Housing Financing and Leveraging MHSA Dollars

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Housing Financing and Leveraging MHSA Dollars
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Objectives

• How housing projects are financed
• Types of funding sources
• How communities can use MHSA funds to create more
  housing
• How to leverage other funding sources

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The Three Flavors of Money
Capital
Operating
Services
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How Funding for Supportive Housing Is Used
Type Uses
CAPITAL Land, buildings, new construction, soft costs of development, capitalized reserves
OPERATING Property operations such as management staff, landscaping, utilities, reserves
SERVICES Delivery of supportive services to tenants
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Putting Together a Financing Plan

• CAPITAL BUDGET
• Pre-Development Site selection, project
  planning and feasibility, architectural
  renderings, early community outreach,
  environmental testing, etc.
• Construction Hard and soft costs of construction
  or rehabilitation
• Permanent Takes out earlier financing and stays
  in the deal for the long-term.
• REMEMBER SOURCES MUST ALWAYS EQUAL BUDGETED
  USES!!!

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Putting Together a Financing Plan

• SERVICES BUDGET
• Wide array of relevant, efficient supports that
  enable individuals to maintain their housing.
• REMEMBER SOURCES MUST ALWAYS EQUAL BUDGETED
  USES!!!

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Putting Together a Financing Plan

• OPERATING BUDGET
• The cost to operate the property
• Rents in supportive housing usually dont cover
  these costs
• EXAMPLE
• Amount a tenant can afford in rent 210
• Monthly cost to operate a unit 435
• GAP THAT NEEDS TO BE FUNDED (225)
• AND REMEMBER SOURCES MUST ALWAYS EQUAL
  BUDGETED USES!!!

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Putting Together a Financing Plan Addressing the
Operating Gap

• Operating Gaps can be addressed in two ways
• Obtain a rental or operating subsidy that will
  pay for that gap on a monthly or annual basis.
• Such sources include Project or Sponsor Based
  Shelter Plus Care and Section 8 Vouchers
• Capitalize upfront to cover the gap over time.
• - The MHSA Housing Program offers the opportunity
  to apply for capitalized operating subsidy funds.

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Capitalized Operating Reserves

• Concept
• Establish a fund at the beginning of the project
  to meet the operating deficits you know youll
  experience over time (best to plan for as long a
  term as possible the MHSA Housing Program
  application allows for up to 20 years)
• CalHFA holds these funds and disburses them
  quarterly to the project.
• Regular, scheduled draw downs subsidize rent over
  time

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Calculating a Capitalized Operating Reserve

• MHSA Example Attachment B
•  
• Operating Cost Per Unit (per year) 6,000
• Rental Income (per year) 2,536
• Expected Operating Deficit Per Unit
• (Year 1) (3,464)
• Required Reserve (Per Unit),
• Based on 20-year operations period 100,000

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Capital Financing
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What are Sources of Capital Funding?
FEDERAL Section 811, HOPWA, HOME, CDBG, Section 515 Rural Loans, Rural Homeless Assistance, Supportive Housing Program (SHP) (HOME, CDBG and HOPWA often administered by local govt or State)
STATE Low Income Housing Tax Credits (Tax Credit Allocation Committee), Multifamily Housing Program (MHP), CalHFA, Rural Predev. Loans, MHSA
LOCAL Redevelopment Agency Funds, Housing Trust Funds, Inclusionary Funds
Intermediaries and Banks Various loan and grant products
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Prop 1C Supportive Housing Funds

• 195 Million available at the state level
• 50 Million available specifically for supportive
  housing for youth

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Prop 1C

• These funds are available by applying to the
  State Department of Housing and Community
  Development Department
• The application process is open to applications
  on an over the counter basis. Applications
  accepted until funds expended.

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Mental Health Services Act Housing Program

• California Counties committed an initial 400
  Million to this program
• Application released August 6th
• Ensure you have the copy that is listed on the
  website as revised August 13th
• A County must submit an MHSA Housing Program
  application to both the Department of Mental
  Health (DMH) and the California Housing Finance
  Agency (CalHFA).
• MHSA Housing Program applications will be
  considered updates to a county's Community
  Services and Supports (CSS) component of its
  Three-Year Program and Expenditure Plan.

