LOS ANGELES-“There is a maturing property crisis heading our way in California.” So said Kelly S. Boyer, director of the Los Angeles Multifamily Hub for the U.S. Department of Housing and Urban Development, at the recent 2012 Ballard Spahr—CSG Western Housing Conference here. There are more than 400 affordable housing projects in Southern California with mortgages that will mature before 2015, she explained. “Southern California has the largest HUD-financed maturing portfolio in the country.”
Leading professionals gathered at the event, titled: Best of the West in Affordable Housing: Succeeding in an Unstable Environment, to discuss how to succeed in the changing landscape of affordable housing in the west. The general theme at the event was the preservation of existing affordable housing throughout the West, but particularly in California, through refinancing, recapitalization and rehabilitation.
Panelist Boyer pointed out that the projects in Southern California with mortgages that will mature before 2015 creates a concern that the owners of the projects will want to sell them and take their profit. That, in turn, she said, has caused prices to rise. One low-income project in Santa Ana that was valued at about $11 million in 2011 has recently received bids as high as $30 million, she said. At that price it would be difficult to keep the rents affordable, “and HUD is not in the business of raising rents by 80%.”
There are a variety of HUD preservation initiatives, including programs designed to assist with refinancing and rehabilitating projects, she said. Since the economic downturn hit in 2008, there hasn’t been much demand or funding for new affordable housing projects, but that is expected to pick up. “HUD has recognized that low-income tax credits are the primary vehicle for building affordable housing. We are making every effort to align our policies so that we can support and encourage construction of new affordable housing.”
According to Wayne H. Hykan is a partner in Ballard Spahr’s real estate department and a member of the Housing and Tax Credits Groups, up until the 2008 economic turmoil, there was a mix of new construction and the rehabilitation existing projects. Since then there hasn’t been a willingness to finance much new housing, but the market for tax credits is strong, he said. “We are starting to see the pendulum swing back to new construction, but with so much supply the question is whether we should be increasing the supply.” At the same time, a lot of affordable housing stock is old and nearing obsolescence, so there is a problem of longer-term rehabilitation. Different subsidies for at-risk properties are being phased out, forcing California to move toward more efficient use of funds and tax credits.”
The decision by California to eliminate 400 local redevelopment agencies in the state will result in less money available for low-income housing, say panelists. “There is going to be an additional stress caused by redevelopment agencies not having money. There will be a gap in funding,” add panelists.
Douglas Westfall of Wells Fargo Multifamily Capital, said “We’re seeing a huge uptick in volume for preservation deals, but there is a lack of soft money for the creation of new housing.”
And according to Claudia Cappio, executive director of the California Housing Finance Agency, “Our focus is on the preservation of multifamily housing through refinancing and recapitalization. The goal is to have a permanent, stable source of funding for affordable housing. It’s desperate out there. A lot of projects are in a tenuous situation.”
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
