1. Conversion of CHA Federal Public Housing through the Rental Assistance Demonstration (RAD) Protecting and preserving CHA’s affordable housing for current and future residents September 2013

2. The mission of the Cambridge Housing Authority is to develop and manage safe, good quality, affordable housing for low-income individuals and families in a manner which promotes citizenship, community and self-reliance.

3. In 2007 and 2008 CHA held meetings across the city discussing the extensive capital improvement needs of state and federal public housing. With the CHA only receiving $7 million* annually from the federal and state government to complete repairs, we calculated it would take over 32 years to complete the work needed in 2008. * In 2013, that amount fell to $3.0 million and with increasing has turned into 100 years to complete...

4. Traditional Mod Funding: Much Less & Not Enough Low Income Housing Tax Credits : Requires additional Operating Income but, does not have to be paid back Section 8 vouchers: Provide additional income to pay for modernization Broader Resident Income: Increase rental income – help fund modernization Soft Loans: State or City funds- limited Types of Modernization Funding Would allow CHA to borrow from a bank

5. Make real estate investment decisions for each property and the CHA’s city-wide housing stock that reflect the CHA’s mission. Encourage active and meaningful resident and community participation throughout the planning and implementation process. Increase the number of permanently affordable units restricted to residents under 80% of area median income. Ensure the long-term physical and financial viability of CHA’s existing public housing stock. Develop a capital plan that results in no permanent displacement of any current CHA resident. Increase the livability and overall marketability of units, through quality design and construction. Continue to protect those CHA residents who are particularly vulnerable. Provide housing that meets current and projected needs of low-income households and preserves affordable housing options in Cambridge. Guiding Principles-from 2008 and still true!

6. CHA has day-to-day and long term financial needs that are not being met under the current funding plan. The switch from Public Housing to RAD Project Based Voucher Program (Section 8) is an opportunity to reallocate the assistance we receive from HUD and allow for mortgages. The switch has very little impact on residents day-to day. CHA plans to keep the same rules, rent calculation and tenant rights that are in place now, though properties subject to LIHTC may have some additional income certifications and inspections. A very small number of over-income families or families of only full-time students may not qualify for a LIHTC unit, but would be housed elsewhere in CHA housing. Residents will not need to move as a result of this conversion, though some temporary relocation from construction may be necessary – for example at Manning and Millers River.

7. Why is CHA considering conversion now? The federal public housing program has received substantial cuts to its operating and capital funds in the past four years. The operating subsidy, which helps the CHA pay for day-to day operations, has been reduced by over 17% in the past four years.

8. Also, the capital budget has been reduced by 35% since 2010! The capital funds that the CHA receives to modernize and improve its housing have also decreased. CHA received approximately $400,000 less in 2013 than 2010 despite increasing the number of federal public housing units by 20%. Without the increase in units, CHA the capital fund would have decreased by $900,000.

9. Potential Impact of These Cuts Over Time  Inability to complete much needed improvements to buildings and apartments  No extraordinary maintenance  Cuts in management and maintenance staffing  Increase in units held off-line because of poor condition  Changes in program requirements  Additional costs in the future

10. TODAY… CHA is proposing to convert 1,153 units of its federally assisted public housing to the RAD Project-Based Voucher Program (Section 8) as Phase 1 of a two phase program. Why would CHA do this? The switch, if approved by HUD: Would allow the CHA to reallocate the funds its receives from the federal government to better operate and maintain the units. With the RAD subsidy, CHA would be able to attract private financing to repair and renovate units.

11. Conversion from public housing to the RAD Project-Based Voucher program would mean: The higher RAD PBV payment would allow the CHA to borrow funds from a bank to help fund the modernization work needed at its properties. $ 731 - $434 = $297 x 12 months = $3,564 x 1,153 units = $4,109,292 CHA would be able to reallocate existing money from HUD to operate and maintain its public housing. Public Housing RAD PBV* Operating Subsidy Operating + Capital Subsidy $434 per unit/month $731 per unit/month * The difference is the added capital money the CHA receives from HUD and CHA’s MTW block grant allocation for capital.

12. What does RAD do for CHA and its residents? Get private financing through bank mortgages and low income housing tax credits to fund the needed improvements to buildings and apartments.  The $4.1 million from HUD’s Capital Fund and MTW would support over $54 million in debt.  The five properties in Phase 1 that have not received tax credits would generate an additional $87 million in equity from investors.

