Sustainable Communities Magazine Sept/Oct by Partnership for Sustainable Communitites

Sustainable Communities

Vol 1, No 5 • September/October 2011 • www.p4sc.org • $12

Refloating Housing Foreclosure fixes progress As delinquencies increase IN THIS ISSUE

CDFI’s gear up for $1 billion capital infusion........................... p. 3 Homebuyers demand mixed-use, short commutes................. p. 10 Survey quantifies cities’ actions to be sustainable................. p. 14 Special Report: Multifamily preservation & retrofits............ .p. 28

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Contents September/October 201 1

28 18

Departments

2 Letter from the Editor 3 F inancing Sourcese s CDFIs prepare for infusion of capital from federal bond guarantee

Features 10 Smart Growth: A preference for smaller houses and a shorter commute, a mix of housing and businesses within an easy walk and nearby public transit are among the results revealed by the National Association of Realtor’s survey of what American’s desire most in their neighborhoods and homes. Although, a single-family home is still the American dream, a smartgrowth neighborhood is quickly becoming part of that dream.

Sustainability: When it comes to government taking action to promote sustainability, Western states lead the way. According to a survey by the International City/ County Management Association and Arizona State University, that looked at 109 different sustainability actions (in 12 categories) local governments could take, from recycling to green building, Western states topped the list in 10 of the 12 categories.

Refloating Housing: State and local governments are working hard to stabilize communities hit

hard by the foreclosure crisis. Through the Neighborhood Stabilization Program, a program that has received $6.9 billion in appropriations over the last several years, governments are purchasing, renovating and reselling foreclosed homes in order to address the neighborhood deterioration created by the large number of homes sitting abandoned and vacant.

3 4 Letter to the Editor

6 Around the Nation

28 Preservation: With new construction facing financial obstacles, preservation, renovation and retrofit of existing buildings is getting more attention for housing sponsors. In this article, we take a look at efforts to preserve and retrofit affordable multifamily properties across the nation.

Form-based codes, housing policy

• Colorado • Massachussetts • Pennsylvania • New York

8 Green Building & Design

LA school campus breaks

new ground

38 GHG Emission Allowances: Pioneering emission allowance auction system hits rough patch as one state leaves the program and another state faces opposition to remaining involved. New Jersey emphasizes alternative energy development, including solar on brownfields, and bans new coal-fired plants.

September/october 2011 • Sustainable Communities

Sustainable Communities

Letter from the Editor

Demand Economic Sustainability By Andre Shashaty

or the last two years, the U.S. government has done something shockingly out of character. It has taken its first tentative steps in decades to plan ahead and invest in the future of our nation’s economic sustainability. But now, with short-term thinking roaring back, those efforts are seriously threatened. Leaders of the budget reduction hawks, like House Majority Leader Eric Cantor, are determined to kill almost all federal investments in communities and the economy. While he’s considered extremist, he has set the tone in Washington. Despite the obvious need for economic stimulus, his kind of thinking has caught hold. The Congressional “super committee” and the Obama Administration are preparing lists of budget items for elimination that will probably include sustainable communities planning grants and investments in environmental protection and green jobs. In the first stimulus package during the last recession of the decade, there was a huge infusion of funds to encourage energy retrofits and deal with the depressed housing market. In his recent speech, President Barack Obama made it clear there will be no repeat or extension of the investments authorized by the American Recovery and Reinvestment Act. There was not one word in the president’s speech about extending or increasing current efforts to create green jobs in retrofitting existing buildings to be more efficient. As for housing, the anchor weighing down our economy, Obama made just one vague and tepid promise to help “responsible homeowners” refinance their mortgages at interest rates that are now near 4%. This is hardly enough to make a difference in the economy or to revive a housing market that is suffering from a succession of very foolish federal policy failures. So, after a very brief flirtation with long-term thinking, we are right back into crisis mode. Once again, we will lurch from crisis to crisis, prioritizing a very small and very short-term reduction in the budget deficit over long-term investments, and with no long-term strategies to build sustainable local and national economies. Our leaders still don’t get it. While things like sustainable communities planning grants do not help our budget woes now, they will save substantial amounts of money in the future. With individual household income on the decline, and robust income growth unlikely for years, it’s essential to pursue sustainable communities planning to help control our cost of living. It’s essential to invest in housing rehab and energy efficiency to reduce future expense. And to abandon federal leadership to control carbon emissions is to invite incalculable costs in just a decade or two. I was hoping the recession would bring back some common sense to our leaders, including the realization that sustainability is really not such a new concept. It’s what folks used to mean when they said “a stitch in time saves nine” or when they quoted Benjamin Franklin’s aphorism: “a penny of prevention equals a pound of cure.” Sadly, it has not happened. We are about to abandon our two-year flirtation with longterm thinking and go back to the bad habits of previous decades. We all have to fight back against short-term thinking and make the case with our elected officials that Benjamin Franklin was right. Economic sustainability is not a left-wing, dogooder, socialist scheme. It’s good old-fashioned common sense.

Vol 1, No 5 •September/October 2011 • www.p4sc.org

Sustainable Communities Magazine 6i-2

Editor and Publisher Andre Shashaty, andre@p4sc.org Office & Member Services Manager Carol Yee, carol@p4sc.org Art Director Laura Williams, laura@laurawilliamsart.com Advertising & Conference Sales Manager Wendy Chaney, wendy@p4sc.org Assistant Editor Megan Truxillo, megan@p4sc.org Board of Directors Rev. Betty Pagett, Community Acceptance Strategist Todd Sears, Vice President of Finance, Herman & Kittle Properties Patrick Sheridan, Senior Vice President for Housing Development, Volunteers of America Dianne Spaulding, Executive Director, Non-Profit Housing Association of Northern California Leadership Advisory Board Richard Baron, Chairman and CEO, McCormack Baron Salazar Doug Bibby, President, National Multi Housing Council Christine Carr, Manager Community Development Finance Silicon Valley Bank Henry Cisneros, Executive Chairman, CityView; former secretary, U.S. Dept of Housing and Urban Development F. Barton Harvey, Former chairman and CEO, Enterprise Community Partners William C. Kelly, Jr., President, Stewards of Affordable Housing for the Future (SAHF) Kerry Mazzoni, public policy consultant, former state legislator and former California Secretary of Education Nicolas P. Retsinas, Director, Joint Center for Housing Studies, Harvard University Caleb Roope, President/CEO, The Pacific Companies Mitchell Silver, PP, AICP Director Department of City Planning for Raleigh, N.C. Sustainable Communities Magazine is published by Partnership for Sustainable Communities (“PSC”) is a private nonprofit organization incorporated in California. It is not affiliated with the United States federal interagency “Partnership for Sustainable Communities,” which is a venture between HUD, DOT and EPA. PSC is not supported by government funding. It depends entirely on membership dues and charitable donations to cover its costs. To make a donation, go to www.p4sc.org

