The latest figures from the California Housing Partnership Corp. indicate that there are over 50,000 apartments in the state at high or very high risk of converting from their current subsidized rent levels to market rents. This dwarfs the ability of the housing community and public agencies to develop new housing, and loss of this housing stock would be catastrophic to the residents, who would be forced to move into fewer and fewer affordable units. Extending the affordability of this rental housing stock must be a part of any effort to assure that lower income Californians have a place to live and raise their families.
So I read a recent article in Affordable Housing Finance entitled Housing At Risk with considerable interest. The article outlines how three policy changes will affect the ability to preserve the affordability of the 800,000 units in the nation facing possible loss of affordability.
First, there is the HUD Rental Assistance Demonstration (RAD) program. RAD may be a revolution in preserving properties that have utilized the Sec. 8 Moderate Rehab., Rent Supplement, and the Sec. 236 Rental Assistance Programs (RAP). RAD will allow some properties subsidized by these programs, as well as Public Housing, to voluntarily convert to a long-term Sec. 8 rental assistance as a means of preserving the affordability of the units. However, the department plans to limit this conversion to only 50 percent of the units in eligible Sec. 8 Mod. Rehab. and Public Housing buildings. Advocates oppose this cap.
RAD also allows owners of Rent Supplement, Sec. 236 RAP, and Sec. 8 Mod. Rehab. properties to convert tenant protection vouchers to project-based vouchers upon contract expiration or termination between Oct. 1, 2006 and Sept. 30, 2013.
A second program that may affect housing affordability preservation is an FHA Pilot Program to expedite processing of Sec. 207/223(f) loans and insurance for LIHTC-funded developments. As outlined in the HUD Notice, this pilot may make it easier to acquire and preserve existing affordable projects using LIHTCs.
The final change was outlined in a HUD Notice last year announcing that nonprofit owners of restricted units which had benefited from FHA mortgage insurance, including those with various HUD program loans may keep the proceeds of the sale of those units. HUD reports that nonprofit organizations own 39 percent of all Sec. 236 and 221(d)(3) properties with maturing mortgages. Currently, more than 700 Nonprofit-owned Sec. 236, Sec. 231 and Sec. 221(d)(3) properties have mortgages that will mature within the next 10 years, representing roughly 80,000 affordable units, including 42,000 units with project-based rental assistance.
Historically, HUD has restricted the use of any proceeds of the sale of a project that received these forms of subsidy, which discouraged the nonprofit owners from selling or refinancing these units with LIHTCs and other forms of subsidy. The new regulations allow the proceeds to be retained by the nonprofit, which should encourage them to preserve the housing for another generation of tenants.
We can only hope that these changes will help save the affordability of the existing stock of subsidized housing, because we could never afford to replace it.