Detroit
By Mark Fogarty
6 min read
Collaboration sustains affordability
An ambitious Detroit program to preserve 10,000 existing affordable multifamily units and build 2,000 new ones is moving quickly to prevent the potential 15-year opt-out of a large number of Low Income Housing Tax Credit projects and sustain affordability in the Motor City.
According to Tahirih Ziegler, executive director of the Detroit office of the Local Initiatives Support Corp., the $250 million effort, announced last year, could see work on units begin this year. Three groups are collaborating in an effort that would upgrade the units as an incentive to keep them affordable past the opt-out window.
The Affordable Housing Leverage Program, a partnership between LISC, the city of Detroit’s Housing and Revitalization Department and the Michigan State Housing Development Authority, will be divided into three separate pools. LISC is raising $125 million. The city is on the hook for $50 million, while MSHDA plans to supply the other $75 million using four percent and nine percent LIHTC bonds.
There’s lots of demand for affordable housing, with many city residents paying up to 50 percent of their income for housing, Ziegler says. Demand includes some 10,000 homeless people in need of affordable housing.
The partners are ready to get started. A Notice of Funds Availability has been posted, says Ziegler, who expects to issue a new NOFA each quarter. “We’ll be allocating funds each quarter for the next five years.
“We have a lot of regulated affordable housing units and then we have some unregulated. The effort of the city of Detroit is to try to figure out how we can maintain, recapitalize and preserve the units we do have. And then bring some additional units to assist with some of the demand for affordability that’s needed in the market.”
Ziegler says LISC has already raised $20 million of its target of $125 million and thinks this upcoming building season will see some work in progress. LISC wants to raise $50 million in philanthropic, corporate and grant funds, she adds.
“We’re also raising $75 million in low interest capital so we can provide gap financing to preserve these units.” She is hoping to get that from banks, philanthropies and foundations.
“It’s a huge commitment that the city is leading, along with LISC and MSHDA.”
Racing the preservation clock
Some 8,800 of the 10,000 existing units are at risk of losing affordable status between now and 2023, while 1,200 are naturally occurring affordable housing, according to Julie Schneider, deputy director, policy development and implementation, of the city Housing and Revitalization Department.
“The city plan, providing incentives to property owners to keep their property affordable, is one that’s really needed in the market,” Schneider says on a michiganradio.org podcast on the topic last October.
Ziegler says the funds will be customized to the needs of individual property owners. “It’s more than just the basics. Not just that the units are up to code, but they’re safe, they’re energy assisted, they have amenities that are coming online in the market.”
She says the program will have a citywide focus, but also target multiple areas including Downtown, Midtown and some outlying neighborhoods.
“I do think that is a real issue,” Ziegler says of the opt-out potential. “But we’re providing something to property owners that would compel them to stay with their affordability.
“So if we come up with some products that will help property owners renovate, so they are not having to drain their reserves, and they’re able to keep their affordability, then it’s a win for them.
“And it’s a win for Detroit because we have a population that keeps declining. We have to make sure we’re offering the best kind of opportunities and units for affordable housing, so we don’t lose one of our population demographics. We’re trying to attract new people to Detroit but we also need to make sure current residents have the amenities and the high-quality units that may be offered in other parts of Southeast Michigan.”
Detroit LISC said that since 1990, it has provided more than $202.6 million in grants, loans and program investments, leveraged $896.1 million in physical and community development dollars and financed the creation of more than 6,200 units of affordable housing.
With this program, Ziegler is looking to make a big impact. She says a study in 2013 indicated there were 20,000 units that may be at risk. “We’re looking at half that portfolio right now. We’re making a pretty good dent.”
Car company rehabs train station
With the new housing, the city wants to attract people to move in to boost its population, as well as serve the needs of new commercial ventures, such as one by Ford Motor Co., which has bought and will develop the Michigan Central Train Depot for a new facility.
Ziegler says building affordable units there would create a mix with market-rate ones.
According to local news reports, Ford paid $90 million for the empty train station last year and plans to make it the hub of a tech campus that will employ 5,000 workers. LISC described the divvying up of the partnership’s parameters this way: “Detroit LISC manages the application and preliminary underwriting processes on behalf of the AHLF partnership and will manage the award and underwriting of low-interest loans, philanthropically-backed soft debt and capital needs assessment grants ($125 million). The City of Detroit will manage the award and underwriting of federal and local sources of soft debt, ($50 million), and MSHDA will manage the award and underwriting of low-interest tax-exempt bond loans and gap financing ($75 million).”
The need is there. As Scott Beyer reported in the January 2018 issue of Tax Credit Advisor, a much-heralded rebuilding renaissance in Detroit spearheaded by Dan Gilbert, chief executive of Quicken Loans, has been confined to the central business district and a few residential areas and hasn’t benefited much of the city, and could even be siphoning off scarce city dollars from poorer neighborhoods.
Ziegler praises Gilbert’s efforts. “Everything he’s doing is very much needed in revitalizing Detroit,” she says, but more can come from other corporations, nonprofits and philanthropies in the city.
Still, Ziegler is quite optimistic about the future of Detroit, “Because all those entities seem to be working together to get on the same page and the same rapport to move things forward. It’s a very exciting time to be in Detroit.”
Story contacts:
Tahirih Ziegler, Executive Director. Local Initiatives
Support Director, Detroit LISC. [email protected]
Julie Schneider, Deputy Director, Policy Development and
Implementation, Detroit Housing and Revitalization Department
[email protected]
