Our members were asked to provide their insight and expertise on emerging trends for the upcoming new year in the affordable housing industry. They shared their knowledge on the topics of sustainability and green management, managing a mixed-finance property and what they see as the biggest trends for 2018.
The questions they were asked:
- What are the emerging trends in sustainability and green management?
- What are the secrets to success in managing a mixed-finance property?
- Look into your crystal ball, what will be the biggest trend in the affordable housing industry for 2018?
Q1: Sustainability and Green Management: Like other property managers, we made a big push several years ago to retrofit our properties with energy efficient systems. With staff turnover and the passing of time, we became concerned that we were not utilizing these systems properly. Our next step is to analyze their proper use, establish and document standards, and train staff to ensure we maintain these standards. We see this as the next trend in sustainability.
Another trend we see is an increased focus on the health of the residents by maintaining a healthy environment with safe products. An example is using low VOC [volatile organic compounds] carpet to minimize off-gassing.
Q2: Mixed-Finance Property: The keys to success in managing a mixed-finance property are clear documentation of expectations and excellent communication. Clear expectations and documentation are critical because each source of financing will hold management to specific requirements and goals. For instance, tax credit guidelines will include the possibility of fatal errors that could have significant financial consequences. Thus, deep knowledge of the expectations from all sources of financing must be clearly understood and clear expectations given to all levels of management in order to have the most successful project. Excellent communication builds upon the need for clear expectations. As the project ages, there will inevitably be numerous changes in personnel, market and other areas that will impact the project. It is critical that the requirements of the various programs used for financing are clearly communicated throughout the organization. Additionally, on-site staff must be extremely organized and able to handle the frustration that comes with inconsistencies between programs.
Q3: Crystal Ball: We anticipate several trends for 2018. With the continued and increased threat of funding cuts, developers will be forced to build with less funds. This means smaller unit size and less community space. We also expect to see more development in place-based sites where residents can walk to shopping and services are easily accessed. We expect to see the need for affordable housing for seniors to increase significantly with an increased focus on service-enriched housing to allow residents to age in place. We also anticipate that communities will increase their dependence on housing to solve social and economic issues that are not actually related to housing, such as the charging of impact fees or requiring the addition of public parking spaces.
Q3: Crystal Ball: Incredibly, that 2018 will continue in the same vein as 2017. We believe that access to and pricing of debt, investor interest and access to capital, and overall conditions will keep the remarkable housing run alive. Even if there is tax reform (we doubt anything meaningful gets done this year), we believe that some reform is already anticipated and accounted for and that the overall market health will absorb the changes and continue to operate at a high level. The best apartment market of our lifetimes continues into 2018.
Q3: Crystal Ball: In answering this question about trends in affordable housing in 2018, we concluded that it was important to establish where we are today. The biggest issue that we see impacting affordable housing presently is uncertainty in Washington and in particular, uncertainty around what is happening with tax reform. With the Low-Income Housing Tax Credit Program being the main vehicle for the production and preservation of affordable housing, what happens with tax reform will have a material impact. Presently, investors are waiting to see how tax rates will be changed, which will affect how they buy tax credits. In this period of uncertainty, credit pricing has been conservative resulting in lower proceeds for housing unit production and preservation, which in turn causes funding gaps that have to be filled in some form. What we see impacted primarily is the 4 percent preservation transactions; it’s more challenging to refinance and rehabilitate existing properties in need of larger scale capital improvements to preserve this housing. There is talk in the industry that if corporate tax rates are lowered and investors seek to buy fewer credits as a result, there may be other ways to stabilize yields, but these measures cannot be implemented until there is clarity in Washington around the tax codes. In addition to this, developers are seeing huge increases in construction costs driven by increasing labor costs, which have been impacted by increased demand in a climate of low unemployment. These factors taken together along with recent catastrophic storm events suggest a trend toward continued challenges to finance housing, especially housing preservation. Our hope is that the public and private sector work closely together to resolve some of these challenges that we are seeing as the need for affordable housing continues to be a huge issue in the U.S.
Q2: Mixed-Finance Property:
- Know your programs. It is important not for just the compliance department to know the applicable programs for a mixed-use financed property, but for the site staff to also know and understand the various programs. The site needs to know what services have been promised. Also, they need to understand what agencies require reporting and will be completing audits.
