Finding affordable housing in the San Francisco

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1 News, Analysis and Commentary On Affordable Housing, Community Development and Renewable Energy Tax Credits July 2014 Volume V Issue VII Published by Novogradac & Company LLP Affordable Housing for Disabled Adults Promotes Independent Living TERESA GARCIA, STAFF WRITER NOVOGRADAC & COMPANY LLP Finding affordable housing in the San Francisco Bay Area can be challenging for anyone, but for those with special needs who are living on limited incomes, it can be especially difficult. To help address this affordability gap, Satellite Affordable Housing Associates (SAHA) and Housing Consortium of the East Bay (HCEB) teamed up with the Housing Authority of the City of Alameda to build Jack Capon Villa in Alameda, Calif. The $13.9 million low-income housing tax credit (LIHTC) property was built to provide safe, affordable housing to adults with developmental disabilities. From the very beginning, the project was very well received, said Michael Pucci, the housing authority s executive director. Pucci said that Jack Capon Villa was 100 percent occupied by its grand opening in May. At press time, more than 500 people were on the waiting list for units. Jack Capon Villa, named after the late founder of Alameda s Special Olympics, offers features, amenities and services designed to help residents develop and sustain independent lifestyles because many of them are single adults moving out of their family s homes for the first time, said Darin Lounds, HCEB s executive director. Jack Capon Villa houses an on-site property manager and its additional 18 one- and two-bedroom units are all prewired for sight and auditory enhancements for doorbells and alarms. Ground floor units are wheelchair accessible with roll-in showers. Key fobs required for entry to elevators and stairwells provide added layers of security. The transit-oriented development is located two blocks away from Alameda s downtown shopping district, and is within walking distance of city bus lines that can take residents to San Francisco in less than 30 minutes. Many residents receive supportive services from the Regional Center of the East Bay (RCEB), a nonprofit service provider under contract with the California Department of Developmental Services. It s a great model because supportive services follow individuals to the residence, so the property isn t required to have funding in place for specific services, said Lounds. HECB s on-site resident services coordinator also offers independent living guidance and organizes community-building activities such as yoga, gardening, cooking classes and movie nights. Shared amenities include a community room, laundry facilities, secured bike racks, a computer lab and wheelchair-accessible planter boxes. Environmentally friendly features include energy-efficient ceiling fans, a solar heated water system, insulated windows, recycled content carpet and sustainable landscaping that requires minimal watering. Creative Growth Art Center, a local nonprofit that serves artists with disabilities, provided landscape sculptures and decorative ceramic tiles at the entrance of each unit. continued on page 2

2 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT continued from page 1 Financing Jack Capon Villa was developed using local, state and federal incentives, partnered with private financing. Cobbling together different sources of funding was very complex, especially for a fairly small-scale project, said Susan Friedland, SAHA s executive director. Originally, the development team planned to finance Jack Capon Villa with funding from the U.S. Department of Housing and Urban Development (HUD) Section 811 Supportive Housing for Persons with Disabilities program. Although the development was not awarded Section 811 funding, Lounds called the timing fortuitous because putting the development on the fast track to meet Section 811 deadlines meant that developers were able to show site control and entitlements sooner. Getting on the HUD timeline saved us, said Lounds. Developers were able to secure $1.4 million in redevelopment funding right before California redevelopment agencies were dissolved in Jack Capon Villa also received a reservation of $444,000 in annual 9 percent federal LIHTCs under the special needs set aside and $1.7 million in total state LIHTCs from the California Tax Credit Allocation Committee. Rich Gross, vice president and market leader for Enterprise, emphasized the importance of the LIHTC. There isn t really any other significant federal program that provides funding for permanent affordable housing, he said. Even when redevelopment funding was available, it almost always had low-income housing tax credits with it. Cindy Heavens, senior project manager for SAHA, said that LIHTCs allowed Jack Capon Villa s developers to upgrade amenities and features, such as granite countertops in every unit and higher quality carpet in common areas. They re the small things that make a big difference, she said. Bank of America Merrill Lynch provided a $4.8 million construction loan and $5.8 million in tax credit equity through Enterprise Community Investment Inc. This was always a deal which my team and I were excited to be a part of; it s an impactful project, it s in a great location and it honors the memory of a true community continued on page 3 Photo: Courtesy of Keith Baker Jack Capon Villa is located two blocks away from Alameda s downtown shopping district, and is within walking distance of city bus lines that can take residents to San Francisco in less than 30 minutes. July

3 Photo: Courtesy of Keith Baker The $13.9 million Jack Capon Villa low-income housing tax credit development (LIHTC) in Alameda, Calif. offers 18 affordable housing units to adults with developmental disabilities. continued from page 2 leader, said Gabriel Speyer, vice president in community development banking at Bank of America Merrill Lynch. Other funding sources included $300,000 in Alameda County HOME funds; $180,000 from the Federal Home Loan Bank of SF Affordable Housing Program through the Bank of Marin (formerly Bank of Alameda); a $200,000 brownfield grant from the California Environmental Protection Agency; about $470,000 in general partner contributions; and $17,000 from StopWaste.org. The Housing Authority provided all units with HUD Section 8 project-based vouchers, which Friedland said are critical to the development because many of the residents survive on Social Security or work part-time jobs in which they earn about 20 percent of the area median income (AMI). The vouchers allow tenants to pay no more than 30 percent of their household income on rent. Although trying to assemble the different funding sources required considerable work and coordination, the partners agreed that providing residents with a stable housing situation and greater self-sufficiency was well worth it. Lounds said, It created a level of independence that they had no way of achieving without affordable housing, and we hope we set an example of why we need more of these developments. Gross agreed, It s the poster child for why affordable housing belongs in everyone s neighborhood. ; continued on page 4 OF HOUSING AND URBAN DEVELOPMENT Novogradac Journal of Tax Credits July DEPARTMENT

