On Common Ground: Winter 2008

AFFORDABLES m a r t G r o w t h ’s

2 ON COMMON GROUND WINTER 2008

WINTER 2008 ON COMMON GROUND 3

Creating a range of housing opportunities andchoices is a major principle of Smart Growth,as stated by the Smart Growth Network, a

coalition of more than 30 organizations including theU.S. Environmental Protection Agency, SmartGrowth America and the NATIONALASSOCIATION OF REALTORS®. Other SmartGrowth goals, such as greater mobility, reducedtraffic congestion and mixed-use walkablecommunities, can best be achieved when everycommunity has housing for all income levels.

The inclusion of “workforce housing” is anespecially critical element of a complete community.Workforce housing is described as housing servingthose who make between 60 to 120 percent of themedian income in their local area, or perhaps even upto 200 percent in markets with high housing costs.These are the people on whom we rely for basicservices in our communities, including education, lawenforcement, safety, retail services and health services.

In this issue of On Common Ground, we highlightthe many efforts nationwide to provide affordablehousing for working Americans. Several articlesfocus on the many programs that have beendeveloped to meet the needs of people in specificoccupations, such as police officers, teachers andresort workers. Other articles discuss tools, such asemployer assisted housing and preservation ofaffordable rental housing, which can help moderate-income people with housing costs.

In addition to housing costs, transportation costsput an additional burden on households. As describedin this issue, Transit-Oriented Developments are anincreasingly popular form of development that canlower consumers’ transportation costs. Buildingmixed-income housing at transit locations is the keyto providing a valuable mix of affordabletransportation and affordable housing. By lookingholistically at affordable housing, transportation andland use planning can lead us to Smart Growthapproaches to providing greater housingopportunities for all Americans.

For more information on NAR and Smart Growth, go to www.realtor.org/smartgrowth.For more information on NAR and Housing Opportunity, go to www.realtor.org/housingopportunity.

On Common Ground is published twice a year by the Government Affairs division of the NATIONAL ASSOCIATION OF REALTORS® (NAR), and is distributed free of charge. The publication presents a widerange of views on Smart Growth issues, with the goal of encouraging a dialogue among REALTORS®,elected officials and other interested citizens. The opinions expressed in On Common Ground are those ofthe authors and do not necessarily reflect the opinions or policy of the NATIONAL ASSOCIATION OFREALTORS®, its members or affiliate organizations.

Distribution:For more copies of this issue or to be placed on our mailing list for future issues of On Common Ground,please contact Ted Wright, NAR Government Affairs, at (202) 383-1206 or [email protected].

EditorJoseph R. Molinaro Manager, Smart Growth ProgramsNATIONAL ASSOCIATION OF REALTORS®

500 New Jersey Avenue, NW Washington, DC 20001

Co-EditorMike LehrmanHousing Opportunity ProgramNATIONAL ASSOCIATION OF REALTORS®

500 New Jersey Avenue, NW Washington, DC 20001

O p p o r t u n i t i e s


Analyzingthe Market

Today’s currenthousingopportunitiesand challengesBy David Goldberg

If there was an upside to the bursting of the“housing bubble,” it was supposed to be that theend of the meteoric rise of home prices would at

least make homes more affordable in the red-hotmetro areas that are the epicenter of the slump.After all, the years-long run-up during the period ofanomalously low interest rates had torturousconsequences for households supported byteachers, firefighters and countless other modestlypaying jobs. The commute to areas where theycould “qualify” for a more affordable home gotlonger and longer, and budgets were stretchedthinner and thinner.

Today, we hear story after story about high-production homebuilders and other developersbleeding red ink as new subdivisions go begging.With builders slashing prices to lure buyers, sellersof existing homes are watching their hoped-forasking prices recede. Bad news for sellers, butperhaps good news for first-time homebuyers.

But then there’s that other set of headlines: Theforeclosure crisis among high-risk mortgages isleading major lenders to pull in their horns andratchet up qualification requirements or leave thebusiness altogether. At the same time, mortgagerates for Adjustable Rate Mortgages are on the rise.All this is making it tougher and more expensive forless-affluent buyers to get into their own homes.

“There is an affordability problem, and I’mguessing that it has gotten worse recently and willcontinue to get worse in the next few years,” saidKermit Baker, who serves as chief economic analystat the American Institute of Architects and the JointCenter for Housing Studies at Harvard. “Themarginal buyer was getting in with adjustable ratemortgages more than fixed. Many of those are gone,and rates are going up.” At the same time, he noted,“The concessions by builders are affecting a certainpiece of the market, but you don’t see widespreadlowering of prices. People selling their own homeswill wait for the market to recover.”

There isn’t a single housing market, of course.Market conditions are by their nature highlylocalized. In some areas the time on the market andprice can be heavily influenced by just a smallnumber of large projects. “You could pick out 15 or20 metro areas where there was massiveoverbuilding,” Baker said, “but the issues are in theareas where the subdivisions are, but not in the restof the metro area. The area where we’re seeingconcessions is in the new home market, where thereis inventory overhang.”

Where have those buyers gone? “Buyers are onstrike now because many who would be looking fora move-up house already exercised that optionwhen rates were low and prices for the first housewere high,” said R. John Anderson, vice president

for planning and design at New Urban Builders,Inc. in Chico, CA. “In a sense, we stole from thefuture market.”

Builders “stole” from that market, Anderson said,by focusing on larger, more expensive homes, whileignoring the large swath of households that wouldhave been perfectly happy with a smaller house,town house or condo they could afford—especiallyin locations that offered shorter commutes. “A lot ofpeople were stretching to get into big houses theydidn’t really want, thinking that it would be easierto sell it later to someone else who didn’t really wantit,” Anderson quipped.


“It’s fair to say we areentering a fundamentalturning point in howhouseholds are makinghousing decisions and responding tochanging conditions.”

Since the 1970s, the median size of newly builthouses has grown by roughly 45 percent, reaching2,300 square feet early this year, according to theU.S. Census Bureau. This occurred even ashouseholds were shrinking. In 2006, the share ofsingle-person households edged past the proportionof households with children; both hovering near 31percent. Wages, meanwhile, have stayed flat inrecent years.

There are signs the building industry has begunto take notice. Saddled with a surplus of largerhouses that are a drag on the bottom line, high-production builders such as KB Home and Centexhave announced that they will build smaller, moreaffordable homes aimed at first-time buyers.Already in the second quarter of this year, theaverage size had slipped to 2,241 square feet, andmarket observers believe the trend will continue.

There are a number of signs that the slumpingsales in exurban subdivisions and shrinking housesizes are bellwethers of something more than atemporary market “correction,” Baker said. “It’s fairto say we are entering a fundamental turning pointin how households are making housing decisionsand responding to changing conditions.

“The affordability issue is something morepressing in the last couple of years. We’re alsoseeing changes in lifestyles and a growingpreference for being close to jobs and activities.Homebuyers were disillusioned with buying houses15 to 20 miles from what they needed or wanted todo, and now higher fuel costs underscore that andyou’re paying more for transportation.”

Egbert Perry, CEO of The Integral Group, anAtlanta developer, agreed. “You can’t just talk about

housing costs anymore. You have to talk abouthousing and transportation, because it is getting soexpensive.” In high-mileage Atlanta, for example,the combined cost of housing and transportationaccounts for 61 percent of the typical householdbudget, higher than any other region save the SanFrancisco Bay area. But with one in sevenhouseholds nationally paying more than half of itsincome for housing, according to the Joint Center,Atlanta is far from alone.

To accommodate the new economic anddemographic realities, Baker said, “There willcontinue to be a trend toward more of a mix ofhousing types and uses in areas closer to jobs. Andmore changes are ahead now that sustainabledesign and green building are coming into play aspeople become concerned about climate changeand energy independence.” Recognizing thegrowth in a more “urban” market, at least four of thebig, national homebuilders—KB Home, Centex, K.Hovnanian and Toll Brothers—have createddivisions focused on building attached and otherhousing in mixed-use settings.

But will all these changes help more people findan affordable place to live? Tammie Hoy, executivedirector of Low Country Housing Trust inCharleston, SC, thinks they will, if they are managedwell. “The best way to promote affordability is tomaximize land, because that’s the biggest cost onthe coast. We promote higher density, mixed usecommunities because that’s more efficient in termsof land and infrastructure. If it’s well done it canreduce the cost and make a nicer neighborhood.”

Building a denser mix of housing types requiresa transition from viewing housing as a commodity

“We’re seeing changes in lifestyles anda growing preference for being close

to jobs and activities.”



to building distinct places, said Anderson. And thatmakes the design both of individual homes and ofneighborhoods all the more critical, he added.

At the level of the individual home, this means“recognizing that one size really doesn’t fiteveryone,” he added. This can mean, for example,building houses as small as 1,000 square feet andavoiding house plans that have the garageincorporated, and making a detached garage anoption rather than a standard feature. This makesthe house cheaper, but it also increases flexibility forthe buyers, he said. “Once the garage is detached,we don’t really care whether you buy a garage ornot. You can do it now or later, build it bigger andput an apartment over it; or skip it and build acarport.” The smaller a house is, the more theavailable space needs to be used flexibly andefficiently—a bigger design challenge thanbuilding a separate room for each function, but alsoa big money-saver.

Similar considerations operate at theneighborhood level as well, Anderson said. Buyerslooking at a particular neighborhood should have avariety of options, from small to large houses or fromattached to stand-alone. “People decide they want tobe in the neighborhood and they decide whichhouse is a better fit or more affordable.” Again, this

presents a greater design challenge than carving outuniform lots and offering a few similarly sized houseplans. Closely grouped houses have to be arrangedto allow for private space, as well as usable, sharedopen space. Buildings of all sizes and types must bebuilt with similar design detail to protect theproperty values and cohesion of the neighborhood.

Meeting the changing demand and economiccircumstances will require that not only developerschange their way of doing business, but thatgovernment does as well. Local governments haveplayed a role in promoting the building of higher-end subdivisions over more affordable homes, somedevelopers said. Most jurisdictions zone their landinto single uses at low densities. Many also haveput up a growing number of regulatory barriers tomore-affordable housing, imposing requirementsfor larger lots, bigger houses and restrictions onmultifamily housing. When interest rates were lowand barriers to building affordable homes high,builders cranked out the large, single-family housesthat are now waiting for buyers.

In the Bay Area and Central Valley of California,where Anderson works, building the moreaffordable, compact configurations can require adozen or more special allowances, he said. At timeshis firm has negotiated a special zoning overlayknown as a form-based code, which regulates theform and placement of buildings so that the overalldesign has a “high-quality” feel, whether the unitsare costly or more affordable.

Government can help make homes moreaffordable in others ways as well. To help meet thepowerful demand for “workforce” housing for thetechnology workers making $50,000-$80,000 a year,Anderson is working with local jurisdictions todevelop smaller one- and two-bedroomcondominium flats. In Chico, the city offers secondmortgages to help cover costs. Employers aregetting into the act, too. In Silicon Valley, somecompanies are offering their employees anEmployer-Assisted Housing plan to help pay for adownpayment or closing costs.

Though well behind northern California in termsof house prices—like every other region—theCharleston area is seeing similar changes, Hoysaid. “Developers are finally starting to think ofworking families as a niche market,” she added.“It’s a whole new set of customers for developerswho think of it that way. But everyone—developersand local governments alike—is having to go toschool on how to build for it successfully.”

Building a denser mixof housing typesrequires a transitionfrom viewing housingas a commodity tobuilding distinct places.

David A. Goldberg is the communications director forSmart Growth America, a nationwide coalition based inWashington, D.C. that advocates for land-use policy reform.In 2002, Mr. Goldberg was awarded a Loeb Fellowship atHarvard University where he studied urban policy.

