Managing Through The Storm In an Economic Downturn, Effective Management is Vital
By Caitlin Jones
7 min read
Tax Credit Advisor, February 2010: High unemployment has caused downward pressure on occupancies at many LIHTC properties and boosted rent delinquencies and “skips,” as more tenants lose their jobs, have their hours pared, or move out to “double up.” Meanwhile, operating costs keep rising, and many LIHTC projects face stiffer competition for renters from other tax credit and conventional properties.
Effective management of low-income housing tax credit (LIHTC) properties is important in normal times, but in this tough economy it requires some creativity. This means not only making sure that a project continuously complies with all of the LIHTC program rules, but also keeping it in sound physical and financial shape as well as keeping the residents happy.
“In the end,” says LIHTC compliance expert A. J. Johnson, of A. J. Johnson Consulting Services, Inc., Williamsburg, Va., “the basics of sound management still form the cornerstone of successfully weathering bad times – curb appeal, responsive management, and strong staff.”
LIHTC industry officials report there is a list of essentials for effective management of tax credit properties in this economic climate:
- Constant, close, and personal communications with current residents. This can help minimize tenant turnover and loss in rental income by creating a “sense of community” among residents. According to Choni Wilcox, a Regional Vice President of Bozzuto Management Company, Greenbelt, Md., this requires talking with residents to identify and meet their needs; checking on residents having financial difficulties in a friendly way and working with them; maintaining stand-alone Web sites for each property; and doing small things such as a site manager wishing a resident happy birthday while walking the property. “We try to make sure that our residents have a great living experience with us,” she says. “It’s not just about us collecting their rents; it’s about us knowing who they are, talking with them, and taking those extra minutes.”
- Staying ahead of the game. Management needs to closely monitor things like upcoming lease expirations, move-outs, and tenants with possible financial difficulties, and take pre-emptive steps to head off problems. “It’s so much easier and so much less expensive to keep a resident rather than find a new one,” says LIHTC asset manager Linda Cargill, President of Cargill Investment Group Ltd., Boston. Advises Michael Shanahan, Director of Asset Management at syndicator Boston Capital, “At lease renewals, it’s important to get out to residents well ahead of time. Don’t wait until 15 to 30 days before their renewal is due; if they’re going to start looking, they’ve already started. Get out well in advance of that and start talking to them about renewals.”
- Flexibility. Management should take a case-by-case approach, as the market and circumstances warrant, to keep current residents, including good tenants having a tough time paying their rent, and to capture new renters. This may involve offering rent concessions, upgrades, or fee waivers to new or existing residents; waiving a scheduled rent increase or even cutting the rent a bit for a wavering or strapped resident whose lease is expiring; or making it easier to pay the rent. “We offer a number of programs and ways in which people can pay their rent,” says Wilcox. One allows a tenant to pay half the month’s rent on the first and the rest before the 15th. “That helps to lighten the load,” she notes, “especially people living paycheck to paycheck.” Cargill says managers should do constant market research on competing properties and what they’re offering and then craft a well thought-out set of incentives to retain residents.
- Attention to the basics. When rental income falls and operating costs rise, it can be tempting to skimp on property maintenance. But sources warn against this, saying it’s vital to maintain curb appeal to keep current residents and attract new applicants. In addition, they said site staff need to respond promptly to residents’ maintenance requests; otherwise they may walk.
“If you have a good resident base, have the curb appeal, pay attention to the service needs of your residents, get the maintenance orders handled properly, and hire a professional staff, there’s no reason why you can’t have high occupancy,” says Chuck Durnin, Vice President of Interstate Realty Management Company, Marlton, N.J. Interstate is a unit of The Michaels Organization, which also develops LIHTC and HOPE VI projects nationwide.
Creative, Effective Techniques
Managers are utilizing other creative approaches and strategies for management and marketing of LIHTC properties.
Durnin’s company has a large, award-winning social services department that provides services and activities for residents of properties throughout the U.S. “We get involved in the local community with the residents. We provide educational programs for our residents” and other services, he notes.
Wilcox’s staff conducts weekly and monthly market surveys for each LIHTC property, gathering information on the current specials, concessions, and rent levels at competing tax credit and conventional apartment properties, and any changes in the past week.
Wilcox also noted, “We’re trying to use social media – Facebook, Twitter – to communicate with our residents.” Bozzuto has information about each property on its central Web site, and a stand-alone Web site for each property. In addition, Wilcox says there is a “fan page” on Facebook for many properties; here Bozzuto lists upcoming events, posts photos of past events, provides key information, and allows residents to communicate with one another. Bozzuto also places banner ads on some social media sites to attract applicants.
Bozzuto also utilizes a program on its Web site, called VaultWare. This permits a consumer to check out vacant apartments at a property, place a temporary hold on a unit, and submit a preliminary application. The applicant then has 24 hours to come in and bring in verifying documentation to get preliminary approval.
Interstate Management Company uses an automated internal maintenance software system that simultaneously allows it to manage its inventory costs at each property more effectively. For instance, the system can show a property’s typical monthly unit turnover rate, thereby indicating the appropriate number of extra refrigerators to keep in stock for that development.
Callahan noted that some property managers are hosting on-site job fairs for residents. He added, “A lot of properties offer some job training, help with putting resumes together, those types of things. If you have a nice community room that you can utilize for that, there’s not a lot of additional costs.
Other Techniques
Johnson, whose company reviews hundreds of LIHTC projects yearly, says other effective techniques and strategies he’s seeing at properties include:
- Developing handouts that show tenants a side-by-side comparison of the local costs of renting vs. owning. “Residents considering moving in order to buy a home often do not think about the additional costs of homeownership, such as taxes, insurance, utilities, lawn care, and repairs,” he notes.
- Changing pet policies to allow pets – increasing market share by 40% – or removing size limits on dogs.
- Implementing innovative rent collection policies (e.g., allowing weekly rent payments, credit card payments); paying security deposits for residents, or returning the deposit after one year with a one-year lease extension; flexible lease periods (e.g., 6 to 18 months); door-to-door trash collection; on-site business centers; or upgrades for residents who extend their lease (e.g., new carpet, fresh paint, ceiling fans).
- Project-based Web sites that permit visitors to submit preliminary applications online for an apartment.
