these work-ers (not to mention the shipyard workers, schoolteachers, military personnel, first responders, andoil refinery and other industrial workers), whodrive the economy. For the region’s economy tothrive, the towns along the Gulf Coast must re-build their housing stock to be safe, attractive,and affordable. The programs recommended bythe panel are specifically designed to bridge therebuilding gap for the working families who arecritical to the vitality of the region.


The panel recommends that the RenaissanceCorporation, as a steward of the rebuildingprocess, endeavor to support only thosedevelopments that promote its vision for

the future of the coast. Traditional neighborhooddesign and smart growth principles should bepromoted, as well as mixed-use and mixed-incomedevelopment. New development should be inte-grated into existing neighborhoods, and a pre-mium should be placed on creating a sense of placeand community spaces. Above all, there is a needto ensure high-quality design as well as construc-tion and design practices that promote sustainabil-ity and energy efficiency. Adherence to these prin-ciples underpins all of the following recommendations.

Employer-Assisted Housing ProgramThe Employer-Assisted Housing (EAH) programis designed to help workers employed by businessesin the region to purchase homes. The program—targeted to families with incomes between 80 per-cent and 120 percent of AMI—would help at least1,000 families buy homes. This assistance would beavailable not only to the current generation ofworkers but also to future workers in need of as-sistance, avoiding the need for a new public sub-sidy. The EAH program would thus function as apermanent replacement for part of the area’s loststock of housing that is affordable for workingfamilies.

Because Hurricane Katrina destroyed much of thearea’s older housing stock, many workers in thisincome range can no longer afford to purchase ahome. Similarly, for some working families whowere homeowners before Hurricane Katrina, re-building is prohibitively expensive even after in-surance payments and grants from the state’shomeowner assistance program. The EAH pro-gram would help by providing families with sec-ond and third mortgages to cover the differencebetween the costs of new construction or rehabili-

tation and the amount that the family can afford toborrow on its own. Each family’s needs would becalculated on the basis of such factors as incomelevel and proceeds from insurance or other hous-ing assistance programs.

Under the EAH program, participating employ-ers would set their own policies for selectingworkers to participate. A worker who is selectedwould become eligible for a second mortgage thatis forgivable over time (to encourage employeeretention) and a third mortgage that must be paidback when the employee sells the home (to facili-tate recycling of funds to help future buyers). Thethird mortgage would be silent in the sense thatno payments would be due until resale, ensur-ing that the home is affordable for the workerthroughout the life of the loan. At resale the loanwould be repaid in full plus a modest share of thehome’s price appreciation, to ensure that the sub-sidy keeps pace with the market (while still allow-ing ample opportunity for the buyer to build indi-vidual wealth). The money would then be recycledback into the EAH program to help other families.

This assistance would be funded by a combina-tion of employer contributions, CDBG funds, andNMTCs. The CDBG funds would need to comewith the same waivers that the state has used tofund assistance to families with incomes greaterthan 80 percent of AMI through its homeownerrebuilding programs. An allocation of $78 millionin NMTCs would also be necessary. NMTCs canbe used to help families at any income level aslong as the housing is located in a census tractwhere income is at or below 80 percent of AMI.For NMTCs used under the Gulf OpportunityZone Act of 2005 (GoZone), that changes to 120percent of AMI. The alternative option is that atleast 60 percent of the families served must haveincomes at or below 80 percent of AMI (120 per-cent for GoZone) and can be located anywhere.The remaining 40 percent can have any income

Recommendations

13

level and be located anywhere. If the RenaissanceCorporation is able to get its own allocation of taxcredits, rather than going through a communitydevelopment entity, it will be able to leverage asignificantly higher amount of equity.

For the purposes of estimating the numbers offamilies that could be assisted, the panel assumedthat employers would contribute $10,000 perworker and that these funds would be augmentedby an average of $60,000 per worker in public funds—CDBG leveraged with NMTCs. Both the publicfunds and the employer contributions would beprovided to a nonprofit organization, chosen by theRenaissance Corporation, which would administerthem on the corporation’s behalf and facilitate theleveraging of those funds with NMTCs. The non-profit organization would be the entity issuingboth the forgivable second mortgage for an amountequal to the employer’s contribution and the silentthird mortgage funded with public funds.