Shared equity home ownershipaddresses affordable housing needs

BalancingBy Judy Newman


Nancy Rowand and her 18-month-old twindaughter and son were welcoming theholidays in their tiny Washington, D.C.

apartment on Christmas Eve, 1977.But their joy faded quickly when Rowand

received a startling, hand-delivered “gift:” aneviction notice.

New owners of the eight-building, 96-unitcomplex—built in the 1940s to house military ormilitary support staff—wanted to tear down the600-square-foot, one-bedroom apartments betweenGeorgetown and American universities or convertthem to condominiums.

Rowand and her neighbors, a diverse group ofmoderate-income people, were not about to let thathappen without a fight. They formed a committee,hired lawyers and appealed to the city for help. “Wehad a rally and chanted, ‘we shall not be moved,’”Rowand said.

And they won. In 1979, the Beecher Cooperativewas created, 63 units in six buildings, for an initialbuy-in cost of $1,000 per household plus a co-opfee to cover a blanket mortgage on the property.

Nearly 30 years later, the Beecher Cooperative isstill going strong. In 1986, members bought out thelimited partnership that co-owned their buildings,raising $2.5 million through individual share loansaveraging $30,000 from the National CooperativeBank. Today, households pay $550 to $800 a monthin mortgage and co-op fees,Rowand said, a lot less than thearea’s market-rate, one-bedroomrents of about $1,400.

“We’re very much of ananomaly,” Rowand said. “Wereally have a beautiful situation in an area of Washington, D.C.that’s very pricey, wooded andvery desirable.”

The Beecher bunch might nothave foreseen it at the time, but itwas part of what has become agrowing trend toward shared

equity housing, a trend that, in the past few years,has taken on the momentum of a bullet train.

Though their numbers still make up only a small percentage nationwide, more and morepeople are embracing shared equity arrangementsto become homeowners.

Shared equity, also called permanentlyaffordable home ownership or third sector housing,is a step between the traditional American housingalternatives of either buying or renting; of privatehome ownership or ownership by a governmentagency or nonprofit organization.

In shared equity arrangements, a homeownergenerally receives some type of subsidy from agovernment agency or nonprofit group, reducingthe purchase and payment costs. In return, thehomeowner shares the rise in the home’s value with

the Cost

Three types ofshared equityhousing are gaining ground.

Southern Lights in Boulder, Colorado


that organization. There are income guidelines forpurchasers and often, rules on use of the property,shared governance, and caps on appreciation.

A study on shared equity home ownership byJohn Emmeus Davis for the National HousingInstitute (NHI) in 2006 concluded that “afterwaiting in the wings for many years, third sectorhousing is now reaching a broader audience andwinning wider support.” Davis estimated therecould be anywhere between 500,000 and 800,000shared equity units around the country. But thatnumber will likely explode over the next decade. Ashousing costs have soared, more and more citieshave adopted inclusionary housing requirementsand set up housing trust funds.

Meanwhile, an expanding range of alternativesis being explored as the call for affordable homeownership grows louder. Shared equity mortgages,in which homeowners share the increased value of their property with investors, are touted in anApril 2007 report co-authored by New YorkUniversity economics professor Andrew Caplin inpartnership with the Fannie Mae Foundation.Homeowners would gain a new source of financing

and reduce their home-buying costs whileinvestors could participate in “a new asset class,”the report suggested.

Also in April, a Business Week article said onetype of shared equity mortgage already isbecoming more prevalent: parents contributing totheir child’s home downpayment and claiming acomparable share of the appreciation when thehome is sold.

But the concept of shared equity is not without itsbumps, ranging from how long covenants shouldstay in effect to how much equity the homeownershould receive. And it is not for everyone. Sharedequity homeowners won’t get rich on their realestate investment. At the Beecher Cooperative,units are now valued at $90,000; condos in the twobuildings that did not join the co-op were recentlyselling for $250,000. But that’s the crux of theprogram: to keep home ownership affordable.

Most commonly, three types of shared equityhousing are gaining ground, the NHI study said:limited equity co-ops, such as the BeecherCooperative, deed-restricted housing andcommunity land trusts.

In Boulder, Colo., four families moved into twonew duplexes in July in Southern Lights, a deed-restricted housing project initiated by the BoulderArea REALTOR® Association.

With the help of Boulder’s Affordable HousingAlliance—a nonprofit group that already had built other deed-restricted units nearby—and thecity’s land contribution, the REALTORS® raised$75,000 and worked side-by-side with thehomeowners-to-be, hammering, painting andlandscaping the property.

Deed-restricted houses,town houses andcondominiums are the fastest growing form of shared equityhome ownership.

Elmwood in St. Albans, Vermont

City’s Edge in South Burlington, Vermont


The Victorian-style duplexes were sold tofamilies earning 80 percent of the median incomeor less, about $57,000 for a three-person household.“Architecturally, they do not resemble affordablehousing that you may be used to seeing,” saidKenneth Hotard, senior vice president for publicaffairs with the Boulder Area REALTOR®

Association (BARA).Two of the units are 1,504 square feet, with four

bedrooms and two baths; they sold for $200,000.The other two, at 1,227 square feet, with threebedrooms and two baths, sold for $175,000.“Market rate would be at least twice that much,”Hotard said, noting that Boulder’s median homesale price is $560,000.

City rules specify that when the currenthomeowners sell their duplexes, the price cannotappreciate more than 1 to 3.5 percent a year.Boulder also has inclusionary zoning rulesrequiring 20 percent of all housing built to bepermanently affordable. But a problem hasemerged, Hotard said: there’s not enough housingfor middle-income people.

“We’re basically driving the middle class out,”he said. BARA plans to work with the city to createincentives to build more middle-income homes.

Deed-restricted houses, town houses andcondominiums are the fastest growing form of

shared equity home ownership, the NHI studysaid, primarily because so many communities arenow using regulatory incentives and inclusionarymandates, requiring that some or all new housingdevelopments include affordable units.

Community land trusts also are sproutingnationwide, from Burlington, Vt. to Irvine, Calif.

Traditionally, the land trust owns the land andleases it to the owner of the home that sits on theland. With condominiums, there’s no land to lease,so a covenant fulfills a similar purpose.

The Burlington Community Land Trust, one of theoldest community land trusts in the U.S., wasfounded in 1984. Renamed the Champlain HousingTrust when it merged with the nonprofit LakeChamplain Housing Development Corporation in2006, it is also one of the largest, encompassingnearly 400 single-family homes and condominiums,more than 1,400 rental units and six co-ops with 115homes in a three-county area of northwest Vermont.Eighty employees run the land trust, which also seesits mission as revitalizing declining neighborhoods,not just with housing but also stores and offices.

“We really are a large-scale community develop-ment organization,” said Kirsten DeLuca, homelandand technical assistance program manager.

Champlain serves households below the area’smedian income and provides a subsidy that lowers

REALTORS® worked side-by-side with thehomeowners-to-be, hammering, painting andlandscaping the property.

Southern Lights in Boulder, Colorado


the cost to the buyer, then limits the appreciationthe homeowner can receive to 25 percent when thehome is later sold.

For example, on a home priced at $200,000,Champlain may provide a $50,000 subsidy. Whenthe owners decide to sell, a fair market appraisal isconducted. If the home is then worth $240,000, theowners will get $10,000 of the $40,000appreciation. They sell the home back to the landtrust for the amount they initially paid—$150,000—plus $10,000, for a total of $160,000. The land trustkeeps the housing affordable by providing the nextbuyer with a $70,000 subsidy, holding themortgage down to $170,000, DeLuca said.

Potential homebuyers not only can buy units builtby Champlain, they can also find a home they likebut can’t afford in another location and ask to makeit part of the land trust, with a subsidy from theorganization to help cover the fair market value cost.

Neighbors who paid full price don’t get angry,DeLuca said. “If you can afford to buy a market-rate home on your own, that’s a better investment.You’ll get 100 percent of the appreciation.”

People get involved with the land trust becausethey’re “entirely priced out of the market,” DeLucasaid. “We’re talking nurses, teachers, firemen;middle-class and working-class folks cannot affordto buy property in our area. We have a criticalaffordable housing crisis and that’s what you’reseeing in many parts of the country,” she said. “Iffolks want to afford a home, for many people, this istheir only option.”

The Champlain Housing Trust is seen as amodel for the nation and serves as a mentor to landtrusts organizing elsewhere, including City FirstHomes, incorporated in Washington, D.C. inOctober. Its goal: creating 1,000 units of“permanently affordable workforce housing”within three years.

“If folks want to own ahome, for many people,this is their only option[the land trust].”


“It has become increasingly clear that workforcehousing was a challenge that was facing D.C. forwhich there were no large-scale solutions,” saidDavid Wilkinson, executive director of City FirstEnterprises, nonprofit parent of City First Homes.

City First is using a $10-million city grantcoupled with $65 million in private financing,whose investors will receive federal New Marketstax credits. The homes will target families at 80percent of D.C.’s median income, currently at$94,500 for a family of four.

Average home prices are nearly $450,000,Wilkinson said. “A teacher in D.C. in 2000 couldbuy one of every three homes. Now, it’s closer toone in 10. Real estate rates have risen much morequickly than incomes in D.C. so the city is facingpotential shortages of teachers and health careworkers and others.”

City First plans to work with developers to buildtown homes, single-family homes, condominiumsand cooperatives in mixed-income developmentsthroughout the District of Columbia, Wilkinsonsaid. City First will help finance the affordablehousing part of the development which will bepassed along as a 3 percent second mortgage forthe homebuyer.

For example, on a $300,000 home, the buyerwould take out a $225,000 conventional mortgage.The remaining $75,000 would come from City Firstas a second mortgage, with 3.1 percent interest.When the buyer later sells the unit, the buyer takes25 percent of the appreciation.

“We are told by home ownership counselors andother real estate market experts across the city thatdemand will be very high for this. It willsignificantly increase the affordability of units,”Wilkinson said. Developers like the idea because itexpands the number of potential buyers for theirunits, he added.

Irvine, Calif. is another community establishinga new land trust. Approved by the city in 2006, itsgoal is to create 9,700 units by 2025—10 percent ofIrvine’s housing stock.

Shared equity housing is “a vision that isneither impractical nor remote,” the NHI studysaid, calling for more resources and research intosuch programs. Public and private support aregrowing, the study noted, adding, “There areencouraging signs that third sector housing hasfinally arrived.”

Shared equity housing isa vision that is neitherimpractical nor remote.Judy Newman is a business reporter for the Wisconsin

State Journal newspaper in Madison, Wis.



A NewBenefitEmployer AssistedHousing in the21st century

Employer AssistedHousing in the21st century


In his work entitled “The World is Flat,” Thomas Friedman explained howastounding advances in technological collaboration combined with the globalspread of capitalism have fundamentally altered the way businesses operate.

In a growing global economy, companies are now facing more fierce competitionfor business and resources both locally and around the world. This competitionextends to recruiting and retaining a productive workforce.

As the business landscape continually evolved, the median home price inthe United States increased from $126,000 in 1997 to $228,900 in July of 2007,an increase of more than 80 percent. As business practices have changed atan ever increasing rate, so have demands on space in America’s urban areas,and housing prices have risen dramatically as a result. Skilled workers arenow in higher demand at a time when the price of owning a home is thehighest in history.

Employers have begun to recognize that in order to remain competitive inthe changing business landscape of the 21st century, they must attract andretain skilled employees. One way that businesses have increased theirrecruitment and retained more employees is by enacting various housingbenefit programs.

Employer Assisted Housing (EAH) is a term that describes an employerbenefit program that helps employees attain housing in both the rental andhome ownership markets. A financial EAH program can take many differentforms, but is most commonly administered as downpayment assistance,rental/mortgage assistance, shared equity, forgivable loans, matched savingsor upfront grants.

According to the Society of Human Resource Managers (SHRM) annualbenefits survey, the number of employers who offer their employees

By Mike Lehrman


downpayment assistance has increased greatly inthe past seven years. In 2000, only 3 percent of allemployers offered a downpayment assistancebenefit program. In 2007, that number increasedsignificantly to 11 percent of all employers.