900 Fifth Ave, Suite 201, San Rafael, CA 94901 415 453 2100 ext 302 www.P4SC.org Printed on SFI Certified 10% Recylced Paper with vegetable and/or soy based inks. At Least 30% Certified Forest Content

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Sustainable Communities • September/october 2011

Financing Sources

Community lenders gear up for infusion Of low-cost capital for low-income areas

hile Congress prepares to slash federal spending, community development financial institutions are gearing up to start using $1 billion a year in new financing courtesy of the U.S. government. It’s not a direct subsidy and in theory, it won’t cost the U.S. Treasury more than administrative costs. But the money will open doors for hundreds of community-based lenders and investors to finance low-income housing, business development and other projects that have few other financing options. The CDFI Bond Program, enacted by the Small Business Jobs Act of 2010 (Public Law 111-240), will provide long-term (up to 30 years), low cost capital by virtue of a federal guarantee on $1 billion a year in bond issues. It is administered by the U.S. Treasury Department, which is scheduled to issue rules governing the program this fall. The taxable bond proceeds

are expected to start flowing in the first half of 2012. “The program is unprecedented in terms of a new capital source being available to community development financial institutions,” said Cathy Dolan, chief operating officer of the Opportunity Finance Network. “We think it could totally transform the capitalization of CDFIs.” The capital will be most welcome for housing and community development projects in small towns and rural areas that have little or no access to capital of any kind, let alone long-term low-cost capital. Although banks are subject to investment requirements under the Community Reinvestment Act, they are only required to invest in their retail service areas. As a result, community lending and investing tends to be concentrated in major metro areas served by a number of major banks. The CRA does little to stimulate lending in small towns and rural areas without many bank branches. The details of how the bond guarantee authority will be administered are not yet public. But the statute calls for a maximum of ten bond issues per year, which means a minimum size per issue of $100 million. It’s unclear how the Treasury Department will decide which CDFIs get to issue the ▲ Library Square provides affordable senior housing bonds but it will probin Mandan, ND. It was financed by Community Housing ably have a lot to do Capital, a CDFI that originates Interim Development with what they include financing and Multifamily Permanent loans to the in the required “capital NeighborWorks® network. distribution plan.”

Cathy Dolan, COO of Opportunity Finance Network

The plan will describe how they plan to use bond proceeds. Dolan said it’s possible the rules will place some restrictions on what projects can be financed using the bonds, but the assumption is most things CDFIs finance now will be eligible. These include: • Affordable housing • Small business lending • Commercial RE in low-income communities • Community facilities It is expected that the primary buyer of the bonds will be the Federal Financing Bank, which means the bonds are essentially private placements with much lower issuance costs than public bond issues entail. While the bond money will be at market rates of interest, the government guarantee and the low costs of issuance will mean CDFIs can get rates lower than they would get from any commercial bank, even in a major metro areas. For CDFIs outside of major urban areas it will be the only —continued on page 4

September/october 2011 • Sustainable Communities

Financing Sources

—continued FROM page 3

source of long-term, reasonably priced capital. Dolan said the bonds will likely have yields “pretty close” to yields on Treasury Bonds of similar maturities. “It’s a once in a generation opportunity,” said Jack Gilbert, CEO of Community Housing Capital, a national CDFI based in Decatur, Ga. The bond proceeds will provide cheaper, longer term and more flexible money than the capital now available to CDFIs. He expects loans made from the bonds to have rates just 1/8th of a percentage point over Treasuries. This compares to margins of three or four points on the financing that is generally available now to most CDFIs. The bond financing is expected to provide financing for as long as 30 years, compared to the 5- to 7-year terms that are typically available to

CDFIs from their traditional capital sources, he added. One major question mark is whether the program rules will allow issuance of bonds with maturities of less than 30 years while retaining the benefit of the full 30-year guarantee period provided by the statute. If a CDFI could issue ten-year bonds without losing the value of the remaining 20 years of the guarantee period, it would allow for a lower cost of funds on the shorter-term debt. It also remains to be seen if the funds can be used for general capitalization of CDFI operations rather than only for project-by-project, asset-based lending. The program has a risk-sharing requirement. CDFIs that issue bonds must take 3% risk share. There are about 700 CDFIs with

Sustainable Communities • September/october 2011

about $30 billion in assets outstanding. But only a handful of them are large enough to manage a bond issue of $100 million. The bulk of the bond proceeds will probably be used to finance pools of loans originated by smaller CDFIs to end users and/or loans to the CDFIs themselves. It’s likely that a large portion of the bond proceeds will be used in conjunction with another program operated by CDFIs – the New Markets Tax Credit (NMTC) program. The first round of NMTC deals are reaching the point where the debt financing on them is reaching maturity. With the lousy economy and the tightness of credit markets, it has become difficult to find sources to refinance that debt. The bond program will help solve that problem, Dolan said. ❧

L ETTERS TO THE EDITOR

Form-based codes I was excited to see your coverage of the Contra Costa BART Station development and to see an image of the buildout. I was dismayed, however, to find that nowhere in the article was reference made to the form-based code (FBC) used to determine the urban form. The 6-day charrette that was mentioned was part of the form-based coding process. The plan gained support from the many involved parties who had previously been at odds with one another because a FBC, by definition, assures a predictable outcome. Form based codes foster predictable built results and a high-quality public realm by using physical form (rather than separation of uses) as the organizing principle for the code. They are regulations, not mere guidelines. They are adopted into city or county law. Form-based codes are an alterna-

tive to conventional zoning. Your readers will be better served if they understand the value of formbased coding as an effective tool for place-making. Carol Wyant Executive Director Form-Based Codes Institute Housing errors costly Your article about the negative consequences of the government’s failure to deal with the housing slump (“Policymakers fiddle while housing burns,” July/August, 2011) was informative but did not go far enough. The U.S. government has not just neglected housing. It actually appears determined to make things worse, not better. The recent talk about eliminating the home mortgage interest deduction is terrible medicine for a sick housing market. Sure, it could be on the

table at some point, but discouraging buyers by threatening a change in the tax treatment of mortgage debt now is moronic. All responsible parties should rule it out, unequivocally and immediately. Then, there’s the Federal Housing Finance Agency’s decision to sue 17 mortgage originators for misrepresenting the quality of mortgage securities they sold to Fannie Mae and Freddie Mac. Add that one to the list of legal battles that is prolonging the uncertainty that is hampering a revival of mortgage lending in this country. Besides, does the federal government really think a judge will take pity on Fannie and Freddie as if they were poor widows who had no clue how to evaluate a mortgage-backed security? Sincerely Edward Park, Jr. Arlington, Va.