To strengthen the program, the panel recommendsthat the state adopt legislation modeled after thatof Illinois, in which employers receive state taxdeductions for qualifying EAH contributions. Byessentially doubling the value of employer contri-butions, such legislation would allow the programto be extended to even more families or would re-duce program reliance on CDBG funds.

To assist 1,000 families in its initial phase, theprogram would require an estimated $50 million in CDBG monies and $10 million in funds fromemployers. A further $18 million in funding wouldcome from the leverage provided by New MarketsTax Credits. Of the total $78 million, $7 millionwould be used to cover administrative costs and$1 million would fund homeownership educationfor all families. The program would be adminis-tered by a nonprofit organization chosen througha competitive process. The organization would beresponsible for providing homeownership educa-tion and counseling and for issuing and monitor-ing loans.

Gap Financing ProgramThis program would offer gap financing to home-owners who need assistance to rebuild beyondthat provided by the CDBG funds given to home-

owners through state programs. It would be struc-tured to assist 1,000 families. Most of the quali-fying families will likely earn less than 100 percentof AMI, because rebuilding needs for families athigher income levels have largely been satisfied.On average, the loans extended through this pro-gram would be for $20,000.

Half of each loan would be funded by CDBG moniesin the form of a silent mortgage, to be repaid withno interest at the time of sale or refinancing. Theother half would be funded by private market cap-ital in the form of a silent mortgage to be repaid infull plus a percentage of the property’s apprecia-tion. All loans would be due at the time of sale or


Price of Home $200,000Insurance $400/monthTaxes $285/month

A family earning the area median income of $50,400 a year can afford tospend a maximum of 35 percent of its monthly income ($1,470) on housing.After insurance and taxes, that represents a 30-year mortgage of $128,000 ata fixed rate of 6.25 percent APR.

Insurance $ 400Taxes 285Mortgage Payment 788Total $1,473 (> 35 percent of monthly income)

Price of Home $200,000Mortgage 128,000Gap $ 72,000

Gap is filled with $ 2,000 down payment by employee10,000 forgivable loan from employer60,000 silent mortgage funded by CDBG/NMTCs

In this scenario, the rebuilding gap would be significantly reduced for a familythat has been able to recoup some home equity or already owns a lot onwhich to build.

If the program designers prefer that families spend a smaller share of theirincome on mortgage payments—for example, 30 percent—one could chooseeither to serve slightly fewer families or to extend the first mortgage lengthfrom 30 to 40 years.

Program Example: Employer-Assisted Housing


refinance, and all loans would have to be repaidafter 15 years.

The loans would be administered by local banksunder the auspices of the Renaissance Corpora-tion. They would require that $2 million of the cor-poration’s private donations be set aside, to coverfirst dollar loss to investors. Incorporating privatecapital reduces the amount of CDBG money re-quired, freeing up public funds to be used in otherprograms. An example of the calculations used tostructure the program appears in the box.

Rental Housing ProgramRental housing has been slow to come back online,and the limited supply of rental housing that is avail-able on the Gulf Coast is very expensive, both be-cause of increased demand for available units andbecause of increased insurance costs. As a result,many families that were renting before HurricaneKatrina have had to find housing far away fromtheir jobs or have had to leave the area altogether.

The ULI panel recommends that the RenaissanceCorporation adopt a two-pronged approach to pro-moting the development of 2,000 units of mixed-income rental housing. First, the corporation shouldcomplement the state’s Small Rental Program byusing $5 million in CDBG funds to assist develop-ers that receive funding from the state with train-ing and predevelopment, acquisition, and con-struction financing. Second, $15 million in CDBG“piggyback” funds should be provided to develop-ers that have already received Low-Income Hous-ing Tax Credits (LIHTCs) to transform to-be-built projects into mixed-income rental housing.Through these two distinct strategies, the Renais-sance Corporation should endeavor to effect thedevelopment of 2,000 units of mixed-income rentalhousing over the short term.

Rental Strategy 1: Complementary Small Rental ProgramThe Renaissance Corporation can kick-start theredevelopment of infill rental housing under thestate’s Small Rental Program by providing com-plementary assistance to small developers with $5million in CDBG funds. The state’s program is de-signed to put 5,000 units of rental housing back online, and many of those eligible under this pro-gram will have neither experience in developinghousing nor credit adequate to undertake the de-velopment process. The Renaissance Corporationshould provide a training program to small devel-opers that receive assistance under the state’sprogram. In addition, the Renaissance Corpora-tion should offer predevelopment, acquisition, andconstruction financing. Through this program thecorporation should assist in the development ofmore than 1,600 units of rental housing.