13. CHA’s RAD and Disposition Proposal – October 2013 (Phase 1 Application) Convert through RAD Washington Elms* 175 units Newtowne Court* 268 units Putnam Gardens* 122 units Manning Apartments* 198 units Woodrow Wilson Court* 68 units LBJ Apartments 180 units JFK Apartments 44 units Lincoln Way 53 units Jackson Gardens 45 units Total – RAD1153 units Convert through Disposition Millers River* 302 units Total1455 units *Will also use low- income housing tax credits Already tax credit properties

14. CHA’s RAD Proposal – Late 2014 (Phase 2 Application) Convert through RAD Corcoran Park* 152 units Jefferson Park Fed* 175 units Burns Apartments* 198 units Truman Apartments* 66 units Russell Apartments* 51 units Small Elderly** Properties* 96 units Scattered Site and Condos*** 123 units Total – RAD Phase 2 983 units *Will also use low-income housing tax credits. *** River Howard, Willow St, Garfield, Hingham, Inman, and Condos ** Weaver, Linnaean, 116 Norfolk St., and St. Paul’s

15. While the switch would have minimal impact to the day to day operations, it would mean: Removal of the HUD Declaration of Trust on the converted properties. This document establishes the affordability of housing and includes a provision that the property cannot be used as security on a loan. Instead of the Declaration of Trust, CHA would use RAD Use agreement, long- term ground leases, deed restrictions and other recorded restrictions to ensure permanent affordability.

16. What about foreclosure risk if the CHA were to take a loan? The CHA would: Develop finance plans for the properties that minimize any foreclosure risk associated with a loan Set aside substantial operating reserves to help weather any financial setbacks and explore use possibility of mortgage insurance Use RAD use agreement, ground leases, deed restrictions and recorded restrictions to protect the property and to make sure it stays affordable to low income families and individuals. “Belt and Suspenders”

17.  Ownership of the converted properties would need to transfer to one of CHA’s non-profits. These non- profits are 100% controlled by the CHA, having virtually the same Board as the CHA.  When low income housing tax credits are used to fund the modernization, a second transfer of the properties to a Limited Liability Corporation (LLC) would be needed so the investor can take the benefits of the tax credits.  In all instances, the CHA would continue to manage and maintain the properties, and oversee day-to- day operations under an agreement with the non- profits or LLCs. Would the converted properties be still owned by the CHA? Different but the same

18. Specifically, the requirement would be that 50% of future households in RAD PBV units who do not qualify as elderly or disabled would need to participate in supportive services. HUD is also requiring a supportive services component to RAD PBV: CHA does not anticipate an impact from this requirement since over 700 household members already participate in existing supportive services like the Work Force Program, adult education activities, pre- school and after school activities, etc.. Additionally, it would use its MTW Authority to establish a hardship procedure.

19. Isn’t it possible that funding to the Project-Based Voucher program could be cut too? Yes. Just like the federal public housing program, the Project Based Voucher program is a part of the Housing Choice Voucher program so it too is subject to annual appropriations by Congress. CHA cannot control appropriations. Historically, the Housing Choice Voucher Program has had significantly less cuts than the federal public housing program.

20. 1. CHA will submit a RAD application to HUD 2. HUD would need to approve the RAD application. 3. Once approved, CHA would submit a physical needs assessment and financial plan. 4. HUD would need to approve the plan and conversion 5. CHA would proceed with any required work identified by the physical needs assessment as part of the conversion. What needs to happen for the conversion to take place? Rental Assistance Demonstration (RAD) Option START HERE 12 months after HUD approval – late 2014 or early 2015 90 days after HUD approval Mid-October 2013

21. Today’s presentation is about: CHA has day-to-day and long term financial needs that are not being met under the current funding plan. The switch from Public Housing to RAD Project Based Voucher Program (Section 8) is an opportunity to reallocate the assistance we receive from HUD and allow for mortgages. The switch has very little impact on residents day-to day. CHA plans to keep the same rules, rent calculation and tenant rights that are in place now, though properties subject to LIHTC may have some additional income certifications and inspections. A very small number of over-income families or families of only full-time students may not qualify for a LIHTC unit, but would be housed elsewhere in CHA housing. Residents will not need to move as a result of this conversion, though some temporary relocation from construction may be necessary – for example at Manning and Millers River.

22. Questions or Comments? Margaret Donnelly Moran mmoran@cambridge-housing.org 617.520.6251 Terry Dumas tdumas@cambridge-housing.org 617.520.6263