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Page 40 — Multifamily Properties Quarterly — May 2021 www.crej.com Affordable Housing L ast issue’s Affordable Hous- ing Spotlight shone on the successful private sector developers and examined how they have moved into a space formerly occupied almost exclusively by the public sector. This month, the focus will move to the public and nonprofit devel- opers who are now behaving and performing in an entrepreneurial way like their private sector coun- terparts. As a reminder: The Great Depres- sion led to the passage of the National Housing Act in 1934, which gave birth to the mortgage insurance programs of the Fed- eral Housing Administration and the passage of the U.S. Housing Act of 1937, which created the U.S. Housing Authority and the subsidy programs for local pub- lic housing authorities. Until the early 1970s, most affordable hous- ing in America was developed by housing authorities with funding directly from the federal govern- ment. At about the same time that the 33 buildings of the Pruitt-Igoe complex in St. Louis were being imploded, Congress amended Sec- tion 8 of the Housing Act of 1937 to create a system for production of housing by the private sector with rental subsidies from U.S. Department of Housing and Urban Development. And about that time, the direct funding from the federal government to housing authorities for production of new units began to be drastically cut back. Because operat- ing expenses for Section 8 projects increased at a rate faster than anticipated, gov- ernment fund- ing of the rental subsidies lagged, FHA-insured loans began going into default and the annual federal budget process couldn’t predict the size of the sub- sidies. That imperfect storm forced the government to shorten the terms of the subsidy contracts and create new programs to prop up the old one. Those problems, along with other market dynamics, led to the creation and passage of the Tax Reform Act of 1986, which brought forth the Low-Income Housing Tax Credit and Private Activity Bond programs. With legislatively mandated limits, structures and stricter controls, those are hous- ing programs administered by the Treasury Department. Because of the built-in limits, LIHTC and PAB programs have a totally predict- able budgetary impact and we now have a system of true public-pri- vate partnerships that are the pri- mary drivers of affordable housing production today. Administered by the Colorado Housing and Finance Author- ity, LIHTC and PAB in Colorado are among the most equitable and transparent in the country. That dynamic, combined with the growth and stability of the economy, the quality of life and the political will that recognizes the need, has drawn profit-motivated developers from around the coun- try who compete not only with each other for the scarce resources of LIHTC and PAB but also with public housing authorities and pri- vate nonprofit corporations serving similar and often different low- income populations. In this issue, you will read the stories of housing authorities and nonprofit organizations that have been extraordinarily successful in affordable development and have, in some cases, become vertically integrated to create operating effi- ciencies and economies of scale that let them compete well, and how they cooperate (play well) with others to make projects work. You will hear from urban, subur- ban and small regional housing authorities and local, statewide and national nonprofits and get their perspectives, which, while different and unique, share much with each other and their for-profit contemporaries. s From the desk of Rodger Hara: Shining the light on public & nonprofit development Rodger Hara Principal, Community Builder Realty Services 40 41 41 42 Contents The evolution of the public housing authorities Sam Betters Sun Valley project uses community-driven wish list Ryan Tobin and Slavica Park Affordability in Aurora: Patience and partnerships Craig Maraschky Thriving with public-private partnerships & LIHTCs Sarah Smith Housing authorities must become entrepreneurial Diane Leavesley Use a market-rate developer mindset when possible Jeff Feneis Mercy Housing continues Colorado development work Dee Walsh Creating communities to help older adults thrive Jim Goddard 42 43 43 44 I n 1976, I was hired by the Love- land Housing Authority as a program manager and in 1981 was appointed its executive director. Being a one-trick pony, I remained in that role until I retired in November 2018. Early in my career I attended a housing conference at which the keynote speaker was Dr. Bill Boast. The title of his presentation always stuck in my head (not many things do): “Now That You’re an Execu- tive Director, are You as Smart as a Cockroach?” It was the story of the dinosaur and the cockroach. When the “pond” began to dry up, the cock- roach, which has been around since the time of the dinosaur, was able to adapt to its changing environment and thrive. Well, we all know the fate of the dinosaurs. This is a story about embracing change and the environment that allowed that to happen. Once upon a time in Colorado (and all around the country), afford- able housing was produced with something other than low-income housing