- You must be able to communicate the eligibility requirements to your applicants and residents. You don’t want one apartment to appear to be more desirable or less desirable than another apartment just because of the program that is associated with that apartment. You don’t want someone thinking you wouldn’t rent them an apartment just because you didn’t like them. Maybe their income is too high or too low to qualify for that particular apartment. Let them know and offer to put them on the waitlist for the type of apartment they would qualify.
- Understand your target market. Not only must you understand your target market, but you must direct your advertising to that market. Monitor the results of your advertising. If you are not getting qualified applicants, then don’t keep spending money on that advertising source. Remember traffic is not the same as qualified traffic. Make sure you are reaching your specific market.
- Site and compliance employees must understand the programs. A handoff bible from development should include all of the pertinent information regarding the financing and program requirements that the site needs to operate the property in compliance. Employees should be trained on all programs before operations begin.
Q3: Crystal Ball:
- There will be less money. The sources of funding affordable housing are limited. Whether it will be 2018 or later, we will see a reduction of funds in the existing programs. HOME funds are an easy source to reduce since there are no annual contract requirements. Project-based Section 8 and Housing Choice Vouchers are also at risk for reductions or significant changes. It will be a bigger and longer fight, but eventually residents may be required to pay a greater portion of their income for rent.
- Energy Efficiency. The push for more energy efficiency will continue. Programs are not going to just encourage it, but require it. The reporting requirements of the energy efficiency initiatives will increase. Agencies want to see the results of the funds they are investing.
- Tax Reform. We will see some form of tax reform. The question is how that will affect the pricing of LIHTC. The market is anticipating this. So, has the pricing already adjusted in anticipation, or will there be more reduction. I suspect the corporate tax rate will not be as low as initially discussed—many in the LIHTC industry have settled on a 25 percent rate. There will be a use for LIHTC from a corporate tax planning point of view. There is still a corporate need to help provide affordable housing. However, the question will continue to be how variable will the pricing of LIHTC be and how difficult will that make planning a development.
- Healthy Housing, Supportive Housing and other targeted programs. More and more housing will be used as a catalyst to address other larger or broader societal issues. There are more questions than answers. Such as how can housing have a positive impact and be heavily coordinated with health outcomes and health care delivery or how can housing be integrated into the effort to address domestic violence, substance abuse, foster children aging out of foster care, or any number of larger issues.
- Area of Opportunity. New construction of housing under the LIHTC program will be directed toward areas of greater opportunity: schools, parks, health care, entertainment, transportation. This may increase the cost of development and redevelopment of sites. Will cities agree to state and national priorities or will this cause an issue of getting developments approved is the question.
Q1: Sustainability and Green Management: I have no idea about emerging trends in sustainability and green stuff as the industry likes to call it. But, in all seriousness, we have been renovating USDA projects since 2008 in large portfolio groups. These are now layered with various programs such as USDA 515, LIHTC, USDA 538 and tax-exempt bonds. Our construction schedule is aggressive as we renovate in eight-10 units per day! We gut the kitchens, baths and replace with brand new custom-made cabinets, countertops, sinks, appliances, plumbing fixtures, tubs, toilets, HVAC, water heaters, light fixtures, ceiling fans, electrical panels, etc. all within the hours of 8 a.m.-6 p.m.—occupied! We complete the project over the next four weeks by replacing windows, playgrounds, parking lots, landscaping, accessibility requirements/needs, etc. We have renovated approximately 200 properties in this manner since 2008.
We consider sustainability as we are replacing the old products with products that have longer life timelines for roofing materials, windows, doors and most importantly, we are installing LVT instead of carpeting. We also are using LED lighting where possible.
Q2: Mixed-Finance Property: Almost of our properties have multiple program layering and it can be tough to deal with but most of us in the industry are very accustomed to dealing with this issue. We simplify this process as much as possible for our site managers while complying with all programs by using checklists and creating forms that comply with all programs. This process also allows us to keep one set of tenant files where others may be using duplicate sets of files.
