WASHINGTON, DC - With the country's attention zeroed in on the foreclosure crisis in single-family housing, little notice is being paid to how difficult the market has become for the nation's non-profit housing developers to bring new affordable rental housing on-line, or to rehabilitate substandard apartment units. An informal survey of members of the NeighborWorks Multifamily Initiative, a group of non-profit apartment developers and managers with more than 65,000 units under ownership, suggests that while times are tough for the single family market, they are no less difficult for multifamily housing.
"Tax credit prices have fallen dramatically in the past year and major investors in tax credits have pulled back. The result is that it's more expensive and more difficult to build affordable rental housing or to rehabilitate existing, but substandard apartments," said Howard Lewis, director, National Real Estate Programs at NeighborWorks America.
The Rockingham Area Community Land Trust, Inc (RACLT)., based in Springfield, VT, a NeighborWorks® network member with more than 350 affordable housing units under its belt found that to get one of its recent affordable housing deals done it needed to redefine the meaning of "complex."
"We have a $9.5 million rehab project that has 17 different sources of financing and an all-in cost of $17 million," said Jeff Staudinger, RACLT executive director. "To make it work we've juggled multiple applications where each one needed us to describe the scope of the project, the social good it would deliver to the community, the rationale for our costs and more."
NeighborWorks organizations have extensive experience with tax credit development and rehab projects. In the fiscal year ended Sept 30, 2007, NeighborWorks organizations completed rehab work on nearly 4,700 units of housing, up from 2,870 units in the prior fiscal year. Importantly, in fiscal year 2007, the organizations developed 4,007 brand-new units of housing.
While most financing arrangements in today's market still go to closing with fewer than 17 parts, the weakness in the low-income housing tax credit market has pushed up the cost of financing and led some investors to pull out of deals, said Lewis.
It's become even more critical for developers to have back-up plans even for deals that are near closing. Respondents to the information survey noted that investors are coming back with reduced prices on tax credit projects or pulling out altogether, and if a non-profit developer doesn't have enough flexibility with its project, it may not close.
NeighborWorks members report that one area where they are looking for savings is in the developer fee. Developer fees typically are in the 10-12 percent range, but now NeighborWorks organizations are saying that to get projects done at today's tax credit prices, fees are dropping to seven and eight percent.
"While lower fees are squeezing a lot of our members' budgets, the important thing is to get quality affordable housing on-line for the residents of the communities," said Lewis.
Source: NewsWire.com