4 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT continued from page 3 This article first appeared in the July 2014 issue of the Novogradac Journal of Tax Credits. Novogradac & Company LLP All Rights Reserved Jack Capon Villa FINANCING $5.8 million tax credit equity from Bank of America Merrill Lynch through syndicator Enterprise Community Investment Inc. $4.8 million in construction loans from Bank of America Merrill Lynch $1.7 million in state low-income housing tax credits (LIHTCs) from the California Tax Credit Allocation Committee $1.4 million in redevelopment funds from the city of Alameda $470,000 in general partner contributions $444,000 in annual 9 percent federal LIHTCs from the California Tax Credit Allocation Committee $300,000 in land donated and fees waived from the Housing Authority of the City of Alameda $300,000 in Alameda County HOME funds $200,000 brownfield grant from the California Environmental Protection Agency s Department of Toxic Substances Control $180,000 from Federal Home Loan Bank of SF Affordable Housing Program through the Bank of Marin (formerly the Bank of Alameda) $17,000 from a Bay-Friendly grant from StopWaste.org Notice pursuant to IRS regulations: Any U.S. federal tax advice contained in this article is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties under the Internal Revenue Code; nor is any such advice intended to be used to support the promotion or marketing of a transaction. Any advice expressed in this article is limited to the federal tax issues addressed in it. Additional issues may exist outside the limited scope of any advice provided any such advice does not consider or provide a conclusion with respect to any additional issues. Taxpayers contemplating undertaking a transaction should seek advice based on their particular circumstances. This editorial material is for informational purposes only and should not be construed otherwise. Advice and interpretation regarding property compliance or any other material covered in this article can only be obtained from your tax advisor. For further information visit July

5 EDITORIAL BOARD PUBLISHER Michael J. Novogradac, CPA EDITORIAL DIRECTOR Alex Ruiz TECHNICAL EDITORS Robert S. Thesman, CPA James R. Kroger, CPA Owen P. Gray, CPA COPY ASSOCIATE EDITOR Jennifer Dockery STAFF WRITERS Teresa Garcia EDITORIAL ASSISTANT Elizabeth Orfin CONTRIBUTING WRITERS Sun-Ae Woo Bryan Hung Stephanie Chow Cyle Reissig ART CARTOGRAPHER David R. Grubman PRODUCTION Alexandra Louie CONTACT CORRESPONDENCE AND EDITORIAL SUBMISSIONS Alex Ruiz Thomas Boccia, CPA Daniel J. Smith, CPA Mark O Meara Tom Boccia John M. Tess Forrest Milder Jesse Barredo ADVERTISING INQUIRIES Tyler Perrotta tyler.perrotta@novoco.com EDITORIAL MATERIAL IN THIS PUBLICATION IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED OTHERWISE. ADVICE AND INTERPRETATION REGARDING THE LOW-INCOME HOUSING TAX CREDIT OR ANY OTHER MATERIAL COVERED IN THIS PUBLICATION CAN ONLY BE OBTAINED FROM YOUR TAX ADVISOR. ADVISORY BOARD LOW-INCOME HOUSING TAX CREDITS Bud Clarke Jana Cohen Barbe Tom Dixon Rick Edson Richard Gerwitz Rochelle Lento John Lisella Philip Melton Thomas Morton Mary Tingerthal Rob Wasserman PROPERTY COMPLIANCE Michael Kotin Michael Snowdon Gianna Solari Kimberly Taylor BOSTON FINANCIAL INVESTMENT MANAGEMENT DENTONS BOSTON CAPITAL HOUSING CAPITAL ADVISORS INC. CITI COMMUNITY CAPITAL DYKEMA GOSSETT PLLC CENTERLINE CAPITAL GROUP PILLSBURY WINTHROP SHAW PITTMAN LLP MINNESOTA HOUSING FINANCE AGENCY KAY KAY REALTY HIGHRIDGE COSTA HOUSING PARTNERS SOLARI ENTERPRISES INC. HOUSING DEVELOPMENT CENTER HOUSING AND URBAN DEVELOPMENT Flynann Janisse Ray Landry Denise Muha Monica Sussman NEW MARKETS TAX CREDITS Frank Altman Merrill Hoopengardner Scott Lindquist Matthew Philpott Matthew Reilein Ruth Sparrow Elaine DiPietro HISTORIC TAX CREDITS Jason Korb John Leith-Tetrault Bill MacRostie John Tess Novogradac & Company LLP 2014 All rights reserved. ISSN X RAINBOW HOUSING DAVIS-PENN MORTGAGE CO. NATIONAL LEASED HOUSING ASSOCIATION NIXON PEABODY LLP COMMUNITY REINVESTMENT FUND ADVANTAGE CAPITAL DENTONS JPMORGAN CHASE BANK NA FUTURES UNLIMITED LAW PC ENTERPRISE COMMUNITY INVESTMENT INC. CAPSTONE COMMUNITIES RENEWABLE ENERGY TAX CREDITS Bill Bush Ben Cook Jim Howard Forrest Milder NATIONAL TRUST COMM. INVESTMENT CORP. MACROSTIE HISTORIC ADVISORS LLC HERITAGE CONSULTING GROUP BORREGO SOLAR SOLARCITY CORPORATION DUDLEY VENTURES NIXON PEABODY LLP Novogradac Journal of Tax Credits July CREDITS Reproduction of this publication in whole or in part in any form without written permission from the publisher is prohibited by law.