September/october 2011 • Sustainable Communities

AROUND THE NATION

4 3 1

preserve the apartments as affordable housing, following the TOD Fund mandate that residential rates are at or below 60 percent area median income, with approximately 15 percent of units serving households at or below 30 percent area median income. For more information on the fund visit http://www.urbanlandc.org.

Massachusettes

Boston’s Bike Share Program Attracts Record Numbers in its First Month According to the Boston Globe, the success of Boston’s bicycle-sharing system is surprising even its backers. The Globe reports in its first month the program attracted over 2,300 annual subscribers, a number neither

TOD Apartments is a mixed-use property located in the heart of the Santa Fe Arts District and includes 16 units of affordable apartments, four Fund helps preserve affordable commercial office spaces and transit-oriented housing an auto body shop. Built in the A fund set up to purchase and preserve 1920s, the property is within five affordable transit-oriented housing blocks of a light rail station. acquired its fifth property in Denver. With $15 million in capital, The Urban Land Conservancy (ULC), and an eventual goal of $25 Enterprise Community Partners, the million, the Fund hopes to create City and County of Denver and other and preserve over 1,000 affordinvestors, created the fund to acquire able housing units near transit. and preserve land for workforce “The Fund answers a basic housing near light rail stops and high real estate conundrum: when frequency bus routes. the economy is bad, property The newly acquired property, Villa values are low and ripe for purchase, but ▲ Hubway bikes await riders at a docking access to capital is poor station in Boston. and affordable housing developers are scarce. Now is the opportune time Denver nor Minneapolis’s bike sharing to invest in real estate systems reached by their 7th month of around proposed transit operation. stations in order to capital“It’s been wildly successful,’’ said ize on current values and Mary McLaughlin, Hubway’s general preserve affordable housmanager. She initially hoped to sell ing,” says ULC. 2,000 memberships by Thanksgiving, The Villa TOD Apartments shortly before the bicycles get taken in currently serve households for winter, reported the Globe. at or below 40 percent area To take advantage of Boston’s New ▲ A pedestrian street in the vibrant Santa Fe Arts median income. The fund will Balance Hubway bike share system, District.

Colorado

Sustainable Communities • September/october 2011

Pennsylvania

Advocates Urge Action to Save Foreclosure Relief Program The Housing Alliance of Pennsylvania is asking for individuals to support Pennsylvania’s Homeowners

Emergency Mortgage Assistance Program (HEMAP) by contacting state representatives and telling them to reinstate HEMAP funding. HEMAP, a state program administered by the Pennsylvania Housing Finance Agency, provides loans to homeowners facing foreclosure due to circumstances beyond their control, such as job loss. Since its inception in 1983, HEMAP has helped over 45,000 homeowners stay in their homes. In June, the General Assembly ▲ A Project Frog building in Oahu. and Pennsylvania Governor Tom Corbett cut HEMAP’s appropriation from $10.6 million to $2 million, which ment, GE has already begun construconly provides enough funding to cover tion of a Project Frog building at its ongoing mortgage payments for existcorporate learning center in Ossining, ing cases. HEMAP stopped taking new N.Y. applications on July 1. Project Frog says its pre-fab kits The similar federal foreclosure improve traditional building conrelief program, the Emergency struction methods by combining Homeowners Loan Program (EHLP), semi-custom designs with a preends September 30th, leaving Pennengineered kit of energy-efficient building components. This enables sylvania homeowners facing foreclofaster and cheaper construction of sure with nowhere to turn after the high-efficiency buildings, the comfederal program ends. pany says. “It’s not too late to get HEMAP “We make the complicated and back. Let your legislators know that, lengthy process of new construction while we understand the need for faster and easier for our customers budget cuts, cutting HEMAP now in by providing a kit of high precision, the midst of a recession and foreclosustainable parts that are optimized sure crisis makes no sense at all,” based on the structure’s size, use urges the Housing Alliance. and location,” said Project Frog CEO To learn more about HEMAP visit Ann Hand. www.housingalliancepa.org. The company calculates its buildings use at least 25 percent less energy than the strictest building codes 4 in the U.S. Project Frog kits are delivered to project sites ready for assembly, gen$22 Million Investment in High erally taking between 6 and 12 months Efficiency Pre-fabricated Building to assemble. Completion of the Project Venture Frog building at GE’s learning center GE Energy Financial Services is leadin Ossining is expected at the end of ing a $22 million investment in San this year. Francisco-based Project Frog, a maker For more information on Project of pre-fabricated energy efficient Frog visit www.projectfrog.com. ❧ building kits. In addition to the investPhoto: Project Frog©

members pay $85 for a one-year membership, which allows them unlimited 30-minute trips between bike stations; longer trips incur an additional charge. Tourists and occasional riders can pay for a one-day or three-day pass. Low-income Boston residents can take advantage of an annual membership subsidized by the Boston Public Health Commission. Subsidized memberships are only $15 for a year and include a free helmet. Presently there are 60 docking stations and 600 bikes available throughout the city. The program has plans to expand those numbers considerably. The success of the program is good news to New York City, which launches its own bike share program next year. In the Northeast, Washington D.C. operates the largest bikeshare program with over 1,100 bikes and 110 stations. For more information on New Balance Hubway visit www.thehubway. com.

New York

▲ Protestors rally to preserve HEMAP funding.

September/october 2011 • Sustainable Communities

GREEN B UI L DING & DESIGN

School Campus Named for Kennedy Uses innovative design, technology

in 1968. It is also an example of innovative design that saves energy and improves indoor air quality. The Robert F. Kennedy Zone of Choice comprises six new schools located at the former Ambassador Hotel site. It is reportedly the first campus in

California to fully employ a technology called thermal displacement ventilation (TDV) in which air is delivered from the lower portion of the walls, rather than from the ceiling. The upward flow of air results in not only a more energy efficient form of air-cooling but also im-

Photo: courtesy of Heliphoto

os Angeles–A new school campus here holds a special place in American history. Named after former US attorney general and presidential candidate Robert F. Kennedy, it is built on the site of the Ambassador Hotel, where Kennedy was assassinated

▲ The Robert F. Kennedy Zone of Choice comprises six new schools located at the former Ambassador Hotel site.