Rental and mortgage assistance programs haveexperienced similar increases during the sameperiod. In 2000, only 6 percent of all employersoffered rental assistance. In 2007, that numberincreased to 19 percent, dropping slightly from thehigh of 22 percent in 2006. Mortgage assistanceprograms doubled during this time period as well,increasing from 6 percent to 12 percent.

Employers in the most competitive fields withhighly skilled workers have turned to these tools asa way of increasing recruitment efforts andretaining employees for a longer period of time,thus increasing productivity and limiting costs.Employers have found that offering a benefit like aforgivable loan can greatly increase retention rates,as employees have a financial incentive to remainwith the company until the full balance of the loanis forgiven. These programs have the potential toimprove the bottom line of employers who facehigh turnover rates and engage in competitiveemployee recruitment.

As the popularity of EAH expands, it isbeginning to be recognized among policymakers asan important tool which helps to expand homeownership and revitalize communities. Despitethis, currently there is no federal incentive forcompanies to offer employees a housing benefit.Companies do not receive any tax incentive foroffering this kind of benefit program, and unlikehealth, dental or life insurance benefits, employeesmust pay tax on all housing related benefits thatthey receive.

Senator Hillary Clinton (D-NY) introduced a billin April of 2007 that would change this portion ofthe tax code. “The Housing America’s Workforce

Act,” originally proposed in 2005, provides afederal tax credit to companies for a portion of theexpenses that they incur by offering a housingbenefit to their employees. Furthermore, thislegislation treats housing assistance benefits of upto $10,000 as nontaxable income for the employee.

Lastly, the legislation creates a competitivegrant program whereby nonprofit organizationsthat assist in the administration of EAH programscan apply for federal grants to fund their efforts.Many times nonprofit organizations offer freecredit counseling services to employees whoparticipate in an EAH program.

Enacting such a bill would create a largeincentive for employers to offer EAH benefitprograms to their employees. Despite havingnumerous cosponsors, the legislation did not makeit to the Senate floor for a vote, but future prospectsfor the bill remain promising.

As policymakers have become more aware of theincreasing value of EAH programs, so also havefederal regulators. In August of 2007, the Office ofthe Comptroller of the Currency released a reportentitled “Understanding Employer-AssistedMortgage Programs: A Primer for National Banks.”The study was released as a response to the

Employers have foundthat offering a benefitlike a forgivable loancan greatly increaseretention rates.

Benefit Mortgage Rental DownpaymentAssistance Assistance Assistance

Yes/No Yes No Yes No Yes No2000 6% 89% 6% 90% 3% 93%2001 9% 88% 8% 89% 5% 92%2002 7% 94% 5% 95% 4% 96%2003 12% 88% 15% 86% 9% 91%2004 12% 88% 19% 81% 8% 92%2005 13% 87% 21% 79% 9% 91%2006 12% 89% 22% 78% 11% 89%2007 12% 88% 19% 81% 11% 88%

SHRM Benefits Survey, 2000-2007


increasing popularity of EAH programs, and wasintended to explain to bankers their responsibilitywhen issuing a loan to a homebuyer who isparticipating in an EAH benefit program providedby their employer.

In addition to politicians and federal regulators,REALTORS® have also taken a leadership role bypromoting EAH in their own communities. In 2006,the NATIONAL ASSOCIATION OF REALTORS®

(NAR) launched Home From Work™, an outreachand educational campaign that teachesREALTORS® how to assist employers in creatingtheir own EAH program for their employees.

Home From Work™ encourages REALTORS® toget involved with lenders and nonprofit groups intheir communities to help promote employerassisted housing and increase home ownershipopportunities. Dawn Lane, a REALTOR® from LasVegas, Nev., has done just that.

In 2002, Lane founded the HOPE program(Housing Opportunities, Programs, and Education).The HOPE program is a partnership betweenREALTORS®, local lenders and nonprofits to supplyHUD-approved home ownership education andfunding to prospective homeowners. Since 2002 theHOPE program has helped prospective homeownersfind funding from nonprofits and affordablefinancing to achieve the dream of home ownership.To date, Lane and the HOPE program have helpedmore than 300 families become homeowners, andhave never lost one to foreclosure.

When Lane heard about the Home From Work™program, she thought it was a great fit for her effortsin Las Vegas, and she traveled to Denver in late2006 to participate in an NAR sponsored HomeFrom Work™ training session. Lane recognized“bringing the employer into partnership withnonprofits and lenders creates another source tohelp potential homeowners achieve the dream ofhome ownership.” She adds, “the program is aboutbuilding goodwill by educating the employers andeducating the public.”

Lane has successfully achieved that goal,working with the city councils of Henderson andLas Vegas along with a statewide title company toorganize eight-hour HUD approved homebuyereducational courses for employees who areinterested in home ownership. Lane is currentlyworking with these employers to construct an EAHfinancial benefit program that meets theirindividual business needs.

Policymakers, regulators, nonprofits, lendersand REALTORS® have taken important roles topromote EAH programs as viable ways foremployers to improve their bottom line whileremaining competitive in the market andpromoting home ownership and vibrantcommunities. EAH employee benefit programs area growing trend among companies and can be avaluable tool to help employers recruit and retain ahighly skilled workforce in an ever changingbusiness environment.

REALTORS® have taken importantroles to promote EAH programs.

Mike Lehrman is an associate in the Housing OpportunityProgram of the NATIONAL ASSOCIATION OF REALTORS®.

By Brad Broberg


REALTOR® Housing Foundationsare providing innovative solutions

for affordable housing

Foundationhome

ownership

Foundationhome

ownershipof

The

Joyce Patton froze in disbelief. Then shehugged her children. Then she cried. Joy, notsorrow, triggered her tears. Her name had just

been drawn as the winner of a new home.Six months later, Patton is still pinching herself.

“I never win things,” said the Charlotte, N.C.resident. “Every time I walk in the house, I smile.”

Patton’s good fortune was no accident. She earneda chance to put her name in the hat for a 1,500-square-foot home by completing a first-timehomebuyer education program—all made possible bythe Housing Opportunity Foundation (HOF) of theCharlotte Regional REALTOR® Association (CRRA).

Between 2003 and 2007, the CRRA HousingOpportunity Foundation teamed up with localbuilders to give away five homes to promote abuyer education program it co-sponsored with theCharlotte Housing Partnership. Each year,everyone who completed the program and became

mortgage-ready was eligible to win a free house ifthey had not already bought one.

Talk about affordable housing! All people had todo was show up for the annual drawing—and crosstheir fingers.

“I’ve never seen lives change in one momentlike that,” said Rodney Tucker, executive director ofthe Charlotte HOF. “It was very exciting to see.”

Of course, giving away a home a year—or 10 or100—won’t solve the country’s affordable housingcrunch anytime soon. But it did build some buzz aboutthe buyer education program and provide a creative

example of how state and local REALTOR®

associations are striving to make housingmore affordable for more people.

Across the country, local REALTORS®

and state REALTOR® associations haveestablished REALTOR® HousingFoundations. The Foundations areidentifying, developing and promotingways to expand affordable housing intheir communities. Today, approximately300 state and local associations sponsorprograms of their own through theirfoundations to assist buyers, renters andbuilders of affordable housing.

It’s not just the “right thing to do.”Providing a range of housing choices at allprice levels is also a principle of SmartGrowth that allows people to live in thesame community where they work,taming sprawl and curbing the congestioncreated by mass commutes.

Beyond that, a healthy supply ofaffordable housing creates a more dynamicmarket for REALTORS®.

Providing a range ofhousing choices at allprice levels is a principleof Smart Growth.

Joyce Patton, winner of a new home throughthe first-time, homebuyer education program.


“At the end of the day, if people aren’t movinginto the first home and building equity, there’snever going to be a second home,” said MonicaRodriguez with the California Association ofREALTORS® (CAR). “We’re helping people grabthe first rung of that ladder.”

The CAR recognized early on the growing chasmbetween incomes and housing prices—and not just forthe poor, said Toby Bradley, former president of theCAR. “Much of the workforce, even the middle class,cannot afford housing,” she said. “The statistics arebad all over the country.”

Bradley began pushingthe issue to the front burnerin 2000. Three years later—during her term aspresident of CAR—theassociation launched itsHousing Affordability Fund.“The market—supply anddemand—wasn’t takingcare of the problem,” shesaid. “We needed to becomemore proactive.”

Over the years, the CAR’sHousing Affordability Fundhas awarded $1.8 millionto local REALTOR®

Associations in California,which have used it to

support a wide range of affordable housing initiativesand organizations in their communities—with moreand more emphasis on increased production ofworkforce housing.

How big is the problem? Nearly one-third ofAmericans worry they will never be able to afford ahome and nearly 60 percent are concerned that thehigh cost of housing is hurting their local economy,according to a 2006 survey by the NAR’s HousingOpportunity Program.

While individual markets vary widely, the averagemonthly mortgage and interest payment climbed from$840 in 2003 to $1,132 in 2006. Other costs associatedwith home ownership also have risen steeply. TheEnergy Information Administration estimates thatbetween 2005 and 2006, the average price ofelectricity rose 12 percent, natural gas rose 28 percentand heating oil rose 25 percent. Meanwhile, annualstate and local property taxes climbed from anaverage of $969 per person in 2002 to $1,121 in 2004,according to the U.S. Census Bureau.

The lack of affordable housing also is hurtingrenters. According to the 2006 HousingOpportunity Program survey, more than two-thirdsof Americans believe that families in theircommunity have difficulty paying their rentcompared to 7 percent who thought so in 2005.

State and local associations are using manydifferent models to attack the problem. The NewJersey Association of REALTORS® (NJAR) Housing

Opportunity Foundation awards somemoney to local associations to supportvarious projects of their choosing, butmost goes to New Jersey CommunityCapital (NJCC), a nonprofitcorporation that finances the creationand preservation of housing andcommercial real estate.

Since 2004, the NJAR HousingOpportunity Fund has given morethan $200,000 to NJCC, including$57,900 in 2007. The money helpssupport a program that supplies pre-development financing foraffordable housing—both homes andapartments—developed by nonprofitand community organizations.

Examples include redevelopmentof the F. Berg Hat Manufacturing Co.in Orange. When completed, theconverted factory will include a mix of35 market-rate and affordable housingunits. Other projects supported by theHousing Opportunity Fund includethe development of 10 apartments inMontclair and two single-familyhomes in Pleasantville.

Pleasantville, New Jersey


Nearly one-third of Americansworry they will never be ableto afford a home.

Although $200,000 is a relative drop in thebucket, the money provides pre-developmentfinancing that many organizations are unable toobtain from more traditional sources. “Partneringwith New Jersey Community Capital enables us toleverage our contribution to make a much largerimpact on the supply of affordable housingthroughout the state,” said Teresa Tilton, director ofpolitical affairs and member services for NJAR.

The NJAR also strives to make an impact byshowing its members examples of successfulaffordable housing initiatives. Every year, the NJARjoins with the New York and Pennsylvaniaassociations to hold the Triple Play Convention inAtlantic City. And every year, the HousingOpportunity Fund sponsors a bus tour ofredevelopment projects in Atlantic City—many ofwhich include affordable housing.

“It’s a way to show our members the new face ofaffordable housing and give them ideas that theycan take back to their communities,” said Tilton.

Member donations account for much of themoney REALTOR® associations use to supportaffordable housing initiatives. Other major sourcesinclude fund-raising events, a slice of associationdues and—where state law allows—interest fromearnest money in escrow accounts.

The Colorado Association of REALTORS® relieson escrow interest to fund its Housing OpportunityFoundation. With an annual budget of between$300,000 and $500,000, it awards grants to housingorganizations that help first-time homebuyers, thehomeless and victims of natural disasters anddomestic violence.

