Preserving Project Based
Section 8 Apartments

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Inventory and Classification of Project Based Section 8 Complexes

• Create an inventory of all the project based section 8 properties in Miami Dade County

• Include information on when the subsidy is set to expire and whether or not the owner plans to renew (and other data).

Classification of Project Based Section 8 Complexes

• Identify projects where the subsidy will expire between now and 2011

• Identify projects in danger because they they have had trouble passing HUD inspections with regard to their physical condition (low REAC scores)

• Identify other projects that may be good candidates for acquisition by a nonprofit

Profiles of Two Owner Types

• Type #1: Owner wants to "opt out" and charge market rate rents - purchase price for nonprofit will be high Typically in more "desirable" neighborhood where the owner can charge rent higher than what is available under Section 8 Such properties typically have a high fair market value - a huge amount of subsidy would be needed to purchase and preserve affordability
  
  

• Type #2: Owner does NOT want to "opt out" but is willing to sell to a nonprofit for a reasonable price The property is in a "less desirable" neighborhood - owner doesn't want to opt-out because rents paid by Section 8 are higher than the local unsubsidized rents Section 8 contract may only have a few years left but a nonprofit could get the term extended and the amount increased Typically the building is 20-30 years old, in need of repairs and not generating much net cash flow because the Section 8 rents have been set low by HUD due to the poor condition
  

Key Variables for Acquisition by a Nonprofit

• Finding a capable and willing nonprofit developer

• Putting together a development team

• Finding an owner willing to sell at a reasonable price

• Ability to extend Section 8 contract with HUD

• Availability of long term permanent financing

• Ability to qualify for 4% "Low Income Housing Tax Credit" (or possibly, even, the 9% credit)�€

• Availability of local subsidy (SHIP, HOME, etc.)

How to Preserve Project Based Section 8 Complexes - Devising strategies for acquisition and creative financing

• Use bond financing coupled with 4% Housing Tax Credits supplemented with local subsidy.

• Innovative ways that nonprofits can partner with for-profits for the acquisition and rehabilitation of existing Project Based Section 8 buildings

• Transferring Project Based Section 8 subsidy to another building

Time line for actual preservation of such apartment complexes

• Identify properties appropriate for acquisition

• Devise strategies for acquisition and finance.

• Form partnerships with HUD, local government housing agencies, and experienced for-profits (and/or affordable housing consultants)