Sustainable Communities • September/october 2011

proves air quality by reducing germs in the air, which in turn leads to fewer sick days for The Robert F. Kennedy Zone of Choice comprises six new students and teachers. schools located at the former Ambassador Hotel site that Another energy efficient are part of the Pilot Schools Network. These include: feature of the campus is a Cen• Ambassador School of Global Education, Grades K-5 tral Plant heating/cooling system that provides chilled and •A mbassador School of Global Leadership, Grades 6-12 hot water to all school build• Los Angeles High School of the Arts, Grades 9-12 ings. This central air condition• New Open World Academy, Grades K-12 ing system saves energy use • School for the Visual Arts & Humanities, Grades 9-12 and reduces utility costs for • UCLA Community School, Grades K-12 the school district. A Pilot School is an autonomous small school. Pilot The full height glass curtain Schools were established in 2007 as role models of edwall facade on the north face ucational innovation, and as research and development of the high school maximizes sites for effective teaching and learning in urban public natural light in the classrooms, schools. While Pilot Schools are part of the school district, which also reduces energy they have autonomy over budget, staffing, governance, costs without glare and significurriculum/assessment, and the school calendar. cant heat gain. In addition to This increased flexibility enables the school to further windows, all classrooms have meet the needs of students and parents. Pilot Schools occupancy sensors and dayare committed to the idea that student engagement and light sensors to control light achievement increase when schools are small, personalfixtures and further reduce ized, mission-driven, and have autonomy over their reenergy consumption. sources in exchange for increased accountability. Other sustainable design elements incorporated into the campus include: double and triple-glazed windows to reduce heat load and urban traffic noise; reflective white roofing; drought-tolerant landscaping; low VOC emission interior materials; water saving plumbing fixtures; renewable materials such as linoleum, rubber, and cork flooring; and photovoltaic panels in the Robert F. Kennedy Inspiration Park. The campus is located one block from a Los Angeles Metro Rail Station to encourage faculty and visitor use of mass transit. The campus was designed by Gonzalez Goodale Architects of Pasadena, CA. The building exceeds the strict environmental standards set by the Collaborative for High Performance Schools (CHPS). CHPS is a self-certifying system designed for rating school buildings in terms of sustainability and construction. The campus meets CHPS criteria in several categories including site selection, water use, energy savings, sustainable materials, and indoor environmental quality. ❧

The full height glass curtain wall facade on the north face of the high school (below) maximizes natural light in the classrooms, which also reduces energy costs without glare and significant heat gain. Designed by Gonzalez Goodale Architects of Pasadena, CA, the campus features cutting edge design (bottom).

Photos: courtesy of Magnus Star© (Gonzalez Goodale Architects)

Pilot Schools Explained

September/october 2011 • Sustainable Communities

▲

2011 NAR Community Preference Survey

Results reveal a desire for

smart growth

communities

More people want to live in a neighborhood characterized by smart growth.

new survey by the NATIONAL ASSOCIATION OF REALTORS© (NAR) reveals where most Americans would like to live — and it’s no big surprise. A single-family home on a large lot remains the American Dream. But that’s just the first layer of the onion. As the 2011 Community Preference Survey peels away more layers, a host of less foreseen insights emerge — including the news that more people want to live in a neighborhood characterized by smart growth than one characterized by suburban sprawl. That’s one of many thought-provoking findings contained in the survey of 2,071 adult Americans conducted for the NAR by Belden, Russonello and Stewart in February. Other significant highlights include:

Sustainable Communities • September/october 2011

Commute time Larger houses

39%

and lots, longer commute

59%

Smaller houses and lots shorter commute 0%

20%

40%

60%

80%

100%

▲ Given the choice between a smaller house and lot with a commute of 20 minutes or less and a larger house and lot with a commute of 40 minutes or more, respondents said smaller is better if it’s closer to work.

hile a majority of Americans rank space and privacy W as their top priorities, a lengthy commute can sway them to consider smaller houses on smaller lots; n Seven times more people say the neighborhood where a house is located is a bigger consideration in deciding where to live than the size of the house; n Two-thirds of Americans see being within easy walking distance of places in their community as an important factor in deciding where to live; n Americans see preserving farms and open spaces as much more important than creating new developments; and n Improving public transportation is viewed as the best answer to traffic congestion by half the country. All of those findings paint a picture of housing prefern

ences that look a lot like smart growth — whether people call it that or not. Shyam Kannan, a principal with RCLCO Real Estate Advisers and one of several experts who provided advice to NAR on the design of the survey, said the results show that when presented with options that reflect smart growth versus options that don’t, “more and more people choose smart growth.” Perhaps the most telling question asked people to choose between living in Community A — all single-family homes on large lots, no sidewalks, little public transportation — and Community B — a variety of housing and businesses, more sidewalks, nearby public transportation. People preferred Community B — the neighborhood characterized by smart growth — over Community A — the neighborhood characterized by suburban sprawl — by a 56 to 43 percent margin.

Size of house 88%

Neighborhood

Size of the house 0%

12% 20%

40%

60%

80%

100%

▲ By a very large majority, respondents said the quality of a neighborhood was more important than the size of a house.

September/october 2011 • Sustainable Communities

>> 11

Mix of housing and business Mix of housing and

58%

businesses within an easy walk

40%

Houses only and drive to businesses 0%

20%

40%

60%

80%

100%

▲ Most suburbs were designed to be exclusively residential, so you’d have to drive to stores and other businesses. But a majority of resondents said they’d prefer to have business within walking distance.

The survey breaks down responses demographically. People between the ages of 18-29 and 60-plus chose the smart growth community more frequently than any other age group at 62 percent (18-29) and 58 percent (60-plus). These are telling statistics, as they are part of the nation’s two largest demographic waves — Generation Y and the baby boomers. People earning $100,000-plus chose the smart growth community more frequently than any other income group (60%) followed closely by people earning $25,000 or less (59%). African Americans chose the smart growth community more than any other racial group (69%) followed by Latinos (58%) and whites (52%). The strong preference for smart growth by Latinos is especially important, said Kannan, because immigrants are driving the country’s population growth and Latinos — many of whom are immigrants — are the nation’s fastest-growing ethnic population. While 65 percent of single people chose the smart growth community, 52 percent of married people chose the sprawl community. Recent homebuyers also chose the sprawl community more often (54%), but prospective homebuyers favored the smart growth community (57%). People from the Northeast chose the smart growth option more than any other region in the country (63%) followed by people from the Midwest (57%). Walking to restaurants, businesses, schools and other amenities was the most appealing feature of the smart growth community to 60 percent of all those who preferred that choice. It also was the most appealing feature of the smart growth community to 40 percent of those who preferred the suburban sprawl choice. That wasn’t the only survey question that revealed Americans are eager to stretch their legs. Sidewalks and

