The Atlanta BeltLine Partnership is promoting solutions to Atlanta’s affordable housing needs via a series of articles from our public, private, philanthropic, nonprofit, and community partners who – through “The Power of We” – can help define a coordinated set of policies, programs, and resources that build and preserve affordable living opportunities for all. Recently, Enterprise Community Partners discussed the important role of intermediaries and identified examples of policies, programs, and funding sources gaining traction in other major cities facing similar affordable housing challenges and opportunities to those in Atlanta. This month, Denis Blackburne, SVP with The Woda Group, Inc., shares how their redevelopment effort on the Atlanta BeltLine benefited from a collaborative, coordinated approach.
The Atlanta BeltLine is catalyzing growth and development. The desire to live near its trails, parks and coming transit has brought new attention to neighborhoods that have long struggled to attract significant investment. Growing interest in these neighborhoods creates opportunities to develop housing and presents challenges for maintaining affordability. Recent new funding from Atlanta BeltLine, Inc. for affordable housing is a great start, but more tools are needed.
The Woda Group, Inc. consists of nationally-recognized, experienced developers, general contractors, and property managers who have been working in metro Atlanta to help develop quality affordable housing since 2011. The company recently partnered with Atlanta BeltLine, Inc., the Georgia Department of Community Affairs, Invest Atlanta, Parallel Housing Inc. (an Athens-based nonprofit sustainable affordable housing developer), and the Peoplestown Revitalization Corporation to redevelop Stanton Oaks (formerly Boynton Village) a 43-unit apartment complex in Peoplestown. This $7.8 million revitalization project near the Atlanta BeltLine demonstrates how developers can work with government agencies and community residents to produce affordable housing.
When we acquired the property, 100 percent of the rental units were subsidized, and we extended those subsidies for 20 years to help keep the units affordable. But affordable housing developments like this are complex and require many more layers of financing than market-rate developments to be financially feasible. Whereas building a single-family home typically requires only a home mortgage and cash down payment, the Stanton Oaks redevelopment required five types of financing:
- $4,100,000 in 9% Federal Low-Income Housing Tax Credits (LIHTCs) from the Georgia Department of Community Affairs (DCA)
- $1,700,000 in State LIHTCs, also from the Georgia DCA
- $1,300,000 in mortgage financing
- $800,000 from the BeltLine Affordable Housing Trust Fund (BAHTF)
- $300,000 In Owner Equity
Partnerships with investors are critical to developing affordable housing. Rapidly appreciating land costs in high-demand areas, limited programs to foster affordable housing development, and fierce competition for scarce funding sources for low-income housing units, all contribute to the complex challenge.
Many affordable housing developments use Low Income Housing Tax Credits (LIHTCs) as a primary source of funding. Issued by the Federal government, LIHTCs create a way for investors to help finance affordable housing in return for reductions on their Federal taxes. There are two types of LIHTC allocations, nine percent and four percent. The $50 Million annual allocation for the more valuable nine percent LIHTC must serve the entire State of Georgia and is typically limited to only a few projects annually in metro Atlanta. Competition among developers for these credits is intense.
The four percent LIHTC is in far greater supply and much easier to attain – but does not generate as much funding per affordable housing project. Therefore, additional subsidies must be found to keep rents affordable. Because Atlanta lacks consistent sources of local subsidy to leverage these tax credits, we are collectively leaving money on the table that could pay for more affordable housing in Atlanta.
The Woda Group, Inc. – and others – would be willing to partner with ABI, the Atlanta BeltLine Partnership and government agencies to build more affordable housing developments if there was a clear and predictable way to fill the funding gap when using the four percent credit instead of the richer nine percent credit. Other cities in which we work have dedicated funding and policy tools to make the four percent credit easier to use. They combine subsidy, housing vouchers, and real estate tax breaks to help close the gap. Replicating these types of solutions in Atlanta will go a long way toward meeting our affordable housing need.
This article appeared originally as a Thought Leadership column in the Saporta Report on September 12, 2017.