Getting more affordable housing isn”™t easy. With high rents and the median price of a home in the counties of Ulster and Dutchess well beyond the means of lower-income people, the demand is great. Competition for grants and low-cost financing has increased dramatically, making it more difficult for both nonprofit and private developers to qualify for the subsidies.
“The financing is more difficult to get as more communities are recognizing they have a significant need for senior affordable housing,” said Steve Aaron, president of Birchez Associates, which built, owns and manages three affordable rental developments in Ulster County, two of which are for seniors. Aaron just broke ground on a fourth senior affordable rental development, located in Esopus.
In the town of Ulster, Aaron completed a 72-unit rental complex four years ago, which is rented out to seniors with 30 percent to 60 percent of median income. He has just gotten approval from the town to build an additional 67 units at the site. He also has a similar 60-unit senior rental development in Saugerties. A third project, located in Kingston, consists of 80 units targeted to families with 40 to 60 percent of median income.
Aaron was invited by the town of Esopus to build an affordable senior housing development. After two years of looking, Aaron and the town located an appropriate site, which has easy access to Route 9W. Its proximity to Ulster BOCES is another plus: Aaron said the facility”™s programs for seniors will be a valuable amenity to future residents. A new sidewalk will enable pedestrians to walk to the Town Hall. Aaron has made arrangements to have both the county and the city of Kingston extend their bus services to the area.
Aaron said the rents for the two-bedroom and one-bedroom units will likely range from $500 to $700. His target market is people age 62 or over who have 50 to 60 percent of the median income. He expected the project to be completed by the end of the year.
The program was approved by the town Planning Board despite opposition from some residents on nearby River Road. “They thought we were building low-income housing, like in the Bronx,” Aaron said. But after many meetings with the public, “we reduced the amount of dissenters to a handful of people.”
Aaron said he received federal tax credits through the New York State Division of Housing & Community Renewal (DHCR) for his three previous affordable rental developments. But he was unsuccessful in qualifying for the $20 million Esopus project. Instead, he is receiving $11.8 million in tax-free bonds through the New York State Housing Finance Agency. The tax credit will amount to 4 percent (compared to 9 percent through the DHCR). He is also putting in several million dollars of his own money, he said.
The federal tax credit, which was created under the Tax Reform Act of 1986, is the primary incentive offered to developers for building low-income rental housing. This year, the federal government has budgeted $35.2 billion for the credit. The credit is divvied out to the states, which administer the money through various agencies, such as the DHCR. The credits are claimed in equal amounts over ten years.
According to Kevin O”™Connor, executive director at Rural Ulster Preservation Company (RUPCO), based in Kingston, which provides both rental housing and home ownership assistance to low-income people, the credit is often sold by the developer to a group of investors as a way to generate equity for construction of the project. The developer typically would sell the credits for 90 cents for each dollar of tax credits.
Aaron and O”™Connor said Ulster County took a hit a year and a half ago when it lost its status as a “difficult to develop” area, which had boosted the yield of the credit by 30 percent. The U.S. Department of Housing and Urban Development determines the amount of the credit by classifying different regions according to income levels, housing costs and other factors. “In the last month, the market for low-income housing tax credits has dropped from credits being in the mid 90-cent range for every $1 to the low to mid 80s,” said O”™Connor. “There”™s been a 17 percent loss in the value of this credit.”
Because the reduction makes the credit less attractive to investors, developers are finding it more difficult to find buyers for the credit. “Large corporations and banks invest and buy this credit, but there”™s less demand because of the lower price,” said O”™Connor. “They aren”™t doing it. It”™s a secondary loss.”
O”™Connor said that means “projects in the state that were funded last year may not get built,” although he didn”™t know of any in the mid-Hudson Valley that were so affected. On the positive side, low interest rates are encouraging more long-term construction loans, he said.
Aaron said he believes the county”™s change in credit status is a “statistical snafu.” He has been working with U.S. Rep. Maurice Hinchey to have the federal designation changed to more favorable terms. “When you go to the income side, Ulster County is dragging behind the cost of housing worse than the other counties we serve,” he said.
In his own case, the 30 percent drop in the federal tax credit “means we”™re going back to the drawing board on how to finance” the phase two addition to the town of Ulster senior housing project.
More positively, Aaron said new green incentives offered by DHCR under its Qualified Allocation Plan for prospective developers would have a significant impact on future projects. Under the plan, applicants for the federal tax credit accrue points for such factors as servicing people with disabilities, serving a mix of income groups and revitalizing a brownfield site.
The new green incentives include smart siting, building of sidewalks to encourage walking, use of nontoxic materials and a surface water management plan. Aaron said he is considering a geothermal heating and cooling system for the town of Ulster extension ”“ bedrock at the Esopus site doesn”™t allow for geothermal there, he said ”“ and he is also considering solar panels for the new projects.
