The HUD assisted housing industry is at a very dynamic
point in its history. Elected government has not
seen fit to allocate significant resources toward
the construction of new affordable housing units
since the late 1970s. This has resulted in a tremendous
under-supply of housing that is affordable to lower
income Americans. Recently published data suggests
that over 80% of low-income individuals are under-housed
or are paying over 35% of their income toward housing
costs.
Expiring Use. Much of
the current affordable housing stock is subject
to expiring subsidy and use restrictions. This means
that owners of over 8,000 HUD assisted projects
and many other owners of older tax credit projects,
etc. will face the choice of renewing contracts
(often at much lower rent levels than before) or
to opt out and begin to operate properties on a
market basis.
Such action has the potential of disrupting the
lives of many needy residents and the loss of affordable
housing assets to local communities. Low and very
low-income seniors occupy almost 50% of the HUD
units. Given the age of the properties, many of
the seniors have aged in place and are now feeble
and in need of assistance with daily living activities
(ADLs).
Given the significant losses to the nation’s
existing affordable housing stock (estimated to
exceed 3,500 units over the past 2 – 3 years),
and the tremendous extra cost associated with rebuilding
such inventory vs. preservation, HUD and Congress
have recently identified the loss of affordable
housing as a major problem and have allocated significant
resources to combat the problem.
Property and Neighborhood Deterioration. Due to
the age of many of the above affected properties,
many are in need of significant rehabilitation and
upgrade. It has been our experience that many are
experiencing significant “system” failure.
The cost of repair often exceeds $15,000 to $60,000
per unit.
Moreover, the neighborhoods wherein many of these
properties are located have also undergone deterioration.
Often, the subject properties are a leading cause
related to such blight.
Complex Partnership Issues.
Most of the nation’s existing affordable housing
inventory is held in older partnerships. Such partnerships
are now beginning to experience issues related to
phantom income taxes, maturation of partnership
notes, etc. Additionally, partners often have conflicting
goals related to continued ownership, property improvement,
etc. This makes it all the more difficult to get
existing owners to come to agreement on properly
maintaining properties and to initiate services
needed to deal with the changing social conditions
of residents.