The foundation also helps families in danger oflosing their homes. Last year, it gave the ColoradoDivision of Housing $30,000 to help launch a newForeclosure Prevention Call Center. The center—the first of its kind in the country—connectshomeowners involved in foreclosures withcounselors who help them find options to eviction.

As the rising cost of housing has priced more andmore people out of the market, the term affordablehousing—often stigmatized as low-incomehousing—is being replaced by the term workforcehousing to better reflect that it isn’t just “poor”families who can’t afford to buy a home. InCalifornia, for example, only 14 percent of thestate’s households can afford a median pricedhome, according to the CAR.

“We certainly can’t solve the problem on our ownor address the problem in a comprehensivefashion,” said Rodriguez. “But we want to show weare at the table, and we care about affordablehousing and helping all members of the communityget into a house.”

Grants from the CAR Housing AffordabilityFund have helped local associations support avariety of strategies to achieve that goal, includinghousing trusts. The Marin Association ofREALTORS® received $150,000 to support theMarin Workforce Housing Trust (MWHT), whichprovides low-interest loans to housing developersthat construct homes and apartments affordable tolower- and moderate-income families.

According to the MWHT, the median price of asingle-family home in Marin County is $899,000forcing many local workers—teachers, nurses,police officers, clerks—to commute long distances

“We care about affordablehousing and helping allmembers of the communityget into a house.”


from surrounding counties. As a result, traffic clogs the roads, workers lose time with theirfamilies and employers struggle to hire and retainquality employees.

Given Marin County’s location—it’s directlyacross the Golden Gate Bridge from SanFrancisco—the high price of housing is notunexpected. But housing costs are also a problemthree hours away in sparsely populated CalaverasCounty, where demand from retirees and peoplebuying vacation homes is pricing the localworkforce out of the market as well.

“You’d be hard-pressed to find a house here forless than $350,000—even a small one,” said TimMuetterties, a local REALTOR® and current chair ofthe board of trustees of the CAR HousingOpportunity Fund.

Compared to Marin County, that may sound likea bargain, but incomes in Calaveras County areabout one-third as much as incomes in the Bay Areaand many members of the workforce end up leavingto find more affordable housing. “The AmericanDream is to own a home, and if you can’t find aplace you can afford, you’re going to movesomeplace where you can,” said Muetterties.

To stem the tide, the Calaveras CountyAssociation of REALTORS® established a HousingAssistance Fund, receiving a $19,000 grant from theCAR Housing Opportunity Fund and raising$19,000 on its own to get the program started. Thefund helps low- to moderate-income families qualifyfor a conventional loan by providing downpaymentassistance or buying down the interest rate.

In Charlotte, the Home Giveaway Programgenerated plenty of publicity, but the CRRAHousing Opportunity Foundation is not a one-trickpony. Among other activities, the foundation alsoconducts a Workforce Housing Certificate Programthat helps REALTORS® learn how to work with first-time homebuyers. The program includesparticipation in Home from Work™.

Developed by the NAR, Home from Work™teaches REALTORS® to work with employers todevelop housing benefit plans that offer buyereducation, downpayment assistance, loanguarantee programs and other forms ofassistance to their workers.

That’s just the sort of hand up that gives workingmen and women like Joyce Patton a shot at homeownership. As it turns out, the luck of the draw wasall Patton needed. Yet the single mother of three—who went back to college to study electricalengineering and now designs distribution systemsfor the local power company—was on track to buy ahome on her own thanks to the financing optionsand access to downpayment assistance she gainedthrough the buyer education program.

“I feel like I should carry cards with information[about the program] to pass around to people,” she said.

The fund helps low- to moderate-incomefamilies qualify for a conventional loan.

Brad Broberg is a Seattle-based freelance writerspecializing in business and development issues. Hiswork appears regularly in the Puget Sound BusinessJournal and the Seattle Daily Journal of Commerce.



Once the site of Denver’s historic Elitch gardens andamusement park, Highlands’ Garden Village in Coloradomight just be one of the best examples of recent transit-

oriented development and Smart Growth around.The approximately $105 million project created by Jonathan

Rose Companies boasts a bus line just 10 minutes from downtown;75,000 square feet of retail space; schools; a theater; a carousel;140,000 square feet of open space—and every bit of it is tastefullyentwined with dozens of lofts, multi-family residences, town homes,single-family houses, senior residences and carriage houses.


Transit-Transit-


Developments


OrientedOrientedDevelopments

Affordable choices: Connectingcommunities to the workplace

By Amanda Kramer

Jonathan Rose Developer Chuck Perry said the project, whichwas completed in 2007, has been a rousing success. And for a sitethat may have been considered “underutilized” a few years ago,Perry said, the Highlands’ area in Denver is now basking in thelight of its successful marriage of transportation lines and life—the key to transit-oriented development, or “TOD.”

“These (TODs) are the wave of the future,” said Perry. “Weneed to be continually working to create dense, mixed-use,mixed-income communities.”

Portland, Oregon

TODs address affordable housingWhat Perry is saying—and what he’s helping to

build—isn’t far off the mark.According to the Center for Housing Policies’

most recent report, “A Heavy Load: The CombinedHousing and Transportation Burdens of WorkingFamilies,” a growing number of cities across theUnited States are identifying a lack of affordablehousing, an increase in commute times and trafficcongestion as high-priority issues. In fact, the studysuggests that it’s critical for cities or regionsthroughout the United States to constantly considerboth a housing and transportation policy—together.

Mariia Zimmerman, vice president of policy forReconnecting America, spends much of her timestudying the impacts and policies surroundingcurrent transportation-oriented development andhow her organization can improve federal policy’sinvestment in the trend.

Zimmerman, whose national nonprofitorganization works to integrate transportationsystems and the communities those systems serve,said the benefits of living in a TOD can be far-reaching—and all touch on the issues identified inthe Center’s study.

“If you’re looking at one development versus aTOD community, there’s much more benefit if it’spart of a whole community strategy,” Zimmermansaid. “We see households who live near transit owna half a car less and spend less on transit. There areother benefits if you’re in a vibrant, mixed-income,walkable neighborhood—you’re getting moreexercise, there’s nice engaging open space …you’re creating great places.”

“For the developer, the positives are that there’smore of a price premium for the TOD units—evenwith the higher cost it takes to do many of theseprojects. I think at its most basic element that’swhat’s appealing for development,” Zimmermancontinued. “The retail mixed-use side is still hardfor the developer and may have slower immediatereturn, but the unit can maintain itself over thelonger-time horizon.”

Zimmerman said Reconnecting America haslooked at the issue of incorporating mixed-incomehousing into TOD communities.

“With a lot of urban markets there’s concernabout gentrification and displacement,” she said.“There’s a growing interest in seeing if there areways we can create mixed-income TODs so wehave units available for people with a range of


incomes, working families as well as some low-income households.”

Perry said he finds the issue of mixed-incomehousing critical to the future of TODs. He said hiscompany considered and incorporated varyinghousing costs into the Highlands’ project.

“The reactions have been very positive particularlyhere—and what people really recognized is thatwe’ve created a sense of space, very pedestrian-friendly. It’s an inter-generational community andthe most significant thing is that you can stand at thebottom of a picture (of the development) and seetown houses for $300,000 or apartments that rent for

$519,” Perry said. “I believe that the key to effectiveTOD is going to be to ensure there are mixed-income communities and they create a sense ofplace and a sense of community.”

Perry said another older, but still thriving, TODhis company worked on was the Denver Dry GoodsBuilding renovation and renewal. Adjacent to alight rail line and completed in phases from 1993 to1999, the downtown historic department store wasredeveloped into housing, offices and retail storesusing a handful of “green,” or environmentallyfriendly, features and attention to detail. Perry saidother developers had simply suggested the space

“These (TODs) are the wave of the future.”


Highlands’ Garden Village in Colorado

be used as retail, but his company felt the projectwould fare better and serve more if the TOD modelwere used on the 350,000-square-foot space.

Perry said aside from focusing on mixed-incomeprojects, he also strives to plan TODs that are asgentle to the environment as possible. For the DryGoods renovation, Perry said his companycontracted with an organization to create an energymodel for the building and incorporated a set ofenergy-saving features like rebuilding historicwindows with double-paned glass, using low VOCpaints and glues, and installing a cooling systemthat uses evaporative techniques. All are features tomaintain a home’s affordability into the future.

The future of TODsCurrently, Zimmerman said Reconnecting

America is just beginning to research currenttrends in TOD and its future.

“I can’t say where it is right now,” Zimmermansaid. “Anecdotally, what we’re hearing is it doesdepend on the market. In the Twin Cities, somepeople are putting plans for TODs on hold. In theD.C. area; Charlotte, North Carolina; and the Bayarea and the L.A. area in California, we’re hearingthat the market is healthy in terms of sales andprices—from all income levels. It actually appearsto be holding its own.”

Whether waxing or waning, though,transportation planner Katherine Perez said it’ssimply smart to realize that TOD could and shouldplay an important role in future developmentacross the country.

Perez, who currently serves as vice president ofdevelopment for Forest City Development inCalifornia and is often on the “front end” ofdevelopment projects, said there are a number ofissues inherent to TODs that are important fordevelopers and real estate professionals to


The key to effectiveTOD is going to beto ensure there aremixed-incomecommunities.

Dry Goods building renovation in Denver, Colorado

WINTER 2008 ON COMMON GROUND 31Portland, Oregon

understand. TOD planning that addresses the needfor live/work environments and affordable housingoptions must be a priority.

“The real estate market is really going throughsome tough times,” Perez said. “What cities andresidents and community folks should be doingright now—if they have a corridor and a busline—is planning these TODs.”

Perez said some TOD markets are mature whilesome are not there yet.

“New York and Boston are mature, and Portlandis sort of the gold standard of TOD,” Perezremarked. “They really do the best kind of urban

design—the best kind of land use and transitpairing, they understand the value of transit.”

Perez said that as for the future of TOD,developers across the United States may want topay attention to overseas models.

“They’re in Hong Kong, Singapore, Tokyo,” Perezcommented. “They’ve marshaled sustainability—and comparatively, affordability—and they’re goodat that. They’ve marshaled technology, and on thetransit side they make it very efficient. If you miss atrain there’s another in 30 seconds.”

Perez said models for the best in TODs can befound outside the country—where the fear ofdensity and entrepreneurship often inherent to thistype of development is nowhere to be found.

“We’ve got a lot to learn from overseas partnersand colleagues—how we take good ideas and not beafraid to cherry pick them, and how to be ambitiouswith this stuff,” Perez said. “We’re not there yet, butwe will get there, in my lifetime, for sure.”

TOD could andshould play animportant role infuture development. Amanda Kramer is a freelance writer from Evansville, Wis.

The AmericanThe AmericanCommunities are attemptingto ensure affordable rentals


Dream … Dream … of Affordable Rental Housing

By Steve Wright

of Affordable Rental Housing


If home ownership is the American Dream, thenlack of affordable rental housing is theAmerican Nightmare.

For a huge percentage of Americans—those whoare part of the increasing low-wage workforce,elderly, disabled, entry-level professionals, evenmid-level wage earners in expensive big cities—renting makes more sense than home ownership.

While the need for affordable rental housing hasnever been greater, the uphill battle to preserveexisting affordable housing has never been steeper.

A number of factors—an endless maze of U.S.Housing and Urban Development (HUD)regulations, the lure of market-rate rent earnings,high land values, perplexing local building codes—threaten to diminish an affordable rental housinginventory that already fails to meet the risingdemand for it.

The John D. and Catherine T. MacArthurFoundation is supporting a 10-year, $75 millioninitiative to preserve and improve affordable rentalhousing across the country.

The foundation’s “Window of Opportunity:Preserving Affordable Rental Housing” goal is todirectly support the preservation and improvementof 100,000 affordable rental homes and tosignificantly improve the regulatory and fundingenvironment for preservation through policyreforms at local, state and federal levels.

