In The News › Housing program problems assesed

May 16, 2007

Source: Times-Picayune

Housing program problems assesed

Housing program problems assesed
BGR report says state underestimated costs
Wednesday, May 16, 2007
By David Hammer
Staff writer

The state underestimated how much it would cost developers to build subsidized low- and mixed-income housing units when it awarded them millions of dollars in special federal hurricane relief, a government watchdog group reported Tuesday.

And though the federal tax credits and loans are designed to spur private investment, the report found precious little private money flowing alongside the government subsidies.

The Bureau of Governmental Research, a local nonprofit research firm, analyzed the distribution in December of low-income housing tax credits backed by federal disaster grants. The report looks at the development costs and financing sources of 44 projects.

The Louisiana Housing Finance Agency selected those developments to receive a total of $80 million in federal tax credits, as part of $168 million in Gulf Opportunity Zone Housing Credits authorized by Congress.

Thirty-three of the 44 developments also got a total of $417 million in Community Development Block Grants from the state Office of Community Development, as part of $594 million in special low- and no-interest loans authorized by the Louisiana Recovery Authority. The state handed out those grants to developers who agreed to provide a certain percentage of low-income housing in market-rate areas.

In most of the 44 projects, less than 10 percent of the money came from private first mortgages, the report says. For example, the report says the Lafitte public housing redevelopment is getting $27 million in CDBG loan money, nearly $12 million in tax credits and nothing from private loans.

Falling short of goals

The report also points out that the selected projects, most in New Orleans, don’t appear to meet the LRA’s goals for the federal grants, in both the number of new units built and their cost.

The LRA, which sets the state’s policy for the use of most federal disaster relief, had set a goal of spurring the development of 18,000 affordable rental units in the southern Louisiana market. But even if all 178 GO Zone Housing Credits lead to finished developments, they would account for only about 15,000 new or renovated units, the bureau report released Tuesday found.

The reports also questions whether the projects that received these federal tax credits and loans will ever get built. The LHFA is requiring the developers to collect 10 percent of their private investments by July 1, and the projects must be done — with renters moving in — by Dec. 31, 2008, or they may have to give back the tax credits.

The U.S. House passed a bill that would extend the deadline to Dec. 31, 2010, but it has yet to get a vote in the Senate.

“We were really concerned initially” that it wouldn’t be enough time for developers, said Kimberly Levy, spokeswoman for the LHFA. “However, we’ve gotten great support from Congress, and we’re playing the waiting game now.”

Calvin Parker, manager of multifamily housing programs for the Office of Community Development, said the state has asked for an extension of the federal deadline. He said some of the developers are waiting to see if Congress will grant the extension, but a few others, whom he wouldn’t name, have lined up their financing and are about to break ground on construction.

Hurricanes Katrina and Rita destroyed or severely damaged about 82,000 rental units, more than 51,000 in New Orleans alone. As a result of the lower supply, rents skyrocketed. So did building costs, and the bureau report found that the federal block grants and housing tax credits were subsidizing costs that far exceeded the LRA’s expectations.

“We are hearing from developers that is still a critical issue,” Levy said.

Expensive projects

Among the most expensive projects to get awards were public housing redevelopments in New Orleans, which will have to include market-rate units in their development. The first phases of work on the B.W. Cooper, Lafitte and St. Bernard developments, along with the second phases of the St. Thomas-River Garden and C.J. Peete projects, all cost more than $233 a square foot to rebuild.

Mixed-income developments ranged widely in cost, from $100 a square foot to more than $300 per square foot for one- and two-bedroom units in the Warehouse District.

“People are entitled to know how expensive this publicly subsidized housing is,” said Janet Howard, president of the bureau. “You have to question if it’s the best use of the funding if it costs $334 per square foot.”

However, the state stands by its decision to back higher-priced projects because they avoid concentrated poverty.

“With this financing, we’ve achieved something that’s very difficult to achieve: getting affordable housing in very strong neighborhoods like the Warehouse District,” said Calvin Parker, manager of multifamily housing programs for the Office of Community Development.

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David Hammer can be reached at dhammer@timespicayune.com or (504) 826-3322.

May 16, 2007

Source: Times-Picayune

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