Q3: Crystal Ball: In 2018, we are hopeful to see repetitive, time-consuming regulations and requirements cut out from programs and for various agencies to work together to assist in simplification. We already received requests to submit our recommendations and this is a great sign of good things to come from an administration that wants to cut unnecessary work.
Community Housing Partners Corporation
Scott Reithel, NAHP-e, CGPM, vice president. Kim Strahm, CHP communication partner, also contributed to this answer.
Q1: Sustainability and Green Management: One trend Community Housing Partners Corporation (CHP) is embracing and has implemented is the creation of green maintenance policies and procedures, which are clear, cohesive and easily accessible. We are doing so through the development and implementation of a web-based operations and maintenance portal. Once fully implemented, content will be delivered via a user-friendly, multimedia format, which is regularly updated and frequently utilized by staff.
The key outputs of the portal center around the cohesive documentation of CHP’s green operations at our multifamily properties—documented policies, standards, procedures and training leading to measurable operational efficiencies. These operational efficiencies include:
- Equipment standards leading to bulk purchase savings and efficiencies in staff training.
- Consistent practice of preventative maintenance to ensure longer lifespans of building equipment and fewer work orders. A secondary impact will be customer satisfaction/fewer resident concerns.
- Transition from paper-based to digital preventative maintenance workflows leading to easier measurement, verification and staff performance management.
- Improved knowledge and accountability for more proactive monitoring and faster identification of problems such as water leaks and mechanical issues.
Additionally, many of CHPs’ properties were developed over a span of 30-plus years and the buildings are at various levels of green certification. By documenting the current state of “green” and customizing operating policies, CHP can ensure staff training matches the current green features of a given property; it also allows for easy revision or upgrades as the properties undergo renovation.
CHP will also benefit from more effective training for maintenance team members. CHP’s Energy Solutions Division is a HUD-approved CGPM trainer and will develop training modules, which are relevant to each of our rental properties. A training library will be developed for staff onboarding and training, including robust video content. By having current training materials easily available and accessible, CHP will decrease the impact of property staff turnover on operations.
CHP’s online green operations and maintenance portal will ultimately ensure that our properties will be able to fully leverage the energy efficient and green building features included in each CHP community, thus resulting in better air quality, and reduced energy and water consumption across our portfolio.
Q1: Sustainability and Green Management: The key is a systematic continual rehab and upgrading of the property and its systems. LED lighting conversions and Energy Star upgrades should be in process or completed. Whether funded from operations or reserves, everyone needs to be focused on the capital needs of the property and have knowledge of the plan.
Side Note: As electric cars are becoming more affordable, we are adding changing stations on our properties with power company incentives. We were having issues with extension cords coming out windows across sidewalks to cars. We want to be part of the solution of creating a better environment.
Q3: Crystal Ball: We will continue to be asked to do more with the limited resource of affordable housing especially the deeply subsidized units. Specifically the housing of the homeless. The homeless issue facing cities and towns across this country is reaching crisis levels in many communities and we will be asked to be part of the solution. This will not be easy and we need to understand the issue and have a plan to deal with it. The HUD initiative has merit but critical to any plan to house the homeless is supportive services. We need to anticipate and, I believe, be willing to be a participant.
Q3: Crystal Ball: My crystal ball tells me that the biggest trend in affordable housing will be owners/management companies focusing on “Preservation.” With all the uncertainty coming out the White House and with proposed cutbacks in funding across all affordable programs, federal and state—preservation is the only means of survival. So many existing management companies and developers are opting out of affordable housing all together or they are hunkering down and protecting their affordable assets as a means of survival. I am proud that the board of Federation Housing, Inc. sees the downward trend and has taken action across its portfolio to ensure that future generations will be able to benefit from affordable housing, which appears to be under almost constant attack.
Q2: Mixed-Finance Property: Mixed-finance deals are becoming the norm rather than the exception. Successful management of a mixed-finance property requires consistent and effective communication, training and collaboration. Communication between all parties involved in the transaction is probably the most essential factor in successfully managing mixed-finance assets. Many firms are comprised of multiple departments working in tandem to construct these complex deals. It requires an organized and continuous group effort to keep everyone apprised of every financial and regulatory commitment and the repercussions for noncompliance. Miscommunication of just one essential piece of the puzzle may result in financial or regulatory consequences.
