PRESERVING AFFORDABLE HOUSING

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2004
PRESERVING AFFORDABLE HOUSING IN MONTGOMERY
COUNTY Stephanie Killian, Multifamily Housing
Manager Department of Housing and Community
Affairs
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Montgomery County Active In Affordable Housing

• Housing Trust Fund since 1988 Housing Initiative
  Fund, or HIF (Currently _at_ 15 million each year
  of County funds)
• Preservation Strategy for Expiring Federal
  Programs and for Existing Affordable Housing
• Aggressive Code Enforcement
• Licensing of rental properties
• Right of First Refusal for sales of Multifamily
  Rental Facilities
• Strong political support

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Preserving Affordable Multifamily Housing

• Highlight here preservation of Federally Assisted
  Properties and properties with Expiring Controls
• Also means preserving multifamily housing
  threatened because of deterioration, poor
  management, or threat of conversion to
  condominiums or to market rate housing

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Preservation Strategy Federally Assisted
Properties

• In 1999 DHCA developed a comprehensive strategy
  to preserve at-risk affordable federally-subsidize
  d housing. DHCA pulled together a partnership of
  local, nonprofit, and for-profit organizations to
  study the problem, develop solutions and achieve
  results.
• The County staff developed a straightforward goal
  for this program preserve as many of the
  Countys federally assisted housing units as
  possible.

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• DHCA Developed a Five-Step Program to Address
  This Problem

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First step - Planning and Analysis - compile
data, gain a thorough understanding of each
property, and develop a plan of action

• DHCA hired the National Housing Trust (NHT) to
  compile a comprehensive inventory of the Countys
  federally assisted housing stock. The NHT study

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• Analyzed HUD and local housing authority data and
  prepared an inventory of federally assisted
  properties, determining the Section 8 contract
  expiration date for each property, and when
  federally financed mortgages could be pre-paid
• Identified which properties were at risk of
  conversion to market-rate housing by analyzing
  the type of ownership for each property, and
  analyzing their ownership goals and
• Assessed the physical condition of each property
  by visiting each property, and requested that the
  County conduct housing code inspections of each
  property.

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Second Step Strategy development - analyze the
information and develop a specific strategy for
each property.
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• DHCA staff worked with staff from the County
  housing authority, the Housing Opportunities
  Commission (HOC), to analyze this information and
  develop a preservation strategy for each
  property.
• The properties owned by nonprofit housing
  providers, the County, and by HOC were considered
  to be generally safe from loss. The properties
  owned by for-profit companies or individuals were
  considered to be at risk.

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The at-risk properties were divided into three
categories

• Section 236 properties
• 100 Section 8 properties
• 20 Section 8 properties
• The at-risk properties provided nearly 2,000
  affordable rental housing units.

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Third Step Preserve Section 236 Properties
use all of the Countys preservation tools to
have all of the Countys Section 236 properties
acquired by HOC or a nonprofit organization.
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• Regulatory Tools Used
• Code Enforcement
• Right of First Refusal Authority
• The Maryland Affordable Housing Preservation Act
  which provides for fines of up to 1 million to
  owners who fail to provide a one-year notice to
  the County and to all residents if they plan to
  allow a Section 8 contract to expire.
• Worked with Nonprofits organization and HOC
• Used many different funding sources

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Results - Section 236 Properties

• HOC purchased three Section 236 properties
• Two nonprofit organizations purchased the
  remaining two
• All of the Countys Section 236 properties have
  been preserved continuing to offer affordable
  rents to families.
• Two of the Section 236 properties were in very
  poor condition and were renovated
• The other three were enhanced by the addition of
  community centers and other amenities.

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Fourth Step Preserve 100 Project Based 8
Properties - identify appropriate nonprofit
housing providers to acquire any available 100
Section 8 properties, and negotiate with the
owners of all others.
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Results 100 Project-based Properties

• HOC acquired one 100 Section 8 property.
• The owners of two Section 8 properties have
  agreed to renew their contracts for five years,
  after agreeing to participate in a
  County-sponsored preservation program.
• The County continues to assess one elderly
  property and one located in an area with rent
  control. Neither property is seen as high risk
  at this time, but we are assessing feasibility of
  nonprofit ownership.

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Fifth Step Preserve 20 Section 8 properties -
negotiate long-term preservation agreements with
the owners of 20 Section 8 properties.
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Strategy

• Give owners incentives to continue to offer the
  project-based Section 8 housing. The incentives
  vary from financial incentives, to personal ones
  such as making sure the owners are recognized for
  their actions.
• Minimize the risks of operating affordable
  housing Most for-profit owners are motivated by
  risk as well as profit.