Rental Strategy 2: CDBG Piggyback ProgramPlanned LIHTC projects in the three coastalcounties have largely been halted by communityopposition to high concentrations of rental housingfor families earning less than 60 percent of AMI.Turning these projects into mixed-income rentalhousing will be costly but will break the logjam ofopposition, to put rental units on the market in theshort term. The CDBG piggyback program entailsusing an allocation of $15 million in CDBG fundsfrom the Mississippi Development Authority (MDA)and awarding the funds to qualified developers of


Rebuild $180,000Insurance $217/monthTaxes $285/month80 percent of AMI 40,320

A family earning 80 percent of AMI ($40,320) can afford to spend a maximumof 35 percent of its monthly income ($1,176) on housing. After insurance andtaxes, that represents a 30-year mortgage of $110,000 at a fixed rate of 6.25percent APR.

Insurance $ 217Taxes 285Mortgage Payment 677Total $1,179 (> 35 percent of monthly income)

Price of Home $180,000Mortgage 110,000Gap $ 70,000

Gap is filled with $50,000 from state programs20,000 from Renaissance Corporation loan

Program Example: Gap Financing

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to-be-built projects on the Gulf Coast. The fund-ing will be used to transform these projects intomixed-income rental housing, providing bothrents that are affordable for individuals earningno more than 60 percent of AMI, as well as rentsthat are comparable with pre–Katrina marketrate rents. With $15 million in CDBG funding, itwould be possible to create more than 300 unitsof mixed-income rental housing.

Under this program, the Renaissance Corporationwill link CDBG funds to existing LIHTC awardeesin the towns along the coast. A process will needto be developed for selecting projects, determin-ing feasibility, issuing appropriate award docu-ments, monitoring completion and complianceduring construction and lease-up, and managingthe assets postdevelopment. The CDBG funds areneeded to underwrite the rising developmentcosts in the region to offer rents comparable withpre–Katrina market-rate rents.

The panel recommends that in each rental devel-opment, 60 percent of the units be rented at pre–Katrina market rate rents, which are affordablefor households earning approximately 80 percentor more of AMI ($40,320). Anyone, regardless ofincome level, would be eligible to rent these units.The remaining 40 percent of the units would carryincome restrictions to be affordable for familiesearning 60 percent or less of AMI ($30,240), byvirtue of the LIHTC equity invested in those units.The rental developments that receive assistanceshould also be located adjacent to sites where acomparable or greater number of new for-salehomes are being built, with the goal of mixingfor-sale and rental units in proximity.

Two points should be noted. First, by virtue ofthe use of housing tax credits, the units rented tohouseholds earning no more than 60 percent ofAMI must remain affordable at that income levelfor 30 years. Second, the use of CDBG funds willrequire that developers include affordability re-quirements for 51 percent of the total units in eachdevelopment. (Note: “Affordable” under CDBGguidelines means affordable for households earn-ing no more than 80 percent of AMI. As such, inaddition to the 40 percent of units affordable forhouseholds earning 60 percent or less of AMI, atleast an additional 11 percent of units must be

rented to families earning 80 percent or less ofAMI at lease-up. Once the projectwide 51 percenttest is met by leasing a sufficient number of unitsto families earning 80 percent or less of AMI, thebalance may be rented at rates previously agreedto by the Renaissance Corporation and the de-veloper. Furthermore, the CDBG rental require-ments cease to apply after the first anniversary of the project.

We expect that the LIHTC units rented to house-holds earning 60 percent or less of AMI will beable to support as much as 95 percent of the totaldevelopment costs through the sale of the housingtax credits and permanent debt. The market-rateunits will be rented to higher-income tenants andwill therefore be able to support more permanentdebt than the LIHTC units. However, the market-rate units will not be restricted to renters earn-ing 60 percent or less of AMI, making these unitsineligible for LIHTC benefits.