Communication must be followed up with adequate training for corporate management staff as well as site staff. You cannot meet objectives and expectations without proper tools and knowledge. Successful management of these programs requires more than reading a how-to manual on each finance layer. Program regulations are complicated and often contradictory. In order to successfully manage these mixed-finance communities the staff must be well versed on how these program layers interface. Remedial and ongoing training is essential since program regulations are ever changing.
Site employees are the instrumental feet on the ground members of our management organizations. They can’t, however, be expected to successfully manage a community without corporate support. Corporate management and compliance staff members must train and work in partnership with site staff to meet the various financial, regulatory and ownership objectives of each program. Developing effective workflow processes between site staff and corporate departments will help to identify everyone’s responsibilities. The workflows will need to be frequently monitored and revised for staffing and/or regulatory changes.
Mixed-finance deals are difficult to piece together and challenging to manage. Early, comprehensive communication, adequate training, regular monitoring and staff collaboration may not be a secret formula, but can be an effective formula for success for managing mixed-finance properties.
Q2: Mixed-Finance Property: Successful management of mixed-income developments requires a management strategy that acknowledges the unique challenges facing the neighborhood and its residents. Managing mixed-income communities requires strong property management skills, knowledge of market conditions, and an understanding of public programs. Most importantly, we believe that all residents must be treated equally and with respect. Our staff understands the complexities of managing mixed-income housing, possesses the technical expertise to handle multilayered compliance issues, and offers the personal touch needed to work with residents of diverse backgrounds. We also manage our residential developments to market-rate standards, and work with residents and the larger community to address the nonhousing needs and issues that exist in the community.
Q3: Crystal Ball: We expect to see increasing interest in the creation, management and programmatic support for healthier communities. The health of low-income families and children is often negatively affected by their built and social environment. Creating successful healthy communities, particularly in affordable and mixed-income housing developments, requires an intentionally integrated approach as well as a long-term commitment on the part of the owner and the management team. We are building and managing communities with the understanding that a healthy community requires attention to the physical design combined with holistic property and human services management to encourage healthy individual behavior and social relationships. Our particular Healthy Communities Program starts with initial site selection, project design and building materials—and expands to include maintenance methods, provision of both public and private amenities, programming for residents and finally, improved access to health care services.
Owners and managers, more and more, are going to be tasked with moving the needle on health outcomes.
Northwest Real Estate Capital Corporation (NWRECC)
Noel Gill, NAHP-e, SHCM, CPO, executive vice president
Q1: Sustainability and Green Management: Some emerging trends in the west are going to solar energy and steel framing; these will help reduce job site waste and can be recycled. These opportunities can be further enhanced by partnering with modular builders. Landscape design that incorporates local indigenous plants and trees with the elimination of large lawns can dramatically reduce water consumption. Water cistern collection can also be used for toilet water to further reduce water and sewer bills.
Q2: Mixed-Finance Property: The most important aspect of going into mixed-finance assets is the finance budget/operational proforma; these expectations must be realistic and align with the proposed management model. An effective preventative maintenance program is critical for planning and forecasting expenses; planned expenses allow for better control of DSCR requirements and deployment of replacement reserve funds. This will ensure that your lender and investor expectations are met and the physical asset is maintained well into the future.
Q3: Crystal Ball: Focusing on rural communities, goods and services inflation is growing faster than the rents can be increased to support the property expenses.
Q3: Crystal Ball: I predict that the affordable housing industry will start to provide enhanced training and retention opportunities to attract and keep talent that mirror the opportunities afforded by STEM (Science, Technology, Engineering and Math) industries.
Because more schools have begun to focus on preparing students for STEM jobs, I predict that the skills gap will increase between general knowledge hands-on skilled workers and those educated and trained for STEM jobs.
To bridge this gap, our industry will begin to see a greater shift in the traditional onboarding and training of talent happen in 2018. We will see more apprentice programs and partnerships to build workforce-training programs. I predict a need for greater emphasis on promoting careers in our industry to students as young as high school in order to solve the impeding skills crisis.
Q3: Crystal Ball: As I look ahead to 2018, I can see that certain trends in the affordable housing business are likely to continue while others will accelerate.
