By Flynann Janisse & Peter Nichol
Late last year, Congress answered the question of “would” tax reform be coming with the passing of the Tax Cuts and Jobs Act. The passage of the measure also eliminated some of the ambiguity around the production of affordable housing; however, not all. A lower corporate tax rate means that the Low-Income Housing Tax Credit (LIHTC) program, though survived, may be perceived as somewhat less valuable as an incentive.
These deals are complex, often with multiple layers of financing, various partners and guarantees to be maintained as affordable for lengthy periods of time. However, what of these communities after the paperwork has been signed? When the last construction vehicle rolls off the property, the focus turns to the residents. Since its inception, Rainbow has focused on providing resident services in such a way that promotes self-sufficiency among the tenant population. At its core, this type of programming helps residents stay in their homes, giving them the tools they need to be successful in life. The benefits also extend to the property, enjoying higher occupancy, lower turnover rates and a reduction to related expenses.
Benefit of Supplying Services
Providing safe, affordable housing can be an intersection for better employment rates, higher test scores in schools and generally improved health outcomes. In a 2014 speech, then Washington University in St. Louis Assistant Professor Melody Goodman addressed the Harvard School of Public Health and delivered the now famous line: “Your zip code is a better predictor of your health than your genetic code.” However, it does not have to be. Local governments have looked to the Housing First model to help rein in the cost of emergency rooms and mental health services. Last year RAND released a study in conjunction with the Los Angeles County Department of Health Services showing a near 60 percent decrease in associated costs for public health services from residents living in permanent supportive housing. The Missouri Workforce Housing Association estimates that it is roughly three times more efficient to build affordable senior housing, often with supportive services, than to operate a Medicaid-funded nursing home.
In our discussions with a potential partner, there is always agreement regarding the benefit of supportive social services. However, paying for a true service-enriched housing model may put a strain on a property’s operating budget. That is where the latest program from Fannie Mae comes in to play. The GSE is now offering a product with a lower borrowing rate for affordable housing communities that provide enhanced resident services. Financing incentives can offset the ongoing annual expenses for these services. When combined with the return on investment a service-enriched housing model already provides, this program has the potential to become a powerful force for not only the creation, but also the sustainability of affordable housing.
“We believe that the strength of an affordable rental housing property is directly linked to the health and stability of the people and families who live there,” said Bob Simpson, Fannie Mae’s vice president of affordable and green financing. “Fannie Mae continues to develop innovative approaches to financing and is working with our partners to ensure that more affordable rental properties can provide financial stability, a healthy living environment and better access to community services.”
As an added benefit, Fannie Mae has kept the definition of Enhanced Resident Services broad to “include health and wellness services, work and financial capability support and more.” This allows owners, residents and service providers to collaborate, generating a customized community plan that will meet residents’ needs while also delivering mutually beneficial outcomes.
Flynann Janisse is executive director of Rainbow Housing Assistance Corp. and Peter Nichol is managing director at Pillar Financial.