The targeting of higher-income tenants within thesame development will come at a cost, specifically


Development costs $200,000

At 60 percent AMILIHTC $140,000Permanent debt 40,000Deferred developer fees 20,000Total $200,000

At 80 percent AMIPermanent debt $ 80,000CDBG 80,000Developer equity 40,000Total $200,000

AssumptionsAMI $50,00060 percent AMI 30,00080 percent AMI 40,000

60 percent of units rented to people earning 80 percent of AMI40 percent of units rented to people earning 60 percent of AMIUnits rented to those earning 80 percent of AMI use $80,000 of CDBG per unit

Program Example: Rental Housing


in the appointments in the units and property man-agement. These enhancements to the project’s de-sign will have to be available for all units, regard-less of the tenant’s income. As a result, the gap infinancing will be made up with CDBG funds. TheRenaissance Corporation should also require de-velopers to contribute up to 20 percent in funds.The mix of debt to CDBG to equity should be 40percent debt, 40 percent CDBG funds, and 20 per-cent equity. The calculations used as a basis forthe design of this program appear in the box.

Both the rental programs suggested here will putdesperately needed rental housing back on line forthe region’s workforce. It is estimated that $20million in CDBG funding will allow the Renais-sance Corporation to leverage both LIHTCawards and funding provided under the state’sSmall Rental Program to effect the developmentof 2,000 units of mixed-income rental housing.The piggyback program will trigger the releaseof LIHTC awards, enabling the development ofworkforce and affordable units in the region.Meanwhile, providing training and financing todevelopers will accelerate development under thestate’s Small Rental Program. Promoting mixed-income rental development in the short term willcreate the economically diverse communities thatwill be key to the region’s long-term success.

Land Acquisition ProgramLand acquisition will be an important tool for en-couraging housing development. The RenaissanceCorporation should first review current commu-nity redevelopment plans to identify projects andparcels of opportunity. The land that is acquiredshould have potential for use in corridor projects,flagship mixed-use projects, and infill develop-ment. To reduce competition for land, it will benecessary to coordinate land assembly options andsales agreements with the land acquisition strate-gies of for-profit and nonprofit developers. It willalso be important to identity public propertiesthat might be available for development.

A Gulf Coast Site Acceleration Fund should be cre-ated to finance $48 million in land acquisition. Itwould be funded by $20 million in CDBG monies,$20 million from local lenders and Fannie Mae, and

$8 million in private equity. The CDBG moniescould also be used as a loan loss reserve to createmore leverage.

Land that is acquired should then be made avail-able to selected developers at a reasonable cost.Over ten years, it should be possible to build 3,000units of housing on the land acquired by the Re-naissance Corporation. To the extent that sitesare sold to developers below market price, devel-opers should be required to provide communityamenities such as below-market housing or publicspaces through a site acquisition and dispositionagreement. Assistance would be offered in secur-ing development entitlements for projects thatconform to the design principles to which theRenaissance Corporation ascribes. Developerswould be required to complete payment for theparcels in three to five years. Going forward, theRenaissance Corporation should also pursue leg-islation to expedite the sale of tax-delinquentproperties from taxing bodies to the corporationfor redevelopment.

Developer Assistance Currently many disincentives prevent develop-ers from building housing on the Mississippi GulfCoast. The Renaissance Corporation should createa range of incentives to bring high-quality devel-opment to the coast. Through the incentives enu-merated in this section, the corporation can pro-mote high-quality housing as well as new approachesto development, such as modular construction,live/ work units, and granny flats. These incen-tives should be targeted to creating primarily in-fill, for-sale housing (not including the Renais-sance Builder/Developer Guild). Together, theseprograms would provide assistance to developersfor creating 3,000 units of primarily for-sale hous-ing. The assistance strategies explained herewould be in addition to the assistance offered todevelopers of rental units under the state’s SmallRental Program.

Renaissance Builder/Developer GuildAs the centerpiece of developer assistance offeredby the corporation, it should create the Renais-sance Builder/Developer Guild. The guild can cer-tify members who commit to achieving specific


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standards in the following areas in all their devel-opments: energy efficiency, storm-fortified con-struction, sustainable design and construction,and mixed-use/mixed-income development. Thecertification process will be mutually beneficial tothe corporation and developers alike. Membershipin the guild can be used by the developers to at-tract clients, while the Renaissance Corporationcan use the certification process to inform devel-opers about best practices in building design andconstruction. In addition, the corporation shouldconvene regular meetings of the guild at which ed-ucational programs and reports on best practicesare given.

Small Developer Loan FundThe Small Developer Loan Fund should be cre-ated with an allocation of NMTCs. The fund couldprovide up to $3 million in acquisition, predevelop-ment, and development funding to assist small de-velopers—those producing between five and 20units of single-family housing. The fund could beused to create an initial 100 units of housing.