Among the continuing trends, I see the following:
- There is likely to be a continued “gobbling” of the existing Section 8 portfolio by recent newcomers (last five years or so) to the industry who are from different backgrounds but with a common theme of “chasing yield.”
As interest rates have remained at record lows over the past six-seven years, it is no secret that investors have been looking for yields that exceed that of bonds with a similar safety rating. Voila! The ever-diligent investors found Section 8 with backing from the federal government and the race was on to building portfolios. Look for it to continue as older owners liquidate their portfolios at record prices.
- The very same “record prices” for Section 8 transactions are putting pressure on management to “reign in” operational costs to offset “overpayment” for these relatively scarce number of Section 8 projects. Look for this to continue … and for fee managers, this will also mean pressure on management fees.
- In line with the record number of project sales and record prices, look for the intensification of demand for Section 42 Tax Credits in connection with Section 8 preservation and housing authority RAD transactions creating lengthened waiting periods for credit awards. For all-star management firms, this can represent an “opportunity” to assist these new owners in getting to the top of the “point score range” necessary to get Section 42 allocations.
- Managers are “aging in place” along with their tenants. Therefore, “generational retirements” will put pressure on management firms for hiring and training new managers in the complexities of affordable housing. This will not be an easy task and puts new emphasis on the value of the AHMA’s and other training organizations to help these management firms meet their training needs.
- “Generational retirements” may well engender a looming shortage of skilled site and regional managers. This will create upward wage pressures and competition for skilled personnel, which in turn will come in conflict with the pricing pressures mentioned in No. 2 above.
- Watch as the “soaring demand for affordable housing” due to:
Aging of the boomer population (10,000 person per day turning 65) will lengthen waiting lists att elderly properties and create significant demand for tax credit elderly properties;
Hurricanes, floods and natural disasters will cause spiking demand in certain regions of the country;
… Creates a crisis atmosphere where cities and towns start to make a lot more noise about the need for more affordable housing to meet the needs of their citizens.
- Courtesy of Hurricanes Harvey and Irma and perhaps others yet to come, look for an increase in insurance rates related to 2017 hurricane season.
Q1: Sustainability and Green Management: We have limited experience. Two buildings that were purchased and obtained tax credit in addition to Section 8 have taken the green option. We have another two buildings that are also receiving tax credit and will be rehabilitated with the green option. Both will start their rehabilitation in 2018.
Q2: Mixed-Finance Property: We are currently managing seven COMBO projects. In all cases, we have established a mass recertification date where we do both the Section 8 and tax credit recertifications at the same time. This makes it much easier on the resident but does stress the on-site staff given all the required work. It would be easier if we could use EIV for the tax credit program, which makes a lot of sense but just does not seem to be getting the necessary approval. Usually keeping two sets of books gets one a free pass to prison, but not for HUD and the IRS COMBO projects.
Q3: Crystal Ball: Given all the open positions at HUD that have not been filled, I cannot but wonder how HUD will continue to operate. We are already seeing delays of three months in funding for the Section 8 subsidy billing with repeated delays of similar lengths of time for the same properties. It appears as if there isn’t sufficient funding to cover the existing HUD contractual obligations. This may prompt more owners to opt out of Section 8 resulting in loss of precious affordable housing.
Q2: Mixed-Finance Property: The industry is leaning heavily to mixed financing with both new construction and renovation/rehab work of existing sites. The ability to successfully manage these properties rests on a few key items: communication, organization and recognition. The properties are under tremendous regulatory oversight immediately so working with the ownership representative, syndicator/investor, and key management personnel early on is vital. Understanding the commitments made, timeline and impact in order to establish from the first day the appropriate procedures/policies and training. The final piece is staying active and involved with all related financing and monitoring agencies. Regulatory changes come often and being on top of new requirements will allow more complete and accurate implementation and the opportunity to make timely adjustments and decisions.
Q3: Crystal Ball: Renters will continue to look for amenities especially in LIHTC developments; the tax credit housing units in many areas are competing with market-rate developments placing emphasis on competitive elements. HUD housing developments will be exploring renovation opportunities through financing options adding regulatory complexities.