Sustainable Communities • September/october 2011

places to take walks ranked third among factors considered very important or at least somewhat important in deciding where to live. Privacy from neighbors (45 percent very important/87 percent at least somewhat important) was first, followed by living within a 30-minute commute to work (36 percent/78 percent) and having sidewalks/places to walk (31 percent/77 percent). Another sign that walkability is important came when people were asked to choose between a community with a mix of housing/businesses within an easy walk and a community with houses only, where residents have to drive to businesses. People preferred the walkable community by a 58 percent to 40 percent margin. “You have so many amenities, restaurants, shops, friends nearby, culture,” said a survey respondent. People were especially keen on walking to a grocery store (35 percent very important/40 percent somewhat important), pharmacy (24 percent/41 percent), hospital (25 percent/36 percent) and restaurants (18 percent/42 percent). When asked to choose from a list of community needs, 46 percent of respondents cited having more shops or restaurants within an easy walk of home. That ranked it third behind providing better public transportation (51%) and offering more housing for people with low incomes (47%). Besides being the leading community need, better public transportation also was the preferred answer to reducing traffic congestion. An even 50 percent of the public favored that option compared to 30 percent who favored developing communities that require less driving and 18 percent who favored building new roads. Nothing, however, eclipses the desire for a single-family detached home. That’s where 80 percent of people said they preferred to live — and where 70 percent already reside — when asked to choose between various housing types.

Most (59%) said they would be willing to accept a longer commute and forgo walking to shops and restaurants to live in a single-family home rather than an apartment or a townhome. Still, that leaves a sizable minority — 38 percent — who’d prefer an apartment or townhouse if it shortened their commute and enabled them to walk to shops and restaurants. That’s a significant number considering 80 percent of the country would otherwise prefer to live in a single-family home. Kannan believes it’s another indication that “the more information we give people about what smart growth looks like, the more likely they are to choose it.” It’s also noteworthy that despite ranking privacy as the most important factor in deciding where to live, 59 percent of the public said they’d choose a smaller house on a smaller lot if their commutes were 20 minutes or less. “Quality of life is convenience for me,” said a survey respondent. “Being able to walk to public transportation means I spend less time commuting. We could have a bigger house somewhere else, but it wouldn’t be worth it for me.” On the other hand, walkability doesn’t transcend the desire for space even if it means living in a sprawl-oriented community. Most people (61%) said they’d be willing to drive to schools, stores and restaurants in order to live in a house on a large lot rather than live in a house on a small lot that enabled them to walk to those destinations. “It doesn’t even have to be a larger house. I just want space between my

100%

A and B

80%

60%

40%

20%

0% ▲ The survey asked respondents to choose between two kinds of communities. Community A was described as all singlefamily homes on large lots, with no sidewalks, and little public transportation. Community B was described as having a variety of housing and businesses, more sidewalks, and easy access to public transportation.

neighbors and me,” said a survey respondent. Nevertheless, a strong anti-sprawl sentiment emerged when people were asked to prioritize a list of housing and community issues facing their state governments. Preserving farms and open spaces was the number one issue with 53 percent of the people saying it was a high or extremely high priority. Creating new developments was dead last at 24 percent. Kannan believes one of the most significant findings for real estate developers involves the tradeoff between size of house and the quality of the neighborhood. Builders typically emphasize size and finishings much more than neighborhood when developing and marketing housing, he said, yet 88 percent of survey respondents said neighborhood mattered more than size of house in deciding where to live. And — based on their answers to numerous other questions — the kind of neighborhood they prefer includes a healthy dose of smart growth. That puts real estate developers at the same crossroads as U.S. auto companies a few decades ago when they were painfully slow to respond to changing consumer demand for smaller and more fuel-efficient cars, said Kannan. “I don’t know if builders realize that this is their 1970s/1980s oil shortage ... and they can’t ignore the opportunity to change their business model,” he said.

To view the survey in its entirety, please visit http://www. realtor.org/government_affairs/smart_growth/survey. “Reprinted with permission from On Common Ground, Copyright National Association of REALTORS®”

Defend Sustainability: Join PSC today With budget battles raging in Washington, D.C. and many state capitols, the community sustainability movement faces severe setbacks. If you care about making communities sustainable, now’s the time to act. Take a moment now to become a member of Partnership for Sustainable Communities®. Go to www.p4sc. org and click on “become a member” in the green bar at top, or call 415-453-2100 x 302. You pay just $99 for an entire year. You will be supporting a good cause, and you will receive these practical tools you can use immediately to advance your organization’s goals: • Receive six issues per year of Sustainable Communities magazine, the only magazine focused on planning and community development with sustainability in mind. • Get access to our unique, 24/7 online Land Use Research Library • Free access to premium content on our web site • A free listing in our membership directory and • A discount on our upcoming Leadership Conference on Affordable Housing Preservation & Resource Efficiency.

September/october 2011 • Sustainable Communities

Western states lead in adoption of 10 of 12 types of sustainability activities

ocal governments in the western part of the country are the most likely to have taken concrete actions to make their communities more sustainable, according to a survey conducted by Arizona State University. Western communities are most active in regard to measures related to water, vehicles and lighting, transportation alternatives, and transportation improvements. Local governments in different parts of the country vary in their likelihood of taking sustainability action. To some extent, there is a state effect as well. Local governments in states that have approved more climate change initiatives are more likely to have higher activity levels—in some cases because they are mandated to do so by the state.

Sustainable Communities • September/october 2011

For example, California, which according to a Pew Center report has the most state initiatives, also has the highest activity level among local governments, with an average adoption rating of 33%, according to the survey, which was conducted by the International City/County Management Association. The primary drafter of the survey was James H. Svara of Arizona State University (ASU). Svara is a professor at ASU’s School of Public Affairs and director of its Center for Urban Innovation. A detailed report on the results appeared in The Municipal Year Book. The survey asked about 109 different activities divided into 12 major categories. It used the responses to derive an overall measure of a local government’s activity level—a total sustainability action

▲ Sustainable community garden, Los Altos, CA

▲

▲ The University of California, Riverside will receive sustainability awards for its new School of Medicine Research Building and a student-led community garden initiative.

rating—based on the level of activity in those areas. Dividing the states into two groups according to the number of initiatives reveals a clear difference in overall adoption ratings related to the number of state initiatives: • Twenty-three states with 11 or fewer initiatives: rating of 14% • Twenty-six states with 12 or more initiatives: rating of 20% The five states with the fewest state initiatives—five or fewer—tend to have low overall adoption ratings, but they vary from Alabama (9%), Mississippi (10%), and South Dakota (11%) (ranks of 46, 45, and tied for 41, respectively, among the state overall adoption ratings), to Tennessee at 13% (tied for 38) and Nebraska at 16% (tied for 26). Other states that have a high number of state initiatives are generally highly ranked but vary in their overall adoption ratings. Among the four states tied for second place below California with 19 state initiatives, the average ratings from the ASU survey are 22% for Massachusetts and Washington (tied for rank of 8), 19% for Oregon (tied for 16), and 15% for New York (rank of 29). Regions, on the other hand, differentiate activity level to a greater extent. Local governments in the West have the highest average adoption ratings in 10 of the 12 activity areas. The exceptions are recycling and land conservation, which are used most commonly in the Northeast. By a large