“Harvard University’s Joint Center for HousingStudies reports that over the past 10 years, twoexisting units were lost for every affordable rentalnewly built,” said Debra Schwartz, director ofProgram-Related Investments for the MacArthurFoundation. “Without concerted action, our nation’sstock of affordable rental housing is projected to fall byanother million units or more in the decade ahead.”

“It is expected that by the end of 2007, more than$3.5 billion in new long-term subsidy and financingwill have been invested in ‘Window of Opportunity’projects at an average cost of roughly $80,000 perhome,” she added. “This is significantly less thanthe cost to build a new affordable rental unitanywhere in the country today.”

Schwartz, sharing observations she and MacArthurcolleague Erika Poethig delivered at a HUDsymposium, identified three barriers to affordablehousing preservation that must be overcome:

• Properties. Current resources, incentives andrequirements tied to affordable rentalproperties do not adequately encourage orrequire owners to preserve long-termaffordability or to sell to other ownerscommitted to that objective.

• Ownership. Current policies also limit theability of owners to recapitalize, earn sufficientcash flow and build a sustainable capital base

from which to successfully maintain, manageand operate properties that are affordable tolow- and moderate-income renters.

• Transactions. Current housing programs andregulations are fragmented, cumbersome,often unpredictable and inconsistently applied.Transactions that would transfer properties tonew owners committed to preservingaffordability and providing good long-termstewardship are difficult, costly and slow.

In the Chicago region, the MacArthurFoundation is breaking barriers by funding thePreservation Compact, an Urban Land Instituteproject that will save at least 75,000 existingaffordable homes in Cook County by the year 2020.

The compact is working to create moreresponsive and flexible financing from investors,expedited approvals or tax incentives from thepublic sector and creative development strategiesboth from for-profit and nonprofit developers.

One recent victory involved the LorringtonApartments in Chicago’s Logan Squareneighborhood, which has been affordable since1985. The building owner’s Section 8 contract wasexpiring, and he was ready to sell.

With housing costs steadily rising in the popularneighborhood, the classic building’s 54 units couldhave easily been sold to a for-profit condoconversion developer.

But a combination of public, private andnonprofit agencies preserved them as affordable.

A number of factorsthreaten to diminishan affordable rentalhousing inventory.

Chicago, Illinois


The nation’s largest nonprofit developerbought, rehabilitated and now managesthe building—with a contract ensuringaffordable rental prices through 2027.

A case study provided by thePreservation Compact explains that thepre-development financing was providedby a nonprofit lender specializing inemerging markets. Crucial financing wasprovided by both the state of Illinoisthrough tax credits and a housing trustfund and the city of Chicago via bondsand Community Development BlockGrant funds.

In August, Chicago Mayor RichardDaley announced that the city will helpcreate nearly 2,700 affordable rental units

for low- and moderate-income households in 29developments in neighborhoods across the city.

The city’s $277 million contribution to themultiyear project includes $175 million low-income

housing tax credits and bonds, $63 million in loansand $39 million in tax-increment financing.

Additional money will come from the IllinoisHousing Development Authority, the Federal HomeLoan Bank and private investors and lenders.

Without such aggressive programs, the nation’slack of affordable rental housing will continue tocreate dire consequences, according to SheilaCrowley, president of the National Low IncomeHousing Coalition.

The city of Chicago willhelp create nearly 2,700affordable rental units for low- and moderate-income households.

Block grant-funded development in San Antonio, Texas

WINTER 2008 ON COMMON GROUN

“Communities are incomplete,” she said. “Peoplewho do jobs that the community needs—hospitalaids, cashiers—these folks must work more thanone job and are left with fewer hours for family time.There are health and education consequences.”

“Kids who are in families who don’t haveaffordable housing move from school to school,”she added. “With these increased rates of schoolmobility—churning through school system toschool system—they don’t learn and are trying tocatch up. Teachers in the classroom must devoteextra time to them, which has a negative effect onthe quality of schools.”

Crowley said for owners who want to get out ofHUD’s rule, there should be incentives toencourage them to sell to nonprofits that willmaintain the apartments as affordable rentals.

“If you have a property that is in a decliningneighborhood, you tolerate it,” she said of HUDhurdles. “But if the neighborhood is improving,then you’re motivated to get out of affordable

housing. HUD needs to preserve the stock it has toremain competitive in the market. At the end of theday, the problem is budgetary—(the federal)domestic discretionary budget is low.”

Crowley also called on HUD to provide help tomaintain the aging housing stock that was createdwith its dollars.

“The federal government needs to put moremoney into this. A national housing trust fundwould be a tool for reinvesting in affordablehousing preservation,” Crowley said.

Recently, in additional efforts to preserveaffordable housing, the House passed the“National Affordable Housing Trust Fund Act of2007,” which will create a national fund to be usedto produce, rehabilitate and preserve affordablehousing. The funds could also be used for homeownership assistance including downpayment andclosing costs.

The obstacles preventing affordable rentalhousing preservation could be further removed by:

A national housing trust fundwould be a tool for reinvesting inaffordable housing preservation.


states and counties matching the dollars that comefrom HUD, affordable developers creating goodcommunity relations programs that eraseneighborhood opposition and some sort ofincentive or device that would assist developers inovercoming regulatory barriers at the local level.

Denise Muha, executive director of the NationalLeased Housing Association, said a lack ofaffordable housing rentals can result in problemsranging from an insufficient amount of serviceworkers to keep an economy going to dangeroussituations where 10 or more people are crammedinto a tiny housing unit.

“Owners’ decisions to renew the contracts orterminate their low-income use are generallymarket based, but can be attributed to somethingwe call ‘HUD fatigue,’” which Muha defined asowners “just getting tired of dealing with the HUDlayers of rules and changing policies and recentlyHUD’s inability to pay its bills—specifically,subsidy on Section 8 contracts. Many owners havewaited one or more months for their funds, leavingthem late in paying mortgages, etc.”

Muha said more affordable rental housing canbe preserved by providing tax relief to owners ofaging Section 8 (low-income housing) portfolios inexchange for selling the properties to new ownersthat will recapitalize them to remain affordable foryears to come.

She notes that current tax laws act as adisincentive for investors in certain properties toconsent to a sale to a new entity that wouldrehabilitate and extend the life of affordableapartment complexes.

“It is shameful that in the richest country in theworld, a worker earning two times the minimumwage is living in substandard housing or doingwithout sufficient food, medicine, etc. to pay therent,” Muha said. “Americans have lost interest andas a result, so has our federal government, inensuring that our citizens have a decent and safeplace to live. Until housing becomes a priority on thenational agenda, there will be families and elderlyand disabled folks living in substandard housing.”

Julie Bornstein, president of the Campaign forAffordable Housing, can easily tick off a list of theconsequences of not preserving a healthy inventoryof safe, well-located and affordable housing:

• Workers are pushed farther away from jobs andmust endure long commutes that pollute the

air, congest the roads, lower productivity andincrease absenteeism.

• There is a negative impact on community lifebecause people don’t identify with either theirwork community or their home community andare on the freeway when they could be coachingLittle League or volunteering at the hospital.

• The incidence of substandard housingincreases as tenants don’t have decent choices,so they accept whatever dwelling they can find.

• Overcrowding results in both apartments andhouses. When housing is unaffordable, twofamilies will double-up to rent housing.

• Illegal conversions—usually garages, but anystructures not intended to be housing—createan unsafe supply of rental housing to meetdemand in the underground economy.

• Employers cannot find workers to fill essential,but lower paying, jobs.

• Many young families leave the area and mostothers can’t afford to move in, so an expensivearea’s population becomes older very quickly.School population declines and perfectly goodschools close for lack of students.

As National Church Residences continues toexpand beyond its traditional portfolio of affordablehousing for elderly and disabled people and tacklesmore diversified projects for all ages andpopulations, Senior Vice President of Acquisitionsand Development Michelle Norris sees a need formore flexibility from HUD.

“HUD headquarters must help steer the dealthrough the complicated old regulations that seemto want to trip up every deal and expedite thetiming. Preservation often takes longer to do thannew construction, which means we aren’t reachingas many communities as we should quicklyenough.” Norris said.

“Preservation is complicated, often frustratingand hard to execute with excellence,” shecontinued. “However, when it is done right, it isabsolutely the right thing to do. It is moreeconomical than building new, it is inherentlygreen, it allows residents to stay in theircommunities and it creates partnership and greatpride in all who are involved in saving the housing.”

More affordable rental housing can be preserved by providing tax relief to owners of aging, low-income housing portfolios.

Steve Wright frequently writes about Smart Growthand sustainable communities. He and his wife live ina restored historic home in the heart of Miami’s LittleHavana. Contact him at: [email protected].


BUILDING STRONGBy Christine Sexton

BUILDING STRONG


COMMUNITIES

Builders develop Barrington Villagein Raleigh, North Carolina


Housing options for those who protect, serve and teach

COMMUNITIES

Asimple act of Christmas charity has becomethe inspiration for an innovative effort tohelp those who help everyone else.

Years ago, Tim Mercurio was a Cincinnatipoliceman who one Christmas Eve decided to bringhome a woman and her two kids caught shopliftinginstead of put in jail. This random act of kindnessresonated with one of the kids, who years later aspart of a school project, wrote a letter to thepoliceman, identifying him as a hero.

The incident left a lasting impression on MikeMercurio, the son of the kindly policeman. “I neverlooked at him the same again,” said Mercurio, the

executive director of the San Diego Association ofREALTORS® (SDAR) and the driving force behindthe group’s new program, Everyday Heroes,administered by the recently developed SDARAmbassador Foundation.

The goal of Everyday Heroes is to provideeducation and financial preparation, as well as buydown mortgage loan interest rates, for up to 10qualifying San Diego Police Department officers bythe end of 2007. It’s part of a trend across thenation where REALTORS® are helping to provideworkforce housing to those who serve, protect,teach and care for Americans.

“I saw the challenges my dad had. I can onlyimagine the challenges these men and womenhave,” Mercurio said of San Diego police officers.

The first phase of the program will assist policeofficers, but Mercurio envisions that after theAmbassadors Foundation receives its tax free

REALTORS® are helpingto provide workforcehousing to those whoserve, protect, teach andcare for Americans.



designation from the federal government, it canblossom further, extending to firefighters and othermunicipal employees who may not be able to affordhomes in the zip codes where they work.

“They really need to live in the cities they are sovested in serving,” Mercurio said.

The Everyday Heroes program is funded in partby the Ambassadors for Cities grant program, whichis funded by the NATIONAL ASSOCIATION OFREALTORS® in partnership with the United StatesConference of Mayors. Funding for EverydayHeroes comes from other sources as well, includinga recent golf outing that raised $25,000 and anupcoming benefit dinner.

Those who have an interest in vying for theofficers’ business, such as REALTORS® andmortgage bankers, also have to contribute to theprogram, by paying a $49 fee and registering for theABCs course, or Ambassador Buyer Certification,which helps them help first-time homebuyers.

To qualify for the program police officers musthave served on the force between two and fiveyears and must also be a first time homeowner.Prequalified officers will be offered access toeducational programs and be given informationabout other organizations and programs in the citythat promote home ownership.

Teachers, too, are often held out as heroes, andsimilar to police officers, can be locked out ofaffordable housing in the communities where theywork. In Hertford County, N.C., young teachersfresh out of college cannot find affordable rentalunits in the county. At times, the lack of availablerental housing meant the county couldn’t hireenough teachers. James Eure, senior vice presidentof the State Employees Credit Union and presidentof the Partners for Hertford County Public Schools,helped broker a deal that changed all that.

Eure helped develop the Hertford Pointecomplex, which boasts 24 apartments. The unitshave two bedrooms, two baths, a living room, anupdated kitchen, a dining area and laundry room.They rent for $500 per month and profits will be usedto pay off the $2.2 million interest-free loan issued byState Employees Credit Union Foundation, thecharitable arm of Eure’s credit union.

