Paying It Forward: Permanent Supportive Housing for Homeless Female Veterans and Families Rises on Former Navy Land

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When completed next spring, Blue Butterfly Village in the San Pedro section of Los Angeles will be more than just another housing development. Rather, with affordable apartments and supportive services, it will provide a safe and nurturing environment for the special but vulnerable households that will have priority for occupancy: homeless women veterans and their children.

Located on land that was once part of a U.S. Navy base, the nearly $31 million project is being developed jointly by Volunteers of America of Greater Los Angeles (VOALA) and Volunteers of America’s National Office. The latter helped pursue federal 9% low-income housing tax credits, while VOALA engineered the years-long effort to obtain the site and necessary entitlements, secure funding, and get the development underway.

The location, with plenty of open space near the Pacific Oceans, is special, says VOALA President Bob Pratt. “It’s an absolutely idyllic site surrounded by a habitat for a species of endangered butterflies. If it wasn’t set aside for our use, it would be the location for million dollar homes. It’s the antithesis of what you generally think about in terms of urban locations for homeless housing; that’s part of the uniqueness.

“We added to that equation by asking ourselves, ‘What population would most benefit from such a serene and peaceful environment?’ And we decided it would be homeless women veterans and their families.”

Closed in April 2014, the transaction involves the extensive renovation of 15 vacant townhouse-style buildings with attached garages into 74 two-bedroom apartments plus a community and on-site service center. All but one of the apartments will consist of low-income housing tax credit units, restricted to households at or below 30%, 40%, or 50% of the area median income (AMI). The current local income limit for a four-person household at 50% of AMI is $40,750 a year, although the residents are expected to have much lower incomes.

Initial monthly rents will range from $100 to $906, but residents of 50 units will pay no more than 30% of their income because of project-based vouchers from the Housing Authority of the City of Los Angeles. VOALA may later seek to obtain HUD “VASH” vouchers for the remaining units.

In addition to housing, the women veterans and their families will benefit from a wide array of on-site and off-site supportive services provided by VOALA and numerous partner organizations and facilities, including a few nearby VA Medical Centers. “It’s a rich network of local services plus on-site services,” says Pratt.

These services will include case management, health care, various types of counseling, Early Head Start and Head Start programs for the children, van transportation, job training and job placement, and educational programs geared toward veterans at the local community college.

Pratt says many of VOALA’s service programs “aren’t veteran-specific. But we prioritize all those programs for veterans…Our funders’ preference is that we first and foremost target veterans populations.”

Multiple Funding Sources

The donation of the site and the receipt of housing tax credits were key to the viability of the project.

The existing buildings were constructed around 1990 as housing for Navy personnel working at the nearby Long Beach Naval Shipyard, which was closed in 1997 as part of the federal Base Realignment and Closure (BRAC) process. Under the McKinney-Vento provisions of the Base Closure Act, surplus military land must be offered to nonprofits and used to benefit persons who are homeless or at risk of homelessness. Through the city of Los Angeles, the Navy conveyed the land for the project around 2006 to VOALA, which provided the site to the limited partnership owner of Blue Butterfly Village under a 99-year ground lease.

The largest chunk of funding is roughly $18.4 million in equity from the Chicago-based National Equity Fund, which syndicated the federal 9% housing tax credits at a price of $1.04 per dollar of tax credit. NEF acquired the limited partner interest in the project on behalf of Bank of America Merrill Lynch, which is both the tax credit investor and construction lender.

The California Tax Credit Allocation Committee made the housing credit award for the project in mid-2013.

Other funding sources included a soft loan of federal HOME program monies from the Los Angeles Housing Department; a soft loan of state Mental Health Services Act (MHSA) dollars from the California Housing Finance Agency; a soft loan funded by an Affordable Housing Program grant from the Federal Home Loan Bank of San Francisco; a grant from The Home Depot Foundation; and developer equity.

The MSHA assistance is earmarked for 12 of the apartments, which must be occupied by residents certified as having a mental disability. Pratt said this shouldn’t be difficult given the prevalence of PTSD and sexual trauma in the military.

Appealing Project

Los Angeles-based Debbie Burkart, National Vice President of Supportive Housing at National Equity Fund, says NEF was attracted to the Blue Butterfly Village project because of its existing relationship working with VOA on other projects and because of NEF’s “strong presence in doing these kinds of deals in the LA area.” In addition to financing several permanent supportive housing projects for homeless veterans in the Los Angeles area, NEF has funded such projects in other parts of the country.

“We currently have over 2,000 units that are up and running or under construction, specifically targeted to homeless vets, in 15 states,” says Burkart. “We’ve been in this space doing housing for homeless veterans since 2006.”

In addition to tax credit equity, NEF and its parent organization, the Local Initiatives Support Corporation, under their Bring Them HOMES initiative, provide pre-development grants and other kinds of financial assistance for permanent supportive housing projects for homeless and low-income veterans, especially those returned from the Iraq and Afghanistan wars. Funding sources have included grants from Citi Community Capital, the MetLife Foundation, and Northrop Grumman.

A Number of Hurdles

VOALA had to confront a myriad of challenges to make the Blue Butterfly Village project a reality. These included overcoming an early decision by the city, which issued the RFP for the Navy land, to limit the housing project to only 15 units for homeless veterans; dealing with Navy deed restrictions and construction deadlines; obtaining all the necessary entitlements and building permits; connecting the site to utilities; and competing for an award of 9% housing tax credits in California’s highly competitive program.

It took a second attempt to win a tax credit allocation, according to Michael Seltz, Vice President of Housing Development in VOA’s National Office, who described Blue Butterfly Village as a special project “for the people it will serve and the number of funding sources.”      According to Pratt, the tax credit application for Blue Butterfly Village couldn’t obtain a perfect score because of the site’s rural characteristics; it wasn’t close enough to public transit and certain other amenities. However, the application was successful on the second try because of fewer competing applications in the funding round due to the demise of California’s local redevelopment agencies and the gap funds they once provided for many LIHTC projects.

Now, with the toughest hurdles behind, Pratt is looking forward to the time when Blue Butterfly Village opens its doors to its initial residents – who might even spot the endangered Palos Verdes Blue Butterfly fluttering about on their first day.

“It’s been a long time coming,” says Pratt. “The only regret is not being able to have this housing available for such a high-need population sooner. But that’s the nature of the beast – with land use, entitlements, tax credits, and all the other things that came into play here.

“I was always philosophical that this was going to happen; I just wasn’t sure when. Happily now we are sure.”

 

Sources and Uses Summary
Permanent Sources  
Low-Income Housing Tax Credit Equity (NEF/Bank of America Merrill Lynch) $18,356,951
Navy Land Donation $6,550,000
Soft Loan, Los Angeles Housing Department $2,673,764
Soft Loan, California HFA/Mental Services Housing Act $1,257,960
Soft Loan from Federal Home Loan Bank Affordable Housing Program Grant $1,000,000
Grant from The Home Depot Foundation $500,000
Deferred Developer Fee $600,000
Total Sources $30,938,675
   
Uses  
Land/Acquisition Costs $7,226,716
Rehabilitation Costs $14,173,844
Architectural/Engineering/Survey $856,868
Reserves $924,033
Construction Interest and Fees $945,490
Legal $135,000
Construction Contingency/Other Costs $4,676,724
Developer Fee $2,000,000
Total Uses $30,938,675