Working with HFAs Structured Financing Programs Andrew Baldwin Corporation for Supportive Housing July 17,

2 Financing Supportive Housing: Three Main Ingredients Capital Funding Operating Subsidy Services Funding * Cannot work without all three

3 CapitalOperatingServices HUD McKinney Programs LIHTC SAMHSA HOMESection 8State & Local HOPWA Section 811 Private & Philanthropic Federal Home Loan Bank – AHP State Rental AssistanceCommunity Linkages State Housing Trust Funds or Bond Funds Typical Sources of Financing

4 Tax Credit Underwriting Issues/Challenges Higher development costs Multiple funding sources Higher operating budgets Very low income and rents Short-term service funding Short-term operating subsidies Need for large operating reserves Inexperienced developers

5 Structured Financing Programs Provide a comprehensive “package” of financing to help meet the challenges of supportive housing. Can provide a “one stop shop” for providers. As production programs, can stimulate development of large numbers of units. Award of tax credits more straightforward due to HFA role and projects’ financing readiness.

6 Challenges of Developing Structured Programs Political will to allocate resources. Buy-in from multiple parties/agencies. Coordinating effort by HFA. Developer capacity to produce units and provide services.

7 Two Examples: Connecticut (1993 to Present): –Pilots Initiative –Next Steps California (2005 to Present): –Mental Health Services Act –Governor’s Initiative

8 CT’s Supportive Housing Pilots Initiative 650 units Approximately 300 scattered-site, existing apartments 350 new construction and rehab Over 40 community-based nonprofit organizations involved

9 CT’s Supportive Housing Pilots Initiative Capital (CHFA, DMHAS, DECD) Services (DMHAS) Predevelopment (CSH and Local Philanthropic) Operating (Project-Based Sec. 8 through DSS; HUD CofC) Supportive Housing Project

10 CT’s Supportive Housing Pilots Initiative Capital Financing –$26+ million in capital subsidy DMHAS - $3 million through new mental health fund DECD - $23 million in new general obligation bond funds* CHFA - $1 million/year set-aide within HTCC program –$12 million in debt financing CHFA - $12 million available through Investment Trust Account (flexible mortgage funding) –$30+ million in equity LIHTC priority, availability outside competitive round *administered through CHFA

11 CT’s Supportive Housing Pilots Initiative Service Financing –$5 million in annual support service funding through DMHAS $9,000 per DMHAS client per year DMHAS selected providers to receive service funds through competitive RFQ process Operating Financing –DSS project-based 200 Section 8 and RAP vouchers Predevelopment Financing –$1 million available for high-risk predevelopment activities –Additional available for bridge financing

12 CT’s Next Steps Initiative Goal: Create 500 SH units over a 3 year period; 150 units have already been leased. Current RFP seeks developers for development of 350 additional units in two phases. Next Steps program limits per unit costs from $198,000 to $297,000 depending on location. Uses 501(c)3 bonds backed by State; $2M set-aside under State Tax Credit Contribution program. State funding for services, rent subsidies. CHFA lead agency for intake, review, and underwriting.

13 CA Mental Health Services Act (MHSA) Financed through passage of ballot initiative (Prop 63) in Counties receive annual allocations; must develop expenditure plans. Counties receive flexible “one time” funds. Flexible funding for multiple uses.

14  Purchasing land or buildings.  Construction or rehabilitation costs for housing and/or office/meeting spaces.  Adequate reserves for projects to cover gaps in operating costs in future years.  Related “soft” costs for development including strategies to build community acceptance for projects. MHSA Capital Facilities Costs May Include (Proposed)

15 Governor’s Chronic Homeless Initiative (CHI): Phase II Announced in May $75 million of MHSA funds per year will be “pooled” at the State. Goal is leveraging other funds. The pooled funds will be administered by the California Housing Finance Agency (CalHFA). Partnership with CalHFA, State DMH, and Dept. of Housing & Community Development (HCD).

16 CHI: What we know now…. CalHFA establishing a special needs lending program; the goal is flexibility. Projects receiving capital funds must be linked to MHSA services and operating support funded by the county. State will work in partnership with counties to determine allocation goals and process and to ensure small county set aside.

17 CHI: What we know now… State will work with counties to further define program and process. Flow of projects is anticipated to be: developer/sponsor seeks county approval and partnership then goes to state DMH and CalHFA. Goals include: –leverage bonds, tax credits and other existing instruments –link to existing Ten Year Plans –partner with other local investments First funds may be available in early 2007.

For More Information: Check out the following resources at SH Financing Guide Toolkit for Ending Long Term Homelessness CSH Policy Pages