The school system donated the land, the townand county extended utility lines, and privatebusinesses donated money. Hertford CountySchool District Executive Director Betty Pugh hadan easier time recruiting teachers this year, and sheknows that the Hertford Pointe apartment complexis the reason.

They really need to livein the cities they are sovested in serving.


“We’ve just about filled all of our positions,” saidPugh, who has asked the teachers living at HerfordPointe to comment on apartment living. Newteacher Nathaniel Glossen works at the HertfordCounty High School. In an e-mail to Pugh, Glossensaid he walks to and from work in six minutes andthat living near his peers also helped make histransition as a new teacher in a new town easier.

“Having so many people nearby that are in thesame boat as I am has definitely made mytransition as a first year teacher much easier,”Glossen wrote. “As far as Hertford Pointe’s ability tohelp the county retain teachers, all I can say is thatit would be very difficult to find another settingwith as much initial community support! Thankyou for everything!”

Eure said 21 of the 24 units at Hertford Pointeare rented to teachers who came from out of stateand are new to the school system. “When you’recoming from Michigan, you really need a place tolive, where you can just sign a contract and movein,” he said.

Municipal employees and teachers are not theonly people struggling with affordable housingoptions. For 13 years, Wilma Stuart Hall hasworked for the North Carolina General Assemblyas support staff in the committee charged withlegislative research.

Hall, whose parents owned the house she wasraised in, never thought she’d be a renter. But aftergetting divorced and running into some creditproblems, she found herself renting. “I fell into thattrap,” she said, adding that she eventually was able toclean up her credit and save toward a down payment.

The dream of home ownership still eluded her,though, because the North Carolina state employeecouldn’t afford the house she wanted; the medianhome cost in Raleigh is more than $223,000.

“I was always told to buy the neighborhood andnot the house,” she said. “I don’t want to go to anyneighborhood. I want a safe place to live.”

Hall’s “safe place” is Barrington Village, acommunity in southeast Raleigh developed byNorth Carolina based Builders of Hope, a nonprofitorganization that partners with local businesses,humanitarian organizations and local governmententities to create opportunities for working familieswho cannot afford to purchase homes.

Builders of Hope not only offers access toaffordable homes, it provides an opportunity forhomeowners to go green. That’s becauseBarrington Village is comprised completely ofrecycled homes, or 60s and 70s era housing that isbeing demolished because new homeowners wantlarger more upscale homes on the lots. The homes,said Builders of Hope Founder and ExecutiveDirector Nancy Murray, would have wound up asdebris in a landfill had they not been donated.

Murray’s 501 (c)(3) organization works withlocal builders to find donated homes. A mover helpsher relocate the houses. She sets them on newfoundations and then works on refurbishing,plumbing and wiring the homes. Barrington Villagewas established on land in southeast Raleigh thatMurray owns. The homes were sold at below marketrates to buyers who earn less than $65,000—themedian income in Raleigh for a family of two.

Barrington Village is replete with landscaping,lantern post street lights and also is designed tohave a community center. It’s about 15 minutesfrom downtown Raleigh and perfect for Hall,because its close to the Capitol.

Hall is working closely with the contractors onsome of the finer refurbishing details of herBarrington Village home, such as interior andexterior paint colors. She also is going to take downa wall in her house, remodeling the space.

“I’m going to get that walk-in closet, which istremendous,” she said.

Municipal employees andteachers are not the onlypeople struggling withaffordable housing options.

Volunteer Day at Barrington Village


Barrington Village is replete with landscaping,lantern post street lights and also is designedto have a community center.

Christine Jordan Sexton is a Tallahassee-basedfreelance reporter who has done correspondent workfor the Associated Press, the New York Times, FloridaMedical Business and a variety of trade magazines,including Florida Lawyer and National Underwriter.

After success with Barrington Village in WakeCounty, Murray is working on developing her secondworkforce housing community in neighboring NashCounty. As with Barrington Village, the communitywill be made from recycled homes.

Murray is taking this project one step further,though, trying to place an emphasis on makingthese 40- and 50-year-old homes more energyefficient and healthier but keep the improvementsaffordable. To that end she has asked NorthCarolina State University to assist in her efforts.

Murray says it’s logical to make the homes moreenergy efficient because high electricity, water andgas bills can undermine a family that already isliving on workforce wages.

“It is an often occurrence that these lower incomefamilies are faced with the decision of paying anelectric bill, or putting gas in the car,” Murray said.“It’s a worthwhile pursuit to help these familiesovercome the hurdle of high utility bills that too oftencontribute to the epidemic of foreclosure.”

Barrington Village in Raleigh, North Carolina

Slippery

Slopes


Slippery

SlopesThe

of

The

of


AffordableEmployeeHousing

AffordableEmployeeHousing

Resort areas are searching for creativesolutions to employee housing concerns

By John Van Gieson

From Maui to Martha’s Vineyard to the slopesof Aspen and Vail, resort areas across thecountry are struggling with the issue of

affordable housing for their workers. The housingcrunch, fueled by escalating housing prices inresort areas, affects both seasonal workers seekingtemporary apartments and year-round residents,

many of them local government employees, whocan’t find a home they can afford.

“We’re way behind the eight ball,” said TomMcCabe, executive director of the Aspen/PitkinCounty Housing Authority in Colorado.

When it comes to worker housing, resort areasare a victim of their own success. They areattractive communities typically located in scenic-mountain and coastal settings, and high-endhomebuyers want a piece of the action, if only part-time. Housing officials grappling with the problemin Rocky Mountain ski resorts say a boomingsecond-home market is devastating the affordablehousing market in the towns they serve.

“The problem is really caused by the second-home market in the town of Mammoth Lakes, andin the last 10 years it has skyrocketed, whichessentially squeezed our middle class workforceinto a situation where there was a big housingshortage,” said Pam Hennarty, housing director forthe town of Mammoth Lakes, a popular ski resort in

California’s Eastern Sierramountains.

The booming market forhigh-end homes is raisingthe price of all housing inresort areas and forcingmany workers to movefurther away in search of ahome they can afford. In theRockies, they call it “down valley syndrome”—the resorts are on the highend of the valley so theworkers move down valley insearch of affordable housing,leading to longer commutesin hazardous winter weather.The problem is, housingofficials say, higher housingprices follow the workersdown the valley.

In Nantucket, a summerresort island 30 miles off the southern coast ofMassachusetts, the averagehome sells for about $2 million and the median

income is $81,900. “Workers seeking affordablehousing, some of whom were born and raised onthe island, take a look at those price tags and say,‘You know, I’ll never be able to afford a house here,so I’m leaving,’” said Aaron Marcavitch, executivedirector of the Nantucket Housing Office.

Dennis Gazaille, owner of the Marine HomeCenter, a popular multi-purpose Nantucket store,actually provides an air ferry for about one-third ofhis workers, who commute to their jobs from themainland. “I need workers or I can’t open my storein the morning,” he said. “In addition to flying 35people a day, we also have apartment rental unitsthat accommodate 30 workers. You do what youhave to do.”

Resort communities are implementing a widevariety of potential solutions to the resort housingcrunch—although few are as creative as AirGazaille. The range of affordable housing optionsin resort areas includes:

• Passing inclusionary housing ordinancesrequiring developers to provide a certain


The booming marketfor high-end homes israising the price of allhousing in resort areas.

Nantucket, Massachusetts affordable housing for island employees.


percentage of affordable units as a conditionfor building market-rate homes, condos andapartments. In Maui, for example, developersare required to provide up to one affordableunit for every two market-rate units.

• Linking the production of affordable housingto new construction in other ways. The town ofVail, Colo., uses a formula providing for acertain square footage of affordable housingwith different standards for different kinds ofprojects. REALTORS® oppose the Vailordinance, saying it imposes unfair burdenson the expansion of real estate offices.

• Levying transfer taxes on the sale of expensivehomes with the revenue paying for affordablehousing programs. Aspen approved a 1 percent transfer tax in 1990, which raises$11 million a year for worker housing.Developers rebelled, however, and Coloradovoters passed a constitutional amendment in1992 that bans transfer taxes in othercommunities. Aspen was grandfathered in.Local officials in Nantucket and Martha’sVineyard are asking the MassachusettsLegislature to increase their transfer taxes onexpensive homes to raise several milliondollars for worker housing programs.

• Reserving all or part of the revenue from othertaxes and fees to pay for affordable housing. In2006, Honolulu voters passed a referendumrequiring the city to dedicate 1 percent of salestax revenue to affordable housing.

• Rounding up state and federal grants andother funds to pay for affordable housing. Thetown of Mammoth Lakes has procured $14million in state and federal grants to help payfor $47 million in development and loanprograms that will provide for more than 250worker housing units.

• Requiring resorts to pay housing subsidies totheir lower-income workers. The city of DanaPoint, Calif., has required the new St. RegisEmerald Point Resort to pay workers’ housingsubsidies averaging $210 a month.

• Encouraging resorts such as ski areas toprovide affordable housing for their seasonalworkers. Mammoth Mountain ski area advisesjob applicants on its Web site that “Our currentinventory of more than 600 beds offers a widevariety of comfortable and inexpensivehousing within the town of Mammoth Lakes.”

Resort communities have turned to manydifferent options in their struggle to provideaffordable housing for local and seasonal workers,but housing advocates say they still have a longway to go.

“I would say it’s pretty bad,” said Jo-Anne Ridao,the housing commissioner for Hawaii’s MauiCounty. “We know that there are a lot of familiesthat are housing two or three generations in a housebecause they can’t afford to buy a house.”

In Aspen, where the median sales price for ahome is $5.2 million, McCabe said local workersseeking affordable housing “are all up against thewall. I would believe that this year we’re not goingto have the workers we need. I really believe ittranslates into service cutbacks somewhere.”

Resort communities areimplementing a wide

variety of potentialsolutions to the resort

housing crunch.

Aspen, Colorado

Resort communities have turned to many differentoptions in their struggle to provide affordable

housing for local and seasonal workers.


Local officials at Hilton Head, a barrier islandresort community in South Carolina, have beentalking about scrapping their affordable housingplan, which has produced 61 worker housing units.As often happens with affordable housingordinances, buyers had to accept deed restrictionslimiting their ability to sell their homes. Due toprotests from the residents, the town of HiltonHead has eased the deed restrictions and isconsidering doing away with them altogether.

Compounding the problem of providing affordablehousing to workers in resort areas is resistance bydevelopers, business owners and residents to thesolutions implemented by local government officials.A Canadian condominium developer filed suit inHawaii to overturn Maui’s inclusionary housingordinance after local officials denied its appeal ofaffordable housing requirements on two proposedSouth Maui condo projects.

In Anaheim, Calif., home of the DisneylandResorts, the local chamber of commerce and Disneyare at war with local officials and housing advocatesover a zoning change allowing the construction of alarge development, including affordable housing, inthe Resort District adjacent to Disney and reservedfor tourism-related businesses.

Orange County, where Anaheim is located, hasbeen identified by the NATIONAL ASSOCIATIONOF REALTORS® as the third most expensive housingmarket in the country. Worker housing advocates saythe Anaheim area needs 27,000 additional affordablehousing units to provide housing for low-wageworkers at Disney and other places.

The city council set off a firestorm earlier thisyear when it voted 3-2 to allow a 1,500-unit

development, with 300 units earmarked foraffordable worker housing, in the Resort District.Disney and the chamber formed a politicalcommittee called Save Our Anaheim Resort (SOAR)that successfully circulated petitions putting areferendum to overturn the proposed project on theballot next June. Not to be outdone, the Councilmajority has instructed staff to draft a referendumthat would require voter approval before Disney canbuild another theme park in Anaheim.

“They tried to make this a resort housing issue,but it’s really not a resort housing issue,” saidSOAR Spokeswoman Annette McCluskey. She saidthe condo project would be built on a 26-acre siteoccupied by two mobile home parks that weregrandfathered in when the Resort District wascreated. “There would not be a net gain inaffordable housing.”