Predevelopment FundThe Renaissance Corporation should also create ageneral Predevelopment Loan Fund with $4 mil-lion in private donations, to provide predevelop-ment loans to developers of for-sale units. The loanswould be for a maximum of $150,000 and would re-quire a one-to-one match from the developer. Theloans would be extended for 15 months, on aver-age, and repaid at the start of construction. Overten years the $4 million would be lent in seven cy-cles, to approximately 26 projects in each cycle.Each project would include 16 units on average,representing more than 2,900 units in ten years.

Credit EnhancementThe corporation should set aside a further $4 mil-lion in private donations to enhance credit for ac-quisition and construction loans. Developers whoreceive predevelopment funding would be thoseeligible for credit enhancement. Credit enhance-ment for each project would be available duringconstruction, for 15 months on average, and wouldbe repaid at closing.

Education, Information, and AdvocacyCampaignThe Renaissance Corporation should endeavor toeducate citizens and developers and disseminateinformation to the public through an education, in-formation, and advocacy campaign. Developersneed education on best practices in mixed-incomeand mixed-use development, modular housing,smart growth, and workforce housing. Educationon these subjects in the community at large willalso be necessary to explain the need for these re-development approaches and to generate commu-nity support.

Access to information will also help speed up rede-velopment. The Renaissance Corporation shouldact as a central clearinghouse for information byworking with Stennis Space Center and others tocomplete development of a publicly available GISdatabase. The corporation should also develop andupdate market data and make the informationwidely available.

The corporation should act as an advocate for theresponsible redevelopment of the coast. In all itsefforts, it will be important to promote coordi-nated planning and smart growth principles, aswell as standards for high-quality design, energyefficiency, and environmental sustainability. Onlythose projects that meet such specific standardsshould be eligible to receive funding from the Re-naissance Corporation.

Design PrinciplesThe redevelopment of the Mississippi Gulf Coastwill be the legacy of today’s officials and citizens.As a steward of that rebuilding process, the Re-naissance Corporation should endeavor to supportonly those developments that promote its visionfor the future of the coast. Traditional neighbor-hood design and smart growth principles shouldbe promoted, as well as mixed-use and mixed-income development. New development should beintegrated into existing neighborhoods, and a pre-mium should be placed on creating a sense of placeand community spaces. Above all, there is a needto ensure high-quality design and construction anddesign practices that promote sustainability andenergy efficiency. Adherence to these principles



should underpin the investment decisions of theRenaissance Corporation.

Integrate New DevelopmentsNew developments should be integrated within oralongside established neighborhoods, to respectand extend the existing settlement patterns bycreating new development patterns that are evo-lutionary—not revolutionary. At the urban scale,this includes such strategies as maintaining streetgrids and block patterns and acknowledging exist-ing settlement and use patterns. Where new usesdeviate, it will be necessary to incorporate appro-priate transition zones into the design. At the ar-chitectural scale, this includes building at thesame scale or, where scale and density differ, de-signing transitional structures or spaces that me-diate changes in scale and density. Architecturaldetails or material selections and the patternsthey create can also tie new buildings to the estab-lished context. Employing indigenous design mo-tifs can help make new buildings fit comfortablywith their older neighbors. However, it is impor-tant that indigenous designs not be merely imi-tated superficially but rather understood and inte-grated into new developments.

Create a Sense of PlaceIt is crucial to design developments in terms ofreal neighborhoods and places. Too often, develop-ers and designers fail to take advantage of the op-portunity to design spaces that create a sense ofplace. Neighborhoods are at least as much aboutthe spaces between buildings as they are aboutthe houses themselves. A certain commonalitymay reinforce a sense of place, but variety and di-versity are also valuable and necessary to creationof that sense. As such, variations in hierarchy,scale, and motif that derive from designing formixed use and mixed incomes help create order,centrality, and focus—all ingredients necessary tothe recipe for a place that people will understandand come to love.

Design Community SpacesShared space is vital to the creation of community.Designing community space is an intentional actand one that is essential to the creation of success-ful neighborhoods, because although communityspace is public, it belongs to the local communityto the exclusion of the still larger community, atleast to a degree. All developments should be re-quired to include an appropriate proportion ofspecifically designed community space. Ideally,


Figure 2Organizational Chart

CEO / COO

Planning andCommunity Relations

Land Acquisition

CFO General Counsel Director of Programs

Accounting Finance SingleFamily Multifamily

Communications

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these spaces should be nodes for community as-sembly, congregation, and neighborly activity.