Q2: Mixed-Finance Property: Take your time to read and understand each regulatory agreement and related documents. Create a format that easily captures compliance requirements and information. Using a software system is an added bonus, however keep in mind the software is only as good as the person who entered (and understood) the data. Do not rely on your memory, document, document, document.
Q3: Crystal Ball: In my opinion, special needs housing will continue to the be focus and biggest trend in affordable housing. The need for housing and services is extreme, and the supply is in no way sufficient in today’s world.
Q2: Mixed-Finance Property:
- Diversity: Mixed-finance properties bring low-income and higher-income households to live together in one building. This type of housing facilitates positive social interactions including opportunities for acknowledging, understanding, accepting and valuing differences among people with respect to age, class, race, ethnicity, gender, disabilities, etc. Further, diversity encourages employees and residents to have constructive dialogues with each other that support overall management operations.
- Allocation of Units: Having various income levels of units supports communities with retail development and plays a critical part to ongoing processes of neighborhood change and gentrification. Thus, the site has a healthy waiting list to fill vacancies and reduce vacancy loss.
- Proximity of Units: Having various set-aside units in a building all being designated as floating units allows households from various socioeconomic backgrounds to interact with each other. This type of intentional action from management facilitates residents in building relationships and overall community with each other. If management were to segregate units by income levels, as a management agent we would be communicating to our residents that one group is better than another, which is not accurate and does not create camaraderie among all parties. As a result, management would be promoting social isolation, which is contrary to our mission statement, effective management operations, and the purpose of developing mixed-finance sites.
Q1: Sustainability and Green Management: Producing and managing high-quality affordable housing has never been easy, but future trends portend that it will become even more difficult. Limited resources at the local, state and federal level is making “soft money” for new development more elusive than ever; at the same time construction costs continue to rise and the list of mandated amenities and features included in QAPs seems to grow longer and longer.
Sustainability and green features are among these mandates. I do not believe the expectations of substantial savings in operating costs have been fully realized with many of the energy-saving “innovations” due to the complexity and maintenance requirements of many. I see a movement toward the less sexy but tried and true measures that have proven effective. Things like solar water preheaters, LED lighting, high-efficiency HVAC equipment and dual/low flush toilets and low flow aerators have proven over time to be money savers and easily maintained at affordable rent levels.
I see design for resiliency playing a role next to sustainability. Recent hurricane damage in the U.S. emphasizes the importance of resiliency of our communities. Stormwater management is critical and we will see more requirements for permeable pavers, bioretention rainwater gardens and green roofs to control stormwater run-off. Simple design elements for resiliency are being examined, such as placing emergency generators or other building systems on the second floor of a building to avoid damage from floodwaters.
Finally, many state agencies have historically focused on a single energy efficiency standard, such as LEED, for their QAPs requirements; I see other certification programs becoming more acceptable by state agencies including Green Globes, Passive House and Energy Star 3.1, giving developers other avenues to meet the efficiency requirements.
Q1: Sustainability and Green Management: Affordable communities can’t ignore the need to make energy conscious decisions. While some green management trends come with a shocking sticker price, not all are that costly; and in many cases, the cost is a direct investment in your product.
Current emerging trends include installing vinyl flooring and getting away from carpet, and utilizing stormwater runoff for irrigation. Roof gardens are a great solution to developing “wasted” space. Most importantly, they can provide temperature control, but also food, ecological benefit for wildlife, and enhance the appearance of your community. Electric cars are far more affordable today than a decade ago. The availability of car charging stations for electric cars is a win-win for our residents and the environment. This trend of sharing is budding at affordable communities in urban locations, where public transportation is a necessity but not convenient to your schedule. Bike sharing racks on-site, along with ride-sharing pickup locations that easily allow drivers to find their customers, are seen as amenities to residents and contribute to our commitment to “green living” with little financial or burdensome impact on our operations.
It’s not just about improving our community and the environment; we also have a responsibility to educate our residents on methodologies surrounding energy conservation and the significance and importance of our community taking these steps. This is a trend in itself. The availability of information is ever changing, it’s not just the internet anymore, it’s social media. Utilizing those platforms to communicate with our residents on sustainable living and green management at our communities could very well be the determining factor in your initiatives’ success.