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Mental Health Services Act Housing Program

• 5 workshops planned over the coming months
• Review and discuss the application process and
  requirements for the MHSA Housing Program.
• Register online at
• http//www.cce.csus.edu/conferences/cdmh/hsa06/mhs
  a07.cfm

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Operating Financing
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What are Sources of Operating Funding?
FEDERAL Section 811, HOPWA, Shelter Plus Care, Supportive Housing Program (SHP), Section 515 Rural Loans, Rural Homeless Assistance (HOPWA often administered by local govt or State)
STATE MHSA, Independent Living Program (transitional youth), THP
LOCAL Section 8 vouchers
TENANT RENT Based on ability to pay
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Services Financing
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Where are Sources of Services Funding?
FEDERAL HOPWA, Supportive Housing Program (SHP) (HOPWA often administered by local govt or State)
STATE MHSA, THP
LOCAL County Departments of Health and Human Services, Mental Health, Alcohol and Drug, HIV/AIDS and other social service programs, private foundations, MediCal
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Leveraging Funds
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Leverage is the Name of the Game

• Supportive housing finance involves MANY
  different sources
• Funders like to LEVERAGE their resources
• Funders want others to share in the cost of
  developing a project to share in the risk
• Some funders will establish either a match
  requirement or a percentage of the total costs
  that they will contribute to a project

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MHSA Funds Can Leverage Other Funds

• MHSA funding can be used with any of the other
  sources identified.
• MHSA can jump-start a development serving your
  population and attract other funding sources.
• Since MHSA funding is flexible, it can be used to
  fill gaps left once youve exhausted all other
  sources.
• Please see the CSH Supportive Housing Financing
  Map for more information on leveraging MHSA
  dollars.

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Projecting and/or Evaluating Operating Costs in
Supportive Housing
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Tenancy Considerations

• Identifying the Target Population(s) community
  need, services experience and capacity
• Planning the Unit / Tenant Mix income levels,
  intensity of service needs, services experience
  and capacity, marketing plan
• Tenant Income Considerations rent levels,
  subsidized vs. non-subsidized units, employment
  histories, access to public benefits.
• Planning for Changing Needs over Time initial
  lease-up vs. projected vacancy rate, tenants
  increased stability

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Vacancy Factors

• Vacancy factors should be tailored to the target
  population and local market conditions.
• In supportive housing, vacancy factors may be as
  high as 10 12, depending on target
  populations, referral and screening processes.

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Operating Budget Categories

• Management Fee - or per door fee
• Office Supplies Expenses
• Legal evictions, etc
• Accounting - tax filings, audit, reporting to
  investors

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Operating Budget Categories

• Staff / Payroll Costs
• Administrative Payroll
• Maintenance Payroll
• Security Payroll

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Operating Budget Categories

• Utilities
• Heating
• Master Metering
• Common Area Utilities
• Water Sewer
• Telephone

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Operating Budget Categories

• Maintenance and Repair
• Exterminating
• Supplies
• Repairs
• Trash Removal
• Snow Removal
• Grounds Upkeep Landscaping
• Painting Decorating
• Elevator Maintenance

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Operating Budget Categories

• Marketing and Leasing
•  Advertising
• Credit Investigations/Leasing Fees

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Operating Budget Categories

• Taxes and Insurance
• Real Estate Taxes
• Other Taxes
• Property Insurance

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Operating Budget Categories

• Contributions to Reserves
• Replacement Reserves
• Operating Reserves

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Trending

• Apply growth factors to both income (typically 1
  to 3) and expenses (typically 3 to 4).
• Growth factors may vary for subsidized vs.
  non-subsidized units, market-rate units vs.
  rent-restricted units
• Spread difference between income growth
  factor and expense growth factor.

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Developing Supportive Housing Additional CSH
Resources Publications Not a Solo ActBetween
the Lines Legal Issues in Supportive
HousingLaying A New the FoundationFamily
MattersWEB resources On-line financing
summaries (via Resource Library link) Toolkit
for Ending Long-term Homelessness