Bike to work day.

margin, local governments in the West (followed by those in the South) are most active in measures related to water, vehicles and lighting, transportation alternatives, and transportation improvements; promoting alternative sources of energy, although still uncommon, is also happening more in the West than in other regions. The most commonly adopted steps to make a place more sustainable are: Residential recycling collection Internal governmental recycling Construction of bike and walking trails Recycling household hazardous waste and electronic equipment Conducting energy audits and improving the efficiency of office lighting in government buildings Purchasing fuel-efficient vehicles The full report, including details on adoption of all 109 activities, can be downloaded from the web site of the Partnership for Sustainable Communities at www.p4sc.org/ ASU-survey. The Local Government Sustainability Policies and Programs, 2010 survey was mailed in the summer of 2010 to all city-type governments with a population of 2,500 and above and to all counties with an appointed administrator/ manager or elected executive. Overall, 25% of local governments responded.

September/october 2011 • Sustainable Communities

>> 15

How Sustainable is Your Community? If you want to assess the sustainability of your community, get ready to gather a lot of information on a very wide-ranging list of activities. Making a city or county sustainable can involve up to 109 specific sustainability activities divided into 12 major areas, according to James H. Svara of the School of Public Affairs at Arizona State University (ASU). The list was used for a survey of local governments in 2010. “It is the most comprehensive and well organized list we have seen,” said Andre Shashaty, president of the Partnership for Sustainable Communities. The list is reproduced here to help readers rate their community’s achievements and set an agenda for actions they might consider taking in the future. The survey of local governments was conducted by the International City/County Management Assoc.

Greenhouse gas (GHG) reduction and air quality Baseline GHG emissions of the local gov ernment Baseline GHG emissions of the community GHG reduction targets for local government operations GHG reduction targets for businesses GHG reduction targets for multifamily residences GHG reduction targets for single-family residences Locally initiated air pollution measures to reduce dust and particulate matter Plan for tree preservation and planting Water quality Actions to conserve the quantity of water from aquifers Use of grey-water and/or reclaimed-water use systems Sets limits on impervious surfaces on • private property Use water price structure to encourage conservation Other incentives for water conservation behaviors by city, residents and busi nesses Recycling Internal program that recycles paper and plastic and glass in your local govern ment Community-wide recycling collection pro gram for paper and plastic and glass for residential properties Community-wide recycling collection pro

gram for paper and plastic and glass for commercial properties Recycling of household hazardous waste Recycling of household electronic equip ment (e-waste) Pay-As-You-Throw (PAYT) program with charges based on the amount of waste discarded Community-wide collection of organic material for composting Require minimum of 30% post-consumer recycled content for everyday office paper Local government action to reduce the use of plastic bags by grocery or retail stores through restriction Local government action to reduce the use of plastic bags by grocery or retail stores through incentive Restriction on purchase of bottled water by the local government Locate recycling containers close to re fuse containers in public spaces such as streets and parks Energy use in transportation and exterior lighting Established a fuel efficiency target for the government fleet of vehicles Increased the purchase of fuel-efficient vehicles Purchased hybrid electric vehicles Purchased vehicles that operate on com pressed natural gas Installed charging stations for electric vehicles Upgraded or retrofitted traffic signals to improve efficiency

Sustainable Communities • September/october 2011

Upgraded or retrofitted streetlights and/ or and other exterior lighting to improve efficiency Upgraded or retrofitted facilities to high er energy efficiency pumps in the water or sewer systems Utilize dark sky compliant outdoor light fixtures Reducing building energy use Conducted energy audits of government buildings Installed energy management systems to control heating and cooling in buildings Established policy to only purchase En ergy Star equipment when available Upgraded or retrofitted facilities to high er energy-efficiency office lighting Upgraded or retrofitted facilities to high er energy-efficiency heating and air conditioning systems Established any energy reduction programs targeted specifically to assist low-in come residents Established any energy reduction programs targeted specifically to assist small businesses Energy audit–individual residences Weatherization–individual residences Heating/air conditioning upgrades–indi vidual residences Purchase of energy efficient appliances– individual residences Energy audit–businesses Weatherization–bus inesses Heating/air conditioning upgrades–businesses Purchase of energy efficient appliances– businesses

Alternative energy generation Installed solar panels on a government facility Installed a geothermal system Generated electricity through munici pal operations such as refuse disposal, wastewater treat ment, or landfill Installation of solar equipment–individual residences Installation of solar equipment–businesses Transportation alternatives Local government incentives for local government employees to take mass transit to work Local government incentives for local government employees to carpool to work Local government incentives for local government employees to walk to work Local government incentives for local government employees to bike to work If your local government offers employees parking, do you charge market rates for employee parking? Is telework permitted for staff members in your local government? Do you have a specific target for the per centage of your government workforce that will telework? Does your local government use a com pressed workweek with offices closed one day? Transportation improvements Expanded dedicated bike lanes on streets Added biking and walking trails Added bike parking facilities Expanded bus routes Requiring sidewalks in new development Widened sidewalks Require charging stations for electric ve hicles Require bike storage facilities Require showers and changing facilities for employees Operate a commuter rail system (subway or streetcar) Have a plan to create or expand the use of subway or streetcars

Established any transportation programs targeted specifically to assist low-income residents Building and land use regulations Require all new government construction projects to be LEED or Energy Require all retrofit government projects projects to be LEED or Energy Star certified Permit higher density development near public transit nodes Permit higher density development where infrastructure is already in place (utilities and transportation) Incentives other than increased density for new commercial development (in cluding multifamily residential) that are LEED certified or an equivalent Incentives other than increased density for new single-family residential be LEED certified or the equivalent Apply LEED Neighborhood Design stan dards Provide density incentives for “sustain able” development (such as energy efficiency, recycling of materials, land preservation, stormwater enhancement, etc.) Provide tax incentives for “sustainable” development (such as energy efficiency, recycling of materials, land preservation, storm water enhancement, etc.) Reduce fees for environmentally friendly development Fast track plan reviews and or inspections for environmentally friendly development Residential zoning codes to permit solar installations, wind power, or other re newable energy production Residential zoning codes to permit high er densities through ancillary dwellings units or apartments Zoning codes encourage more mixed-use development Land conservation and development rights An active brownfields, vacant property, or other program for revitalizing aban doned or underutilized residential,

commercialor industrial lands and buildings A land conservation program A program for the purchase or transfer of development rights to preserve open space A program for the purchase or transfer of development rights to create more efficient development A program for the purchase or transfer of development rights to preserve historic property Social inclusion Provide financial support/incentives for affordable housing Provide supportive housing to people with disabilities Provide housing options for the elderly Provide housing within your community to homeless persons Provide access to information technology for persons without connection to the Internet Provide funding for pre-school education Provide after-school programs for children Report on community quality of life indi cators, such as education, cultural, diversity, and social well-being Local production and green purchasing Local government action to use locally produced material or products through restriction Local government action to use locally produced material or products through incentive Local government action to use locally grown produce through restriction Local government action to use locally grown produce through incentive Use of public land for community gardens Support a local farmers’ market Education program in the local community dealing with the environment and energy conservation Green product purchasing policy in local government.