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Actions

• First, the County Executive met personally with
  six owners and management companies to ask for
  their cooperation in working with the county to
  try to preserve their Section 8 units.
• Second County staff met with owners to understand
  their concerns and to develop a set of incentives
  that meet their individual needs.

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Results 20 Properties

• Grady Management, Inc. manages seven such
  properties and got the owners to participate in a
  County program to extend Section 8 housing units.
  
• The County provides
• Tax abatements to offset the proven costs of
  offering Section 8 housing
• Landlord-tenant assistance when tenants become
  disorderly or other problems occur
• Rehabilitation funds for units that need
  extraordinary repairs because of problem Section
  8 tenants
• Advancement of delayed HUD payments.

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Examples of 20 Properties
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Affordable Housing Units Lost, Preserved and
Still At Risk

• Units Lost Since Strategy Began 231 units out
  of a total of 6,662 units
• 1,500 housing units have been preserved
  permanently.
• Another 387 units are preserved through
  agreements that can be terminated by the property
  owner.
• All Section 236 properties were preserved
• Agreements with Project-based Section 8
  properties where the owners could have terminated
  the Section 8 contract and eliminate the
  affordable housing
• 1,000 units still at risk

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Case Studies

• Stewartown Homes
• Great Hope Homes
• Takoma Tower
• Rosemary Village
• Fireside Condos
• Amherst Square

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Preservation Stewartown Homes Apartments
Property 94 unit complex, one third
uninhabitable when acquired by the housing
authority. Expiring 236 property.
HIF role 30 year loan at 1, with no payments
for 17 years and no interest accruing. Rehab
costs of 120K/unit. Leverage ratio of County
funds 5.24 to 1.
Conditions HOC will operate the property as
affordable housing and will renew the Section 8
contract as long as HUD continues the program.
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Community Preservation and Development Corp. runs
a computer learning center and after school job
training at Stewartown Homes Apartments.
Goals met by this project

• Renovating distressed properties.
• Preserving housing that would be lost from the
  affordable housing stock.
• Provide neighborhood services as well as housing
  units.

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Preservation by Non-ProfitsMHP Great Hope
Homes

• The property suffered for years from having
  absentee owners. The owners were heavily
  marketing this property to sell it to be
  converted to condominiums or expensive rental
  housing.
• Working together, the County and MHP convinced
  the owner to sell the property.
• MHP rejuvenated this property and preserved the
  affordable rents for years to come.

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Great Hope Homes
Before
After
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Takoma Tower Victory Housing, Inc.

• Preservation of HUD Section 202 elderly housing
  by Victory Housing, Inc., a non-profit 1st in
  the Country!
• Used bond financing, 9 tax credits, seller
  take-back financing, County HIF loan
• Preserved 157 project-based units

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Rosemary Village Apartments Fairfield Development

• 416 units in Limited Equity Co-op
• 6000 code violations
• Co-op dissolved
• Tax credits and tax exempt bonds
• 30 Project Based Section 8 Preserved because
  of County strategy

Before
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Other Preservation Activities

• Montgomery County spent nearly 15 million of HIF
  and HOME funds in FY 04 on acquisition and
  rehabilitation of multifamily housing threatened
  by deterioration or threat of conversion to
  market rate housing

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Affordable Homeownership Preservation Fireside
Condos

• Fireside Condominiums Preservation of
  affordable condos threatened with condemnation
  due to faulty construction
• County role Loan to cover soft costs and to
  encourage private bank financing
• Non-profit role Homeowner education, financial
  counseling, assistance with obtaining other
  financing

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Preservation of Other Affordable Housing

• Part of Countys comprehensive code enforcement
  strategy
• MHP acquired 3 adjacent properties
• Amherst Square
• Pembridge Apts.
• Amherst Gardens
• Preserve affordable previously unrestricted
  housing
• In Wheaton, a target CBD

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Conclusions

• Must develop comprehensive strategy
• Be willing to use all available tools and
  resources
• Extensive use of non-profit organizations and
  housing authority (HOC)
• Be willing to invest time and political resources

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For more information, please contact Stephanie
Killian, Multifamily Housing Manager 240-777-3693
stephanie.killian_at_montgomerycountymd.gov Or
check our website
http//www.montgomerycountymd.gov/