Honua’ula, a proposed 1,400-unit developmentwith 700 affordable units for workers located onMaui’s south shore, has run into vehementopposition from Save Makena, a local environmentalgroup. Save Makena has turned out dozens ofprotesters to fight the development at Maui CountyCouncil Land Use Committee meetings.

In Vail, Colo., REALTORS® oppose a localaffordable housing law that requires high-density,mixed-use developers to set aside 20 percent of theunits for worker housing, but requires real estateoffices to provide 2.5 bedrooms of affordable housingper 1,000 square feet of real estate office construction.

“Right now it’s impossible to build new realestate offices in the town of Vail,” said AsherMaslan, president of the Vail Board of REALTORS®.“The goal is to have 100 percent of Vail employees


Lukia Costello, a photographer in Buffalo,N.Y., is part of an exciting new program forartists: She lives and works in an old factoryconverted to live/work lofts for artists.

Costello used to live in a crampedapartment in the suburbs where she wasconstantly banging into things when she wasworking on her photographs. Her move toBuffalo Artist Lofts was a dream come true.

“I have more than enough space now,”Costello said. “It’s like a New York City loftapartment, 950 square feet, 14-foot ceilings,the front wall is all windows with a nice view. Ihave the space to work and the space to think.Wherever I look I can see my work on the walls,and it’s inspiring.”

Costello, who works part-time teachingMicrosoft Office to make ends meet while shepursues a career as an artist, pays $474 amonth for her loft.

Buffalo Artists Lofts was developed by Artspace Project, aMinneapolis, Minn., nonprofit dedicated to renovating oldbuildings to provide live/work spaces for artists. Artspace hasdeveloped 20 projects around the country and has 16 others invarious stages of development, said Roy Close, director ofresource development.

The organization has developed work/live projects for artistsin cities as large as Chicago and as small as Fergus Falls,Minn., population 14,000. Artspace typically renovates oldfactories and warehouses near the city center. The Buffalobuilding was constructed in 1911 as an electric car factory andhoused a printing company for many years.

The Minneapolis City Council created Artspace in 1978 asa referral service for artists seeking affordable housing. It wentnonprofit a year later and decided in 1987 that its real missionwas to develop affordable housing projects where artists couldlive and work. The organization works in partnership with localagencies or organizations that seek its help.

“We get a lot of calls, generally from civic agencies,redevelopment groups or economic development groups,”Close said. “We send in a consulting team and recommend thatthe local organization commission a market survey to see if asufficient number of artists are interested. Projects typicallytake three to five years.”

Projects can be expensive, running into the $15 million to$25 million range. Close said the first source of funding for

Artspace projects is low-income housing credits. “We sell taxcredits to companies that use them to reduce their taxburden,” he said.

Other funding sources include foundations, historicpreservation tax breaks and credits, community development,local government and private fundraising in the community.

“It’s an established fact that these kinds of projects canreally have a dramatic economic benefit in certain kinds ofneighborhoods,” Close said.

The Tashiro-Kaplan Artists Lofts project, featuring 40,000square feet of live/work lofts, studios and businesses, wasdeveloped in a seedy area of Seattle.

“When I started this project I knew we needed long-termaffordable housing for artists and the creative community,”said Cathryn Vandenbrink, Artspace regional director inSeattle. “What I didn’t realize was a need there for affordablecommercial space as well. It is a very tough neighborhood andthis project has brought a feeling of safety to residents of theneighborhood that has spread on the surrounding streets.”

“It has just been unbelievable, the activity that has comefrom this little corner of the neighborhood that used to beempty and barren,” she said.

Another benefit of the Artspace projects is that they create acommunity of artists who learn from each other. “I like thecommunity of other artists,” Costello said. “I find it very inspiring.”

A PALETTE OF AFFORDABLE HOUSING

living within the town of Vail by 2014. It might be anoble cause, but we believe it’s impossible toachieve because in lieu of creating affordablehousing, you can also pay the town $369 per squarefoot” to buy land outside of town for affordablehousing projects.

Maslan said the penalty has little impact ondevelopers because construction in Vail typically

costs $700 to $1,000 a square foot and has gone ashigh as $3,200.

Whatever the future holds for these resorts, onething is certain. Affordable housing must be apriority. The resorts are a beautiful place to work,but how do you afford to live there?John Van Gieson is a freelance writer based in Tallahassee,Fla. He owns and runs Van Gieson Media Relations, Inc.

Buffalo Artists Lofts in Buffalo, New York. Photo providedby Lukia Costello Photography—www.lukiacostello.com.


A Historic


In the never-ending search to preserve andcreate more affordable housing, developersand nonprofits are finding ways to use more

than the traditional Low-Income Housing TaxCredits (LIHTC) to get deals done.

Since 1986, the federal LIHTC program hasprovided financing opportunities for developersto build units for low-income renters.

In return for building affordable housing,investors receive a credit against their federalincome tax liability. The program leveragesroughly $6 billion in annual investments thatproduce more than 125,000 affordableapartments each year.

The federal government allocates LIHTC toeach state based on population, with the currentallocation at approximately $2 per person. Eachstate’s housing finance agency sets priorities,then holds an annual competitive process toaward the credits to the projects that best meetthe priorities.

Investors use the tax credits to reduce federaltax liability. They often receive additionalbenefits of meeting local regulatory requirementsand community development goals.

By Heidi Johnson-Wright

Tax credits createaffordable housing

Approach

Low-income tax credits typically cover abouthalf of an affordable rental building’s totalfinancing. The other half usually comes from cityand county portions of U.S. Department of Housingand Urban Development HOME or CommunityDevelopment Block Grant money, plus state orlocal bond money and housing trust funds.

With construction costs and land prices soaring,developers of affordable rental housing areconstantly pressed to make the numbers work.

In St. Louis, the Friedman Group, Ltd. andDublin Capital, lobbied policymakers, layeredfinancing and launched an uphill yet successfulbattle to clean up and preserve a rapidlydeteriorating 115-unit affordable rental building.

Eric Friedman, president of the Friedman Groupand the St. Louis Association of REALTORS®

Commercial Division REALTOR® of the Year,created a case study on the salvation of the WinstonChurchill Apartments.

“An ongoing problem for the property was crime,which amounted to more than 300 police calls eachyear. In addition to safety problems, the apartments

were only about 40 percent to 50 percent occupiedand many of the tenants were not paying rent,”Friedman said. “The owner of the 115-unit buildinghad renovated the property in 1995, but was facingincreasing pressure from the city of St. Louis, thepolice department and community leaders to makefurther changes.”

The building had not fulfilled its affordablehousing tax credit requirement of 15 years as low-income housing before being allowed to chargemarket rate. If affordable rates had not continued,the owner would have faced procedures torecapture the Low-Income Housing Tax Credits hehad used to finance the project.

The question for the owner was how to proceed insolving the problem. At that point, Friedman Group,Ltd. and Dublin Capital were asked to step in andprovide expertise and solutions. The two firms andowner decided to search for a buyer/developer whowould be able to rehab the building and continueproviding affordable housing.

Friedman, who has experience in affordablehousing, historic renovation and traditionaldevelopment, teamed with Dublin Capital to secure:housing assistance credits through a nonprofitcorporation, tax exempt bonds, city lien forgiveness,plus federal and state LIHTC. The project wasstructured to also benefit from federal historic taxcredits plus state of Missouri historic tax credits.

Friedman and Dublin contracted for a marketstudy and appraisal and assembled a developmentteam including a general contractor, architect and

local legal counsel. Friedmanand Dublin also assembled agroup to provide the debt andequity needed to purchase theproperty plus additional landfor adequate parking.

“Since the Winston ChurchillHouse had Section 8 tenants,the development chose to findalternative housing for theresidents during the gut rehaband pay the difference in rent.Friedman Group, working witha local project manager, assistedin relocating the qualifiedtenants,” explained Friedman,who also maintained a strongcommunity relations campaignwith the city alderman andmayor’s office, a Congressman’soffice, the police department,community religious groupsand neighborhood associations.

Low-income tax creditstypically cover about halfof an affordable rentalbuilding’s total financing.

Winston Churchill in St. Louis, Missouri.Photo provided by Lisa Mandel.



In less than two years, the Friedman and Dublinteam worked its magic and a new developer—Eagle Point, a Maine firm with strong ties to St.Louis—was in place. The $12 million dollarrehabilitation construction is well under way withcompletion expected by year end and residentsmoving back into an exquisitely-restored historicbuilding by early 2008.

Encouraged by the National Trust for HistoricPreservation, some areas are using historic taxcredits as a way of preserving affordable housing.

Mercy Housing in Savannah received the Trust’sprestigious National Preservation Honor Award forcreating 70 units of affordable housing in buildingsthat were historic, but rapidly deteriorating.

According to the trust, Heritage Corner wasoriginally constructed as housing for low-incomeworkers in the early 1900s in what is now known asSavannah’s Cuyler-Brownsville Historic District—one of the city’s oldest and poorest neighborhoods.Before Mercy Housing’s purchase and restoration,Heritage Corner families struggled with blight and overcrowding.

“Heritage Row, a continuous block of buildingsconstructed in 1912, was also in need ofconsiderable rehabilitation to make themhabitable,” a Trust press release states. “Whereapartments once were unheated and raw sewageoften ran through courtyards, residents now enjoycomfortable homes with modern conveniences,playgrounds, a community garden—and even anew branch library.”

Using historic tax credits, Denver-based MercyHousing retained original materials and featureswherever possible and added new materials thatblend with the area’s character.

The National Trust for Historic Preservation—working with leading preservation organizations,developers, the financing community and tax creditusers—has crafted the Community Restoration andRevitalization Act.

The legislation, with sponsorship in the U.S.House and Senate, “is a package of amendmentsthat would further the mission of the HistoricRehabilitation Tax Credit by spurring greaterinvestment in smaller commercial projects and MainStreet-type properties in older neighborhoods—particularly where there is a critical need for housingand neighborhood reinvestment,” according to abriefing released by the Trust.

The idea is to make it easier to combine the rehabcredit with the traditional Low-Income Housing TaxCredit to create projects that save historic structureswhile creating affordable rental units.

The Trust says the legislation would:• Lessen the rule that lowers tax benefits dollar-

for-dollar according to the amount of credittaken when using the historic rehab credit.

• Increase the rehab credit rate to 40 percent forsmaller projects in which the qualifiedrehabilitation expenditures do not exceed $2 million. This would target the incentive to“main street”-type developments in whichrehab credit costs are currently prohibitive.

• Permit the 10 percent credit to be claimed with respect to residential rental property. It is currently prohibited for projects that include dwellings.

• Change the definition of “older building” from“built before 1936” to any property “50 yearsold or older.”

• Ease the rules governing nonprofit deals sothat more community-oriented projects maymove forward.

• Boost, by 130 percent, the qualified rehabil-itation expenditures on which the rehab credit

Areas are usinghistoric tax credits asa way of preservingaffordable housing.

Galen Terrace in Washington, D.C.


can be claimed for buildings located in certaindisinvested neighborhoods, difficult to developareas and census tracts with high poverty rates.

• Remove the recapture clause—requiring thepayback of tax credits upon conversion of a taxcredit property into a condo development—tobroaden the tax credit’s use to condominiumdevelopments and in so doing, provide newsupport for the revitalization of urbanneighborhoods nationwide.

While many are trying to make historic taxcredits more available for affordable housingpreservation, the state of Ohio is among the leadersin setting aside conventional Low-Income HousingTax Credits for the restoration and preservation ofexisting units.

Ohio is one of eight states that reserves 25percent or more of its LIHTC for preservation. Tomake sure preservation really works on olderproperties, the state requires extensiverehabilitation work to bring the existing up tomodern code, to boost energy efficiency and toupgrade to minimum accessibility standards of theAmericans with Disabilities Act.