September/october 2011 • Sustainable Communities

Refloating Housing By Megan E. Truxillo

▲ The Park Lee Apartments in Central Phoenix were renovated with NSP funds, providing 400 units of affordable rental housing.

Photo: courtesy of Heliphoto

Photos: Courtesy City of Phoenix.

State and Local Governments Work to Spend $6.9 Billion, Hoping to Stem Neighborhood Deterioration Caused by High Foreclosure Rates

ommunities coping with high numbers of foreclosed homes are expected to spend all of the $6.9 billion appropriated ▲ The Park Lee Apartments before renovation. by Congress to deal with the properties. Residents in neighborhoods hard-hit by the foreclosure crisis are just beginning to see the effects of the $ 6.9 billion Congress handed over to state and local governments through the U.S. Department of Housing and Urban Development Neighborhood Stabilization Program (NSP).

Sustainable Communities • September/october 2011

To stem declining home values and neighborhood deterioration created by the large number of foreclosed and abandoned properties sitting vacant, Congress awarded the funds for state and local governments to rehabilitate, resell, or redevelop foreclosed homes. Congress first appropriated $4 billion for the NSP program under the Housing and Economic Recovery Act of 2008. The money went to every U.S. state, territory and selected local governments based on a formula that measured the need for assistance. Each of the 50 states and Puerto Rico received a minimum of $19.6 million. The program received another influx of funding in 2009 under the American Recovery and Reinvestment Act, and again in 2010 under the Dodd-Frank Wall Street Reform and Consumer Protection Act. In total, approximately $ 6.9 billion has been appropriated for the program. NSP funds are expected to impact 100,000 foreclosed, abandoned and blighted properties across the nation, said Mercedes Márquez, assistant secretary for community planning at the U.S. Department of Housing and Urban Development. Already, more than 36,000 homes have been or are being purchased or rehabilitated, reports HUD.

The Challenge of Spending an Influx of Money One of the primary challenges facing grantees is spending the money Congress appropriated. The first round of NSP grants specified that grantees must obligate all of the funds within 18 months and spend the money within four years. The second and third rounds have similar requirements.

Program Specifics The goal of NSP is to reduce the number of foreclosure and abandoned properties throughout the country. To this end, state and local grantees may use NSP funds to: • Establish financing mechanisms for purchase and redevelopment of foreclosed homes and residential properties; • Purchase and rehabilitate homes and residential properties that are abandoned or foreclosed; • Establish land banks for foreclosed homes; • Demolish blighted structures; and • Redevelop demolished or vacant properties. All activities funded by NSP must benefit low- and moderateincome persons whose income does not exceed 120 percent of area median income. In addition, at least 25 percent of the funds must be used for the purchase and redevelopment of homes or multi-family properties that will be used to house individuals and families whose incomes are less than 50 percent of area median income.

Homebuyer Assistance Program A major component of the NSP Program is the Homebuyer Assistance Program. In order to prevent neighborhood deterioration from properties sitting vacant and abandoned, NSP aims to get homeowners into foreclosed and abandoned homes. Specifics vary from city to city, but the general requirements are similar: Buyers must not presently own any real property or have any outstanding mortgage obligations; Buyers must attend and complete an eight-hour home buyer education class; Buyers must reside in the purchased property as their primary residence; and The total household gross income of all adults 18 years of age or older who will be living in the home must be at or below 120 percent of the area median income. In addition to a below market purchase price, qualified buyers receive a grant or loan to pay for closing and down payment costs. The money is then forgiven if the homeowners maintain the property as their primary residence for a specified time, generally 5 to 10 years.

For local governments who had never administered a HUD program, meeting the 18-month timeframe was a challenge. “There was a lot of concern in the first round of grants that cities wouldn’t make the deadline,” said Sarah Greenberg, senior manager of community stabilization at NeighborWorks America, a non-profit that provides technical assistance on the NSP program. Based on Greenberg’s experience, she estimates it took grant-

ees approximately 12 months to ramp up their system to administer the complex program. Despite this early concern, however, HUD reports grantees were able to obligate 100 percent of the funds Congress appropriated in the first round and have spent 71 percent of the funds. According to Greenberg, expectations are high that

September/october 2011 • Sustainable Communities

>> 19

Refloating Housing >>

for the initial overestimate. The City of Modesto, ranking consistently as one of the top cities for foreclosure rates, is under fire in part for perceived overspending on renovations. High cost appliances, above average spending on paint jobs and high cost roofing jobs are among the accusations. In defense of grantees spending on renovation, Ascala Sisk, management consultant for community stabilization at NeighborWorks, points out that there is always a question about what standard should be used to decide what work is required in a property. But, she added, the NSP program is meant to help homebuyers succeed in homeownership, and that means rehabbing homes to a condition where homeowners won’t incur immediate expenses. ▲ A homebuyer shakes hands with his real estate agent in front of his home Many grantees are also adding purchased under Phoenix’s NSP Move-In-Ready program. energy efficient appliances and heating/ cooling systems during renovation to keep utility costs low for homeowners. grantees will be able to spend all or most of the money Despite some challenges, in the end, Greenberg predicts by the deadlines. the program will be remembered for providing an infusion of To do so, grantees will need to increase the current level money into neighborhoods at a time when it was desperately of spending to meet the 2013 spending deadline for the first needed. “The amount of investment they are putting in is equal round of grants and spend the money from the second and to what they have done in decades in two years,” she added. third rounds: according to the most recently released data only 20 percent of funds from the second round of grants Implementation in Phoenix has been spent and grantees have just begun to touch money from the third round. Facing some of the highest foreclosure rates in the country, Unexpected Renovation Costs the city of Phoenix received almost $116 million to implement its NSP program. On the other hand, high costs to purchase and renovate have left many cities able to do less with the money than they initially planned. “An unpredictable market and competition with private investors adds another layer to the problem,” said Greenberg. At the end of August, Los Angeles Mayor Antonio Villaraigosa visited the first of seven homes the city purchased, renovated and sold to a qualified buyer under the NSP program. Los Angeles is primarily utilizing its NSP money to purchase and renovate foreclosed homes in areas with the highest foreclosure rates, including South Los Angeles, the Eastside and Northeast San Fernando Valley. The Department estimates it will be able to fix up and sell 1,100 houses and apartment buildings, initially it estimated it would be able to do 1,500. According to Los Angeles Housing Department Man▲ Landscapers putting in drought resistant landscaping at a ager Douglas Guthrie, high renovation costs and the unsingle-family NSP home in Phoenix. expected need to demolish entire buildings is the reason