Q2: Mixed-Finance Property: Understanding the programs, how they overlap, and making sure that any subdemographic at the community is not stigmatized or segregated. It’s important that the community be treated as one, not creating any distinguishing identity to any subgroup. During a rent up, make sure the “mixed” nature of the community is considered and sequence the occupancy of the units to mirror the long-term demographic mix. Providing services or access to services for the residents is critical. Property management needs to be beyond the “bricks and mortar” and nimble enough to adjust and attend to what will assist the resident in everyday life.
You need to develop and maintain systems for record keeping and accounting that meet the needs of mixed finance. It’s extremely important that as the manager you have intimate knowledge of the regulatory requirements associated with each program, the compliance required and what needs to be reported in what format.
Q3: Crystal Ball: Understanding today’s lifestyle and making sure that the units are compatible. Items such as washer/dryers and wireless internet are no longer “nice to haves.” They need to be seen as necessary items just like ranges and refrigerators. Family properties need to have readily accessible child care. Senior communities need to adjust to the more active lifestyle seen in the demographic and make sure that amenities that were seen as unnecessary before, like fitness centers and recreational activities, are added. Parking at senior communities needs to be comparable to family properties to adjust to the senior of today.
Individuals in the affordable housing demographic have more options today. We must be more cognizant of this and know that we must market our communities. What makes our community different? Addressing the ever busy and stressed nature of people’s lives today, do we make the simple processes as easy as can be? Do we offer electronic signatures and leasing tools for on-site management teams? With competition at its highest in most markets, affordable housing owners need to get creative in bringing amenities and services to their residents; residents who are easily tempted to leave and who will leave for the newest, the best, the biggest.
Throughout 2018, you are going to see industry leaders in affordable housing continue to push the limits of bringing perceived “luxury” amenities and services to their affordable communities. How? Creativity and the entrance of new vendors into the marketplace, making materials and products available to us unlike ever before.
Q1: Sustainability and Green Management: When you think about affordable housing, you’re most likely not thinking about a state-of-the-art green design that appeals to people of all incomes. However, next generation developments are combating the negative image that surrounds affordable housing with high-quality designs that are healthy for both residents and the planet.
As the world of sustainable business continues to mature, one emerging trend is to utilize more durable, environmentally friendly materials such as vinyl plank flooring, LED lighting and programmable thermostats.
In addition to using eco-friendly materials, educating residents and site associates on how to conserve water, electricity and HVAC while staying comfortable is key to successfully maintaining a green community.
Q2: Mixed-Finance Property: Education is the key to successfully managing a mixed-finance property. By keeping up to date on program requirements and maintaining a strict adherence to compliance, site associates are more capable of working with residents to submit compliance documents and set expectations regarding lease performance, community rules and green components.
Providing the latest technology and training associates on how to use that technology to make amenities and services readily available to residents is another important aspect of managing a mixed-finance property. An example would be supplying computer-learning centers that support educational programs for all ages.
Q3: Crystal Ball: The most significant trend in the affordable housing industry for 2018 is the continued integration of technology and properties to improve communication and resident satisfaction. Other trends include redeveloping existing assets and more of a focus on connecting residents with local resources and opportunities.
Q1: Sustainability and Green Management: This doesn’t seem to be an evolving subject. Technology isn’t moving very quickly although the price of solar voltaic is making this option a lot more affordable. Most of this seems to revolve around energy savings and not necessarily sustainable construction. Or that is the emphasis from HUD anyway. I would add that the opportunities to be able to finance some of these items are more difficult for PRACs and nonprofit organizations that do not have deep reserves.
Q2: Mixed-Finance Property: In my opinion, this is all about location. If it is a good enough location (usually in a metropolitan center) then it will work. From my perspective, the management of all the different requirements creates too many duplications that politicians are not helping streamline. Therefore, it takes good systems and people with the appropriate organization skills. This also equates to more costs in the terms of wages for the right people or multiple people for paper work.
Q3: Crystal Ball: Finding creative finance options and operating procedures that drop operating expenses to allow for fewer or no subsidies but still be able to offer rents in the affordable range. Additionally figuring ways to deliver more services to residents without more funding. I would add that the creativity of financing options are going to require more partners that can work together under the tax credit programs, otherwise, developers will be disincentivized to enter into deals.
