Marc Jahr, NYCHDC: A Program for Preservation NALHFA 2011 Educational Conference, San Francisco, CA May 20, 2011

Marc Jahr, NYCHDC: A Program for PreservationNALHFA 2011 Educational Conference, San Francisco, CAMay 20, 2011

Source: Norman García, HDC Staff

The most ambitious municipal housing plan ever undertaken

11 years (2004 – 2014)

$8.5 Billion (not including bonds)

HDC’s ability to issue bonds is harnessed to the plan, and its balance sheet leveraged

Create and Preserve 165,000 units of affordable housing

Serving 500,000 low-income and middle-class New Yorkers

The New Housing Marketplace Plan (2003 – 2014)

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• Issue tax-exempt or taxable bonds to finance multi-family senior mortgages.• Use unrestricted corporate reserves, created from net income and other issuance related activities, as low-interest subordinate mortgages.• Innovate and adapt development programs.

NYCHA Federalization Program

(20,139 Units)

Low-Income Affordable Marketplace Program

(22,531 Units)

New Housing Opportunities Program

(5,223 Units)

Mixed Income Program(50/30/20)

(1,980 Units)

Mitchell-Lama Preservation Program

(20,270 Units)

AMI Served: <60%

(Family of 4 - $47,500) Average public housing family income of $23,187.

City and State-built multi-family rental public housing .

Mixed-finance rehabilitation using Taxable and Tax-exempt bonds.

As of right 4% Federal Low Income Housing Tax Credits.

Leverage American Recovery and Reinvestment Act Funds to “federalize” public housing, providing access to annual federal operating subsidies and significantly decreasing NYCHA’s operating deficit.

AMI Served: <60%

(Family of 4 - $47,500) Multi-family rental housing

affordable to low income households.

Tax-exempt bonds (variable or fixed rate).

As of right 4% Federal Low Income Housing Tax Credits.

HDC Subordinate loans of $55,000/unit.

AMI Served: 80-130%, as well as unrestricted market units. (Family of 4 - $63,350-$102,950)

Multi-family rental housing affordable to moderate and middle income households.

Taxable bonds (variable or fixed rate).

HDC Subordinate loans of $65,000- $85,000/unit.

AMI Served: 40-130%, as well as unrestricted market units.

(Family of 4 - $31,700-$102,950) Multi-family rental housing- 50% of

units at market rents; 30% affordable to middle income and 20% low income households.

Tax-exempt bonds (typically variable rate).

As of right 4% Federal Low Income Housing Tax Credits on low income units.

HDC Subordinate loans of $65,000- $85,000 per low and middle income unit.

AMI Served: ~100%

(Family of 4 - $79,200) Multi-family rental or cooperative

housing affordable to middle income households

Taxable or tax-exempt bonds (variable or fixed rate)

Senior debt restructured at lower rate. Subordinate debt restructured at 0%.

Low interest repair loans available to address capital needs.

Extended affordability and commitment to stay in the Mitchell-Lama program for a minimum of 10-15 years

HDC Affordable Housing Programs

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Reasons for Preservation

More economical to preserve than to build newLess vacant land available for new constructionNew capital needed to modernize

Funding for system upgradesCapital resources needed for modernizationServices needed for tenancy

Address cases of poor management and neglectPreserve asset value of affordable financing

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Challenges Facing Preservation

Capital Needs

Restricted Income

Tight Budgets/Cash-Flows

Inadequate Reserves

Statutory & Regulatory Requirements

Loss/Expiration of Subsidies

Cancellation of Debt Issues

Expiring Tax Benefits

Syndicators/Investors (Limited Partners) want to Exit

Market Incentives to Leave Affordable Housing Programs

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HDC Preservation Initiatives

LAMP Preservation Program (including HUD-distressed and/or Section 8 properties) 202 Refinancing Program Mitchell-Lama Preservation Program and Section 236 Decoupling NYCHA Federalization HUD foreclosed properties

Units by Program

LAMP 9,765

NEWHOP 201

M-L 20,270

SECTION 8 791

31,027*as of 05-09-2011

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LAMP Preservation Program

LAMP Developments: 168 Units: 22,531 Tax-exempt Volume Bond Cap: $2,526,505,000 Taxable Bond/Other Financing: $0,056,295,000 Senior Loan Debt: $2,582,800,000 Subordinate Loan Debt: $0,496,840,000