“We are making a number of efforts to preserveaffordable housing,” said Kevin Clark, the HousingCredit Allocation manager for the Ohio HousingFinance Agency. “We set aside a quarter of our taxcredit allocation for preservation of existingaffordable housing—most for preserving a Section 8building, or properties financed by HUD, somecreated with rural development funds and also oldertax credit properties, deals that had to be affordablefor 15 years but now could go market rate.”

The state of Ohio also now requires projects thatreceive tax credits—family, senior, disabled andpermanent supportive housing for the homeless—to remain affordable for 30 years. The demand forlow-income housing remains so high that the stateis still only capable of funding about one out ofevery four applications each year.

To further assist with gap financing, Ohiocreated a housing trust fund. To generatedollars for the trust fund, the state doubledthe fee people pay for recording all officialdocuments with the County Recorders.

Conrad Egan, president and CEO of theNational Housing Conference (NHC),

praised the federal tax credit program administeredby states for its “overall efficiency, economy ofdelivery and longtime sustainability.”

But he said affordable housing is too much of a“lasagna deal,” with several layers of financingrequired in addition to tax credits to make anaffordable rental project’s numbers work.

Egan said it would be easier for affordablerentals to be created if all the layers of fundingwere done in one cycle, so developers would not becarrying land costs and hamstringed from breakingground until several different agencies approvetheir projects.

“Nothing drives developers crazy like a lack ofpredictability,” he said.

Egan also promotes a holistic approach toaffordable housing, such as those detailed in“Increasing the Availability of Affordable Homes—A Handbook of High-Impact State and LocalSolutions,” prepared by the Center for HousingPolicy (CHP).

The publication details how Fairfax County, Va.,recently approved a plan to rezone an area near amass transit stop to increase density substantially

“We set aside a quarter of our taxcredit allocation forpreservation of existingaffordable housing.”

Hazel Hill residents in Fredericksburg, Virginia

Heritage Corner development in Savannah, Georgia


on land formerly occupied by an older,low-density subdivision of 65 homesplus five acres previously used forsurface parking.

The new MetroWest developmentwill have about 2,250 condominiums,apartments and town houses; up to300,000 square feet of office space; and,up to 190,000 square feet of retail space.

“During negotiations over theproposed MetroWest development,Fairfax County secured a promise fromPulte Homes, the developer, thatapproximately 5 percent of the homeswould be affordable—almost double the number required under currentFairfax County provisions fordevelopments of this density,” the CHPhandbook explains.

NHC’s Egan said higher-densityzoning with boosted Floor Area Ratios(FAR) for development can create roomfor affordable housing on even a priceypiece of land, quipping “God isn’t makingany more land, but he is using FAR.”

In the Pacific Northwest, Bob Peterson—Manager of the Tax Credit Division of WashingtonState Housing Finance Commission—isparticularly proud of the historic Monte CristoHotel in Everett, Wash.

The hotel, which once set vacant and neglectedfor more than two decades, was converted toaffordable housing 15 years ago and is still goingstrong. One hundred percent of its 68 units arerented to people earning no more than 60 percentof the Area Gross Adjusted Income, the standardLIHTC requirement.

The rehabilitated hotel has a mix of studios andone- and two-bedroom units. Because Washingtonrequires tax credit recipients to maintainaffordability for 40 years, the Monte Cristo’s unitswill be available to low-income renters for at leastanother quarter century.

Even with success stories such as the MonteCristo, Peterson still said the supply of affordablehousing is not keeping pace with the demand. Toincrease opportunities and make low-incomehousing more efficient and in-line with SmartGrowth principles, he would:

• Make all layers of housing subsidies workseamlessly together.

• Encourage mixed-income developments.• Encourage more urban density and land

efficiency.• Build more affordable housing around public

transit.

• Encourage more Green Building practices.• Create some form of inclusionary zoning that

generates housing units.• Streamline zoning, permitting and other

development processes to control spiraling costs.• Ask For-Profit and Nonprofit to work together

more.• Push for better results from programs and

services that work with special needs housingsuch as those serving disabled, homeless, farmworker and offender re-entry populations.

• Add another layer of subsidy to the Tax Creditprogram to develop Workforce Housing.

“Housing needs differ not only from state-to-state but also within counties,” Peterson said.“More flexibility should be given to localcommunities to ‘fill’ in their housing gaps usingthese current resources. It would be nice to haveincentive-based programs vs. legislating thedevelopment of affordable housing.”

Heidi Johnson-Wright frequently writes about Smart Growth and sustainable communities. She and her husband live in a restored historic home inthe heart of Miami’s Little Havana. Contact her at:[email protected].

The rehabilitated hotel hasa mix of studios and one-and two-bedroom units.

Monte Cristo Hotel in Everett, Washington

OpportunityinthestatesCompiled by Mike Lehrman, NAR Housing Opportunity Program

The Westshore Community Develop-ment Corporation is developing 57affordable town homes on 3.7 acresof land in Tampa, granted byHillsborough County. The cor-poration is utilizing a communityland trust model to keep the homesaffordable. Generally, with acommunity land trust model, anonprofit group retains ownership ofthe land under the homes and deedrestrictions place limits on the resaleprice. This keeps the homes moreaffordable. At a price tag of only$100,000, the homes in theWestshore development are just that,especially considering that theaverage home price in Tampa in2006 was $250,000.

FLORIDACALIFORNIA

The Rosslyn Hotel in downtown LosAngeles has been purchased by twoarea development firms, BuxbaumGroup and the Amerland Group. Thehistoric hotel will be converted into anaffordable workforce housingdevelopment over the next two years.The structure was acquired for $24.5million and the conversion costsestimate is $20 million. Thepartnership, bolstered by $28.5 millionin tax-exempt bonds issued by theCalifornia Statewide CommunitiesDevelopment Authority, plans to make85 percent of the 300 units in theplanned development affordable tohouseholds earning between 35percent and 60 percent of the LosAngeles area’s median income.According to Jeremy Turner, director ofconstruction management for theAmerland group, this ratio is“extremely rare.” Most affordablehousing developments in this areaboast 20 percent of the units asaffordable and the remaining 80percent are sold at market rate. TheRosslyn Hotel conversion will becompleted by late 2009.

Cityview, an organizationdedicated to financing anddeveloping affordable housingprojects, has made a $4 milliondonation to the AffordableHousing Fund of the city ofBoulder. The donation will beused to help fund the Peloton,a $150 million residentialdevelopment addressing thegrowing affordable housingneeds of the city of Boulder.The contribution will helpfinance 38 units in the Peloton,adding to Boulder’s pool ofaffordable housing. Theseunits will sell for as little as$88,000, while the market rateunits in the development arepriced from $300,000 to$900,000. The $4-millioncontribution to Boulder’sAffordable Housing Fundrepresents the largest singlecontribution in the history ofthe fund.

COLORADO


Housing


The Maryland Association ofREALTORS® is partnering withthe Baltimore HomeownershipPreservation Coalition and PrinceGeorges County Coalition forHomeownership preservation tostrengthen home ownership andpromote neighborhood stability toprevent foreclosures in Maryland.As part of the partnership, theMaryland Association ofREALTORS® will provide jointtraining sessions for REALTORS®

and housing counselors toeducate them about helpingconsumers avoid predatorylending and prevent foreclosures.In addition, the MarylandAssociation of REALTORS® hasagreed to sponsor scholarships forhousing counselors in theBaltimore area to completeNeighborWorks® training onforeclosure prevention.

MARYLAND

The Manhattan Association ofREALTORS® and the Junction CityBoard of REALTORS® havepartnered to offer free housingcounseling services to soldiersstationed at Fort Riley inManhattan. Since 2006, Armyofficers stationed at Fort Riley havebeen responsible for trainingsoldiers who will work with andeducate local Iraqi and Afghanisecurity forces. The programstarted when the Fort Riley housingservices department approachedthe two local REALTOR®

associations and requestedhomebuying assistance andeducation for the men and womenstationed at Fort Riley. As a result,the boards partnered to create afree homebuying informationpacket designed specifically for thesoldiers, as well as one-on-oneconsultation at no charge.

KANSAS

Financed in part by contributionsby Brad Pitt made to the nonprofitGlobal Green, developers at FullSpectrum have created theKalahari, a state-of-the-art mixedincome green condominiumdevelopment. The Kalahari islocated on 116th St. in Harlem andoffers affordable condominiumunits to families earning as little as$56,000. The Kalahari boastsadvanced features in greenbuilding, including solar panelsand a rooftop garden. Nearly halfof the 249 condominiums in thedevelopment are designated foraffordable housing. Full Spectrumhas initiated similar projects inNew Orleans and Jackson, Miss.

NEW YORK


HousingOpportunityinthestates (continued)

The city of Allentown recentlycompleted the construction ofOverlook Park, an $87 millionpublic housing developmentwith 269 affordable rental unitsand 53 affordable homeownership units. Overlook Parkhas been a welcome addition tothe Allentown community, ashundreds of residents weredisplaced from their homeswhen a dilapidated publichousing development wasrecently demolished. OverlookPark has more than 400 familieson a wait list to move into theunits, as the newly completeddevelopment boasts attractivedesigns and affordable prices.

PENNSYLVANIA

On October 7, 2007, the ColumbusBoard of REALTORS® hosted andsponsored the Super SundayAffordable Housing Open House.This annual event showcasesaffordable priced homes ($125,000and under) available in CentralOhio and gives consumers theopportunity to receive freeconsultation services with realestate professionals. Along withadvertising the event in local media,the board supplies gifts and prizes toconsumers that participate in theOpen House fair.

OHIO

The Portland MetropolitanAssociation of REALTORS® haslaunched an affordable housingeducational campaign for itsmembers along with a brand newconsumer Web site designed to assistprospective homebuyers attainhousing downpayment assistanceand affordable financing options. Theeducational campaign will certifyREALTORS® to work specifically inthe affordable housing market andconnect them directly to prospectivehomeowners through the consumerWeb site. The certification program,entitled Homeownership Oppor-tunities Certification, will teachREALTORS® about the eligibilitystandards for financial products thatmay help first timer homebuyers,information on state and localdownpayment assistance programsand local consumer home ownershipand credit counseling resourcesavailable to consumers at no cost. Theconsumer Web site, www.hownw.com,will launch during home ownershipmonth, June 2008.

OREGON


The Wisconsin REALTORS®

Association helped organizeand sponsor a coalition ofhousing stakeholders for aworkforce housing symposiumon September 13, 2007 inMadison. The symposiumhighlighted the ways publicand private organizations canbenefit from offering employerassisted housing benefits tolocal employees. As a result ofthe program, the WisconsinAssociation of REALTORS®

has agreed to sponsor regionalHome From Work™ trainingcourses for REALTORS®

throughout the state ofWisconsin to help promoteemployer assisted housing.

WISCONSIN

The nonprofit EvangelicalLutheran Good SamaritanSociety recently broke groundon the new $5.2 millionCreekside Apartments complexin Sioux Falls. The complex,designed to provide affordableone-bedroom apartments to areaseniors who meet federalincome requirements, will becompleted in the fall of 2008.The development, funded by agrant from the Department ofHousing and Urban Devel-opment, will meet a seriousneed in the Sioux Falls area.Information taken from the U.S.census shows that thepopulation of elderly individualsin the Sioux Falls area increasedby 14 percent during the 1990s.Further increases are expectedin the upcoming 2010 census.

SOUTH DAKOTA

The Texas State AffordableHousing Corporation hasannounced a new financingproduct available to individualsand families that earn less than 80percent of area median familyincome. The Home Sweet TexasLoan Program couples low fixed-rate mortgage rates withdownpayment assistance grants.Eligible participants in theprogram can obtain a 30-year,fixed-rate mortgage at rates aslow as 6.15 percent and obtain upto 5 percent of the purchase priceof the home for downpayment andclosing costs. More informationcan be found at www.tsahc.org.

TEXAS

On Common Ground: Winter 2008

Real Estate

Transcript of On Common Ground: Winter 2008