Housing GSO: HRA Greensboro Affordable Housing Plan

AFFORDABLE RENTAL HOMES

SUBSIDIZE 4% DEVELOPMENT | Recommendation

recipients for physical infrastructure projects like housing rehabilitation. Section 108s are flexible in both size and use. The size of the guaranteed loan depends on a variety of factors, including a community’s maximum borrowing capacity and an underwriting assessment of the project or loan fund. As of February 2020, Greensboro has almost $10,000,000 available in Section 108 borrowing authority, based on annual CDBG allocation. The City could use this funding as the base of the funding pool for 4% projects. The City should aim to locate 4% LIHTC developments in areas with limited affordable housing and greater access to opportunity. The Appendix identifies areas of opportunity in Greensboro that provide residents with higher access to economic opportunity and social mobility.

Prototypical 4% LIHTC Deal 200 Unit New Construction | Total Development Cost $29M | Assumes Non-Profit Ownership While 4% LIHTC awards require significant funding to achieve feasibility, they can significantly increase affordable units.

The challenge in offering public support for 4% LIHTC developments in weaker markets is the magnitude of funding required at one time. Low rents in Greensboro equate to a significant gap for 4% LIHTC development . A 200-unit 4% new construction project in Greensboro would have an estimated gap of $6,000,000, assuming non-profit ownership. This equates to about $31,000 in required subsidy per unit. The City should establish a competitive process to award local funding to 4% project applications that meet affordability goals. These goals may include providing supportive housing units, developing in areas of opportunity, rehabilitating blighted structures, and preserving public housing. The City can explore creative methods to help make 4% projects financially feasible. Using HUD Section 108 funding, offering public land for free or at a significant discount and integrating project-based vouchers into 4% project developments are methods that can have significant impact on project feasibility. The Section 108 loan program provides low-cost, flexible financing for CDBG

~$31K per unit subsidy required

$6.1M Development Gap

$520K Def. Dev. Fee

$10.2M LIHTC Equity

$12.2M Permanent Loan

HR&A Advisors, Inc.

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