tax credits; and about the only entities producing this housing were local public housing authori- ties. As an executive director of one of those housing authorities, I was fortunate to learn my trade here in Colorado. When I began my career, there were a number of people who influenced me. Directors like Jack Quinn in Pueblo and Dick Sullivan from the Colorado Springs housing authorities. Around the same time, 1977, the Colorado Housing and Finance Authority – a relatively new agency created by the state Legisla- ture in 1973 to address the shortage of affordable housing – appointed David Herlinger as its second execu- tive director. With Herlinger, CHFA would become one of the most impact- ful “institutions” on the affordable housing industry in Colorado. The other state agency responsible for addressing afford- able housing in Colorado is the Colorado Division of Housing. In the mid-1970s to early ’80s it was headed up by John Maldonaldo – another early and creative force in Colo- rado’s affordable housing history. Prior to joining the DOH, he helped create and direct Colorado Hous- ing Inc., a nonprofit that launched many mutual self-help organizations throughout the state. During Mal- donaldo’s tenure at DOH he encour- aged public housing agencies to get more creative and established ini- tiatives to encourage neighborhood revitalization efforts. These “housers” were smart and passionate about what they did and, most importantly, always looking to find more creative and efficient ways to produce afford- able housing. Like CHFA, most of the Front Range housing authorities, other than the Denver and Pueblo housing authori- ties, were established in the early to mid-’70s. Loveland was established in 1972 and went operational in 1973. Back then, a public housing author- ity produced virtually all its afford- able housing through what was known as the Low Rent Public Hous- ing program financed and operated as authorized by Congress under the National Housing Act of 1937. Most often these units were in multifam- ily developments but also the U.S. Department of Housing and Urban Development funding could be used to build or acquire “scattered-site” units. The biggest challenges in oper- ating these units were a lack of pre- dictable funding and excessive and overprescriptive program regulations. By design, the Low Rent Public Hous- ing program constrained any local control over the administration and finances of those units. About the same time as these Colorado housing authorities were starting to form, Congress passed the Housing and Community Develop- ment Act of 1974. This watershed piece of legislation created the Sec- tion 8 Existing Housing Certificate, the New Construction and Sub- stantial and Moderate Rehabilita- tion programs. It represented a new direction for housing authorities that meant they were now going to have to be responsible for their revenue streams. In 1973, Loveland was a grow- ing town with increasing needs for affordable housing. At LHA we were doing everything we could to increase the supply of affordable housing. In 1976 we developed our first 80 new units of public housing. In 1978 we became the first recipient in the state of bonds sold by CHFA that were used to fund the perma- nent mortgage for Silver Leaf II – a Section 8 New Construction senior project built in response to housing lost from the 1976 Big Thompson flood. During this same time, and encour- aged by new funding opportunities from DOH, we were creating revital- ization programs such as the Rental Rehabilitation program – assisting private landlords with low-interest loans in specific lower-income areas of the community, using Commu- nity Development Block Grant and other grants to purchase and reno- vate existing housing with grants and loans to fix up to resell to an affordable buyer. Now that we were creating resources separate from HUD, we started developing housing by leveraging our balance sheets. It was clear to me that our approach going forward needed to be more entrepreneurial and creative. With the election of President Ronald Reagan in 1980, the heyday of HUD funding for housing authorities ended. His administration immedi- ately began redefining the federal role in the provision of affordable housing. It sought to find ways to shift the financial burden from the federal government and to incentiv- ize the private sector’s participation. It began with defunding of public housing by virtually ceasing the building of any new public housing units and emphasizing the Section 8 programs. With the passage of the Tax Equity and Fiscal Responsibil- ity Act in 1986, Congress created a landmark overhaul of the federal tax code, which resulted in a seismic shift in the affordable housing indus- try. Section 42 of this new Internal Revenue Code authorized the LIHTC program; and the 9% and 4% pro- grams were born. I quickly realized we needed to improve our skill sets if LHA as an organization was going to survive and thrive in this new environment. I started going to different types of conferences. Instead of the tradition- al menu of public housing and Sec- The evolution of the public housing authorities Sam Betters Retired executive director, Loveland Housing Authority Please see Betters, Page 45