Key Program Principles: Funds acquisition and moderate rehabilitation of existing occupied projects, many with Project

Based Section 8 HAP contracts. Uses tax-exempt bonds to leverage 4% LIHTC equity. Project financing must support adequate rehabilitation budget in addition to proposed

acquisition price Rehab scope reviewed by HDC to ensure adequacy Permanent mortgage insurance provided by Sonyma, REMIC or enhancement from a financial

institution or GSEs

The Plaza Residences, Brooklyn NY

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Section 202 Refinancing Program

LAMP Developments: 19 Units: 3,184 Tax-exempt Volume Bond Cap: $247,150,000 Taxable Bond/Other Financing: $001,410,000 Senior Loan Debt: $248,560,000 Subordinate Loan Debt: $000,000,000 Partners – HUD, HPD, Financial Institutions,

Syndicators/Investors, Developers

Key Program Principles Existing Section 8 HAP Contracts extended. Rent increases sought if necessary Underwrite to full Section 8 Contract rents. Acquisition by new LP to leverage 4% LIHTC equity to fund capital repairs and upgrades Seller Note used to boost Acquisition basis Offers lower tax exempt interest rate on 1st Mortgage to reduce monthly debt service and fund

additional ongoing services for residents Permanent mortgage insurance from SONYMA, REMIC, or long-term credit enhancement from

financial institutions or GSEs.

Linden Blvd Apts., Queens NY

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Mitchell-Lama Developments: 41 Units: 20,270 Tax-exempt Volume Bond Cap: $154,400,000 Taxable Bond/Other Financing: $568,949,468 Senior Loan Debt: $592,807,241 Subordinate Loan Debt: $281,188,502 Partners – HUD, HPD, Financial Institutions, Syndicators/Investors,

Developers Key Program Principles

Aimed at preserving the aging Mitchell Lama portfolio as an important affordable middle-income housing resource

Restructure existing HDC 1st and 2nd Mortgages to extend term, reduce rate and leverage additional loan proceeds

Owner must stay in the Mitchell Lama program for a minimum of 15 additional years to maintain affordability

Additional loan proceeds used to fund capital repairs and reserves 2nd mortgages restructured from surplus cash notes to interest-only balloon payments after 1st

mortgage is fully amortized

Mitchell-Lama Preservation Program

Big Six Towers, Queens NY

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Year-15 Preservation Program

Year-15 Developments: 12

Units: 267

Tax-exempt Volume Bond Cap: $N/A

Taxable Bond/Other Financing: $N/A

Senior Loan Debt: $02,095,511

Subordinate Loan Debt: $

Partners – HUD, HPD, Financial Institutions, Syndicators/Investors, Developers

Key Program Principles The City has used LIHTC to develop approximately 30,000 units since the late 1980's. the Year-15 Program has

repositioned 55 projects totaling over 2,800 units since fiscal year 2008. Approximately 10,000 units have reached or will reach year 16 by 2015.

Program purpose is to preserve the long-term affordability and viability of Year-15 projects. Owners must agree to extend the original affordability restrictions by a minimum of 15 additional years. HPD’s preservation strategies include full residential tax exemptions, up to $15,000 per unit in funding for capital work and

project reserves, modifications of existing debt, rent restructuring, and management changes. As a subcomponent of the existing Year-15 Program, HPD proposes to resyndicate Low Income Housing Tax Credits

partnering city capital subsidy with 4% Tax Credit Equity to provide additional funding in situations where there is a substantial scope of work that might otherwise exceed the standard Year 15 subsidy maximum of $15,000 per unit

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NYCHA Developments: 21 Units: 20,139 Tax-exempt Loan: $0,477,000,000 Taxable Loan: $000,3,000,000 Tax Credit Equity: $0,209,242,146 NYCHA Loan (Non-ARRA Funds): $0,463,887,526 NYCHA ARRA Loan: $0,100,000,000 Total Sources: $1,253,129,672 Partners – HUD, HPD, Financial Institutions, Syndicators/Investors, Developers Key Program Principles

A Mixed Finance Transaction that enabled the NYC Housing Authority to qualify for $65M in annual federal public housing subsidies

Utilized a unique circular financing structure that maximized LIHTC without overleveraging the public housing developments with permanent debt