Q2: Mixed-Finance Property: Simplify the complicated. It is critical that each element of specific requirements are understood, reporting expectations are clear, and financial implications are properly budgeted.
Q3: Crystal Ball: Housing built for mixed-income residents is occupying a great deal of our attention.
In addition to adding market-rate residents into an affordable community, many municipalities and regulatory entities are looking to house the workforce or middle-income residents who earn good salaries but are being priced out of the ownership and rental markets. The definition of workforce housing is quite broad and often is designed to meet specific local needs, since area median incomes differ by region. Because this user group is not program regulated, some level of eligibility requirements need to be defined and parameters need to be clearly agreed upon. This often results in certain residences being occupied by people who earn more income than the various affordable programs and not enough income to meet market-rent requirements.
We are already developing and pursuing several projects that will serve and sustain a true mix of incomes, putting market, middle and affordable renters under one roof. With no new affordable housing programs on the horizon and no end in sight to unheard-of rents in urban markets, you can expect to hear a great deal more about this approach next year.
Q1: Sustainability and Green Management: The affordable housing industry continues to embrace energy efficiency and sustainability best practices, including LEED, EnergyStar and Enterprise Green Communities certifications. Retrofitting inefficient systems is business as usual, LED lighting is now commonplace, and the industry’s adoption of utility benchmarking software makes it easier to track performance and prove savings.
Looking ahead, sustainability trends continue to emerge that capitalize on technological innovation and price reductions. Here are two trends at the top of our list:
- Community solar. With the price of solar in steep decline, installations have been on a steady rise for multiple years. Federal tax credits and state incentives, coupled with the environmental and social benefits of clean energy, make the field very attractive for homeowners and investors. Renters, however, have historically been excluded from participating. New community solar regulations adopted by various states are changing this, and enabling renters to benefit from solar power, whether the solar is located on the apartment complex or off-site facility. Many states have developed robust community solar programs, including Colorado, New York, Minnesota, Massachusetts and Washington, D.C.
- Wireless networked thermostats. Wireless technologies and smart home devices are providing new ways to conserve energy. While Wi-Fi enhanced thermostats like Nest have been in the market for years, the adoption of wireless thermostats within affordable housing has been slow. We expect this to change with new devices that use wireless mesh networks (not Wi-Fi) to enable landlords enhanced control of temperatures and set points, and drive efficiency savings. New software platforms offer landlords remote control access over individual heating and cooling appliances, while tracking historic temperatures to ensure tenant comfort and quickly address problems.
Q2: Mixed-Finance Property: Mixed-finance properties are nothing new in the world of affordable housing, but, over time, developers have had to spin increasingly complex webs of financing to provide quality low-income housing. Developers frequently combine federal and/or state tax credits, bond financing, housing trust funds, project-based subsidies, and any other number of other programs to make a deal happen. We recently added to our portfolio a 35-unit new construction property that required seven different program types to make economics work.
One key to success in managing properties with multiple layers of financing is ensuring depth of knowledge in operations, specifically around the various requirements of each program, and how these requirements play into, or against, each other to ensure the correct rules are applied to each household. Site-level employees, from leasing consultants through property managers, need a full understanding of the practical application of each program, including not only which income limits and maximum allowable rents to use, but also the various inspection, audit and reporting requirements, as well as how to keep a property in compliance when a household goes over income. The supervisory team of senior or regional managers also should be well versed in the programs applicable to each property in their portfolio to resolve any issues as quickly and efficiently as possible.
Another key component to managing mixed-finance properties is leveraging technology to assist in mitigating human error. Mistakes happen no matter how much we train employees, either directly or through certification classes offered by the local AHMA. Property management software needs to be built to maintain the various income and rent limits, set asides, recertification requirements, and other provisions of each program type, and use unit type designations to their fullest capacity. It should send an error message requiring supervisory approval to override in the event an employee inadvertently attempts to violate program rules.
Training and technology are two of the key components to effectively managing mixed-finance properties, and both of these will have to keep pace with the changing face of affordable housing in order to ensure future success in an increasingly complex environment.