Promote Energy Efficiency and SustainableDesignThe concept of sustainability may have seemedradical to most people only a few years ago, butignoring sustainability today would be irresponsi-ble, especially on the post–Katrina Gulf Coast. Sus-tainable development means using high-qualityconstruction and designing for walkability andusability, ease of maintenance, and conservation.Energy efficiency is a key part of sustainability,and new developments should be built to con-serve energy both in the construction process andduring occupancy. Design principles related tostreet and building orientation, landscaping, us-able outdoor spaces, and shared infrastructurepossibilities are both timeless and timely ways toconserve energy.

Corporate StructureThe Gulf Coast Renaissance Corporation beganhiring a professional staff in March 2007. The staffwill be led by the corporation’s CEO, with thesupport of its board of directors. Although the Re-naissance Corporation is a not-for-profit entity, itwill be tasked with investing in and overseeingmore than $2 billion of investments in the yearsahead. The structure of the corporation will becrucial to its success. The organizational chartshows the staff that will be needed in the shortto medium term.

In addition to the staff of the Renaissance Corpo-ration, its relationships with the banking sector,local businesses, state government, local govern-ment, and other nonprofit organizations will bekey to its success. The state should grant the Re-

naissance Corporation CDBG funding, officiallyrecognize its plan, and designate it as an imple-menting agent in the redevelopment of the GulfCoast. The corporation must then sign memoran-dums of understanding with local governmentsand other nonprofits that define roles and respon-sibilities going forward.

The corporation must move quickly to begin con-tributing to the rebuilding process. By December2007, the corporate structure recommended hereshould allow the Renaissance Corporation to ac-complish the following:

• Get a commitment from the state for CDBGfunds.

• Fully staff up.

• Get employers to commit to fund 1,000 units ofhousing through the EAH program. Partnerwith lenders to provide gap financing to home-owners.

• Acquire sites through the Site AccelerationFund.

• Partner with a LIHC developer to break groundon a mixed-income rental development.

• Apply for NMTCs and set up the Small Devel-oper Fund.

• Create a coalition of local governments and non-profits to work on an advocacy and educationcampaign.



The rebuilding process on the Mississippi GulfCoast will require leadership and vision toshape a course of action, in order for goodintentions to become reality. The creation of

the Gulf Coast Renaissance Corporation is an ex-emplary statement of leadership and vision. It hasthe potential to be the single most important insti-tution created on the Mississippi Gulf Coast sinceHurricane Katrina. Its mission recognizes thatpeople are the region’s most important asset andthat a region cannot grow without a high-qualityworkforce attracted by affordable housing andquality of life.

The members of the ULI panel that created therecommendations in this report have been in-volved in all aspects of developing public/privatepartnerships to produce high-quality housing solu-tions. The recommendations address the marketweaknesses that currently impede the productionof housing on the coast. The recommendations willenable the Renaissance Corporation to leverage$100 million of public investment to create 10,000units of housing over the next ten years. That rep-resents more than $2 billion in development. Thepublic investment will create rental housing that

will remain affordable to the region’s workforceover the long term. Subsidies that go to helpingdevelopers and making homeownership affordablewill revolve back to the Renaissance Corporationover time to ensure the longevity of the redevel-opment process.

With strong leadership and broad backing fromthe business and political community, the Renais-sance Corporation can stimulate and guide the re-development of housing along the Gulf Coast inways that are affordable for those desiring to liveand work in this beautiful region. In addition, thecorporation’s commitment to high-quality designand sustainable development will lay the founda-tion for rebuilding this area in new ways that willenhance the quality of life for all its residents,while better meeting the environmental chal-lenges presented by its location. The corporationhas many challenges to face as it establishes itselfand begins operations, but the panel is optimisticthat it will meet them and provide the leadershipneeded for rebuilding the Mississippi Gulf Coast in the years ahead.


Conclusion

$ULI–the Urban Land Institute1025 Thomas Jefferson Street, N.W.Suite 500 WestWashington, D.C. 20007-5201

AN ADVISORY SERVICES PROGRAM REPORT Gulf Coast...

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