Really helpful Bo. I have been waiting for a piece like this. I agree that the margins for error seem quite thin given lower median incomes. The Furman Center has done some nice work, but didn't get as much into the financials like you have. I look forward to your next piece and hope it goes into the operating pro forma, not just the sources and uses. I remain a bit fuzzy about how the low-cost "capital" is taken out and what that does to ownership/control, and what it does to debt service, and hence long-term affordability. Also, the dependence on special financing from the feds seems a vulnerability right now, as FHA and GSEs are not in the same hands of course. On a separate note, I remain concerned about the 80% (or even higher) income thresholds, especially if scarce local subsidy (which includes free or discounted land) is used. Given the possible cuts to HUD rental subsidies, the need for deep affordability might only get worse. And it's the folks at <30% or at least under 50% AMI who are much more vulnerable to severe housing cost burdens, displacement, eviction, and homelessness, especially in a *relatively* moderate-cost city like Chicago (vs. a NYC, Seattle, etc.) where fewer 80% AMI folks should be severely cost-burdened. I would argue that the use of scarce local subsidy should be devoted to units at those income levels. The 80% AMI units should be cross-subsidized by market-rate units ideally if needed at all. Of course, someone at 80% AMI is often closer to 100% (or maybe higher) of the median *renter* income. Thanks again, and looking forward to part 2.
This is a fantastic article - thank you so much for taking the time to research and pencil a potential (albeit incredibly optimistic) GSH development.
Broadly speaking I understand the desire to compare LIHTC to GSH, the City and publications do it all the time. But this article does two interesting things, while continuing to use LIHTC as a comparison: 1) It recommends reduced requirements for GSH - most, if not all, were all recommended by Cut the Tape members to DOH specifically for LIHTC given the efficiency, timeliness, and cost impact. Examples? Reduced City Council approvals, reduced environmental & tenant organizing, cleared/clean city parcels. The City has made some improvements but until it considers significant changes to both LIHTC & GSH requirements, production will suffer. 2) You point out the fact that all 80% AMI would meet the GSH ordinance as-is *and* they could even go up to 100% AMI. As someone who wants more housing, everywhere, for everyone - I support GSH, but calling a Class A building with 100% AMI targets “affordable” is a real, aggressive stretch. LIHTC is not comparable to GSH for that main reason. The average AMI target is required to be equal to or less than 60% AMI, and in many cases there are significant number of 30% and 40% AMI units. For context, a family of two at 80% AMI has an income of $76,750; at 100% AMI it’s $96,000. These incomes are not the working poor. We are building homes for different families with different needs, incomes, and hopes. I, too hope GSH succeeds but am tired of the comparison to LIHTC. They are not comparable.
Good article! Just a quick note that the Laureate's TDC was 121M. I have the capital stack breakdown from the developer. HMU if interested zgd@mit.edu.
"just because social housing works in Vienna does not mean it will work in the capital of Vienna Beef."
Found the dad!
And good observation. Vienna has huge waitlists for housing, and they are barely building any new social housing
https://www.aei.org/wp-content/uploads/2023/09/Setting-the-record-straight-on-the-Vienna-Social-Housing-Model-final.pdf?x91208
Really helpful Bo. I have been waiting for a piece like this. I agree that the margins for error seem quite thin given lower median incomes. The Furman Center has done some nice work, but didn't get as much into the financials like you have. I look forward to your next piece and hope it goes into the operating pro forma, not just the sources and uses. I remain a bit fuzzy about how the low-cost "capital" is taken out and what that does to ownership/control, and what it does to debt service, and hence long-term affordability. Also, the dependence on special financing from the feds seems a vulnerability right now, as FHA and GSEs are not in the same hands of course. On a separate note, I remain concerned about the 80% (or even higher) income thresholds, especially if scarce local subsidy (which includes free or discounted land) is used. Given the possible cuts to HUD rental subsidies, the need for deep affordability might only get worse. And it's the folks at <30% or at least under 50% AMI who are much more vulnerable to severe housing cost burdens, displacement, eviction, and homelessness, especially in a *relatively* moderate-cost city like Chicago (vs. a NYC, Seattle, etc.) where fewer 80% AMI folks should be severely cost-burdened. I would argue that the use of scarce local subsidy should be devoted to units at those income levels. The 80% AMI units should be cross-subsidized by market-rate units ideally if needed at all. Of course, someone at 80% AMI is often closer to 100% (or maybe higher) of the median *renter* income. Thanks again, and looking forward to part 2.
This is a fantastic article - thank you so much for taking the time to research and pencil a potential (albeit incredibly optimistic) GSH development.
Broadly speaking I understand the desire to compare LIHTC to GSH, the City and publications do it all the time. But this article does two interesting things, while continuing to use LIHTC as a comparison: 1) It recommends reduced requirements for GSH - most, if not all, were all recommended by Cut the Tape members to DOH specifically for LIHTC given the efficiency, timeliness, and cost impact. Examples? Reduced City Council approvals, reduced environmental & tenant organizing, cleared/clean city parcels. The City has made some improvements but until it considers significant changes to both LIHTC & GSH requirements, production will suffer. 2) You point out the fact that all 80% AMI would meet the GSH ordinance as-is *and* they could even go up to 100% AMI. As someone who wants more housing, everywhere, for everyone - I support GSH, but calling a Class A building with 100% AMI targets “affordable” is a real, aggressive stretch. LIHTC is not comparable to GSH for that main reason. The average AMI target is required to be equal to or less than 60% AMI, and in many cases there are significant number of 30% and 40% AMI units. For context, a family of two at 80% AMI has an income of $76,750; at 100% AMI it’s $96,000. These incomes are not the working poor. We are building homes for different families with different needs, incomes, and hopes. I, too hope GSH succeeds but am tired of the comparison to LIHTC. They are not comparable.
Good article! Just a quick note that the Laureate's TDC was 121M. I have the capital stack breakdown from the developer. HMU if interested zgd@mit.edu.