Used HDC’s strong AA-rated Open Indenture to issue bonds Leveraged $200M in 4% LIHTC via Citi Community Capital Funded physical repairs, upgrades and significant reserve escrows for more than 20,000 units

of public housing

NYCHA Federalization

Castle Hill, Bronx NY

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Preserve 1,800 units of HUD-financed housing and extend the affordability period. Program will ensure that the physical and financial needs of each property are

addressed while maintaining the City’s housing preservation goals

HDC acquired a portfolio of discounted HUD notes on 10 properties in Manhattan, the Bronx and Brooklyn

Transaction enabled the funding of a Revolving Repair Fund (RRF) from a portion of the mortgage revenue

Immediate repair needs funded from the RRF Longer-term repair needs funded via refinancing 4 of 10 properties, with 683 units, have been refinanced to-date

HPD, HUD and HDC CollaborationNote Sale

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Neighborhood Restore (NR)Privatizing Acquisition and Disposition

Neighborhood Restore HDFC

A. Structureo Incorporated in 1999

o A collaboration of HPD, LISC and Enterprise

o LISC and Enterprise select the Board of Directors:

Harold Shultz (President), Citizen’s Housing and Planning Council Ms. Bernell Grier (Vice President), Neighborhood Housing Services Ms. Denise Scott (Secretary), Local Initiatives Support Corporation Ms. Lydia Tom (Treasurer), Enterprise Community Partners Ms. Diane Borradaile, The Low Income Investment Fund Mr. Jack Greene, The Community Preservation Corporation Ms. Holly Leicht , NYC Dept. of Housing Preservation and Development Mr. Joseph F. Reilly, Community Development Trust Mr. James Buckley, University Neighborhood Housing Program Ms. Akiko Mitsui, The Vanguard Group

o HPD Capitalizes Neighborhood Restore

o Annual administrative budget - $700,000

o Annual program budget - $2,000,000

o Neighborhood Restore sells properties at $2,000/unit partially supporting its operating budget

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Neighborhood Restore HDFC

B. Roles and Responsibilities (Bridging the Gap) City takes title to distressed properties through

o in rem proceedings and then instantly transferso property to NR

Selects qualified developers through RFQ processo2010 – 80 applications submitted; 50 qualified

Assigns qualified developers to propertieso Work with tenants

o Address all hazardous and emergency conditions with NR funding

o Assemble take-out construction and permanent financing

Since 1999, over 440 properties, containing 5,141 units of housing have been transferred to Neighborhood Restore; in turn 367 properties, containing 4,600 units have been transferred to nonprofit and for-profit owners

Sources of financing have been divided among HPD PLP Program, Revised Tenant Interim Lease Program and NYS Affordable Housing Corporate Program

o (Homeownership)

Neighborhood Restore (NR)

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The New Housing MarketplaceThe Opportunities Within the Crisis – Proactive Preservation

Then (2004-2008) Now

Challenges • Rising rents and sales prices • Displacement of tenants • Increasing levels of market rate

development• Diminishing availability of land

• Financial distress in multi-family stock

• Diminishing availability and increased cost of credit

• Falling private investment• Rising foreclosures • Increasing signs of physical

deterioration

Opportunities/Tools • Cross-subsidizing mixed income housing

• Inclusionary zoning• Rezoning under-utilized land

• Reclaiming formerly assisted stock • Preserving existing stock• Investing in new communities

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HPD Proactive Preservation Initiative

Stabilize and create new affordable housing out of buildings in financial and physical distress

Goal is to restructure privately owned rent stabilized buildings in distress and gain affordable housing

This initiative marries HPD’s roles as code enforcer and affordable housing finance agency

3 broad strategies:o aggressive outreach to lenders and ownerso work with HDC and private sector partners to restructure debto work with federal partners to find new resources

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HPD Proactive Preservation Initiative

The Ocelot Portfolio

Overleveraged, Multi-family Rental Buildings Collaborative effort between Fannie Mae, HPD and HDC Transfer title of 19 distressed developments with 521 units to a responsible

owner HDC restructures debt of three Ocelot buildings in the Morris Heights section of

the Bronx, preserving a total of 116 low-income units

Finance Note Sale – 1520 Sedgwick Avenue (“The Home of Hip Hop”)

Acquire Mezzanine Debt – Milbank Portfolio: 10 buildings, 548 Units, buy $3 million in mezzanine debt for $1 from Deutsche Bank

Borinquen Court: HPD exercises right of first refusal to acquire HUD foreclosed, 145-unit, Section 202; HDC acquires for $1 and instantly transfers title to qualified nonprofit

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