Sustainable Communities • September/october 2011

The city dealt with many of the same challenges that other grantees faced implementing its program: private competition, high foreclosure rates and complex federal requirements. “Even when we were ready, we were dealing with a whole real estate industry that wasn’t ready. Buying foreclosed properties was tough, every phase,” said Kate Krietor, deputy director of community development for the City of Phoenix Neighborhood Services Department. Unlike many other grantees, which have focused primarily on selling move-in ready homes, Phoenix split its efforts between three different programs: ▲ The Sunset Manor apartment complex before demolition. The City of Phoenix • Homeownership Assistance purchased the crime-ridden Sunset Manor complex with NSP dollars, to ensure that Program: Buyers can purchase the blighted structure was demolished. any foreclosed home within the city of Phoenix, receive credit hood relevant again. More relevance means increased cost.” counseling and homebuyer education plus $15,000 in Garcia also attributes the higher than expected costs to closing cost and down payment assistance. the age and poor shape of many of the homes and complex• Move-in Ready (MIR) Program: Newly renovated es. There are “obsolete floor plans, unpermitted structures foreclosed homes for sale by NSP developer partners; and health and safety issues,” Garcia added. improvements bring house up to housing quality In a city with hot weather year round, weatherization, standards and feature energy-efficient systems. Buyenergy efficient cooling systems and low flow water fixtures ers receive $15,000 in closing cost and down payment are a high priority for all renovations. assistance. Building on smart growth efforts already taking place • Home Improvement Program (HIP): Buyers can in Phoenix, the NSP program targeted areas that provide purchase a foreclosed home in need of repair within transportation options for residents. “All of our target areas program specific zip codes and will receive an adare strategically around transportation corridors and where ditional incentive of up to $40,000 in rehabilitation job centers are,” said Krietor, City of Phoenix Neighborhood funds depending on the condition of the foreclosed Services Department. home, to use in addition to the $15,000 for purchase Phoenix boasts the following outcomes to date: assistance. • 185 homebuyers have purchased foreclosed houses to Krietor attributes much of Phoenix’s success with NSP to use as their primary residence, using NSP homeownerthe breadth of its program. “We didn’t know we were runship purchase assistance loans. ning a broader program than most cities until we were into • 132 foreclosed homes have been purchased by NSP it. But it has been a blessing to be able to adapt to market developer partners for rehab and resale to program elichanges, opportunities and partner capacity,” she said. gible buyers. 24 homes have closed, 22 under contract. Like other grantees, the Phoenix NSP program faced • 6 multi-family properties have been purchased to rehigher than expected renovation costs. However, said Jesse habilitated and provide 988 affordable rental units for Garcia, project manager for community development, City households at or below 50 percent of the area median of Phoenix Neighborhood Services, these costs are necincome. essary for the NSP program to have a real impact at the • 20 blighted properties – including the blighted, 52-unit neighborhood level. multi-family Sunset Manor complex (a property on the “Costs have been higher than budgeted, “said Garcia. city’s slum list for some time)– have been purchased for “But we are going into target neighborhoods that weren’t demolition and redevelopment to revitalize and stabidesirable even at the peak and trying to make the neighborlize target neighborhoods. ❧

September/october 2011 • Sustainable Communities

Refloating Housing

Foreclosures accelerate in mid-Atlantic, Northeast Data source tracks foreclosure rates, Helps forecast future loan troubles

he highest rates of foreclosures and serious delinquencies on home mortgages are concentrated in metro areas in two states, California and Florida, plus a handful of metro areas outsides those states, most notably Las Vegas. But when you look at the increase in the rate of foreclosures and serious delinquencies from March 2010 to March 2011, the fastest increases are occurring in a wide range of areas from Maine to Seattle, Wash. Most of the metros with the largest increases are in New York and New Jersey. The

does not include a single city in California or Florida. The serious delinquency information is an important indication of current conditions in the housing market, but now there’s also a way to project future trends. The source of the data, Foreclosure-Response.org, offers tools to help assess the level of foreclosure risk in a community. One tool is the site’s Foreclosure Risk Scores — a composite measure combining data on subprime lending, foreclosures, and mortgage delinquencies. It also provides access to HMDA data on high-cost loans. Foreclosure-response.org is an online guide to foreclosure prevention and neighborhood stabilization developed and maintained by the Center for Housing Policy, the Local Initiatives Support Coalition (LISC) and the Urban Institute. LISC’s Foreclosure Risk Scores identify the relative risk of foreclosure and foreclosure-related abandonment for each ZIP code within a state or within a metropolitan area. Data for the three individual components included in the scores (subprime lending, mortgage delinquencies, and foreclosures) may also be viewed separately. Data is also available at the level of zip codes and census tracts. Go to www.forecloseure-response.org/nsp. htm.

Delinquencies rise again ▲ A foreclosure in Atlantic City, New Jersey.

Atlantic City, N.J., area tops the list with an increase from 14% in March 2010 to 15.9% in 2011. It is followed closely by Vineland-Millville-Bridgeton, N.J., Kingston, N.Y. and Lewiston-Auburn, Maine. The Seattle metro area saw an increase from 7.7% to 8.4%. The list of the 25 metro areas with the largest increases

Sustainable Communities • September/october 2011

On a national basis, overall mortgage delinquencies increased slightly between the first and second quarters of this year, according to data from the Mortgage Bankers Association (MBA). “it is clear that the downward trend we saw through most of 2010 has stopped. Mortgage delinquencies are no longer improving and are now showing some signs of worsening,” said Jay Brinkmann, MBA’s chief economist. The delinquency rate for mortgage loans on one-tofour-unit residential properties increased to a seasonally

TOP 25 METROPOLITAN AREAS BY GROWTH IN SERIOUS DELINQUENCY RATE, MARCH 2010 TO MARCH 2011 Rank

Metropolitan Statistical Area

Serious Delinquency Rate*

Year over Year Pct. Point

March 2010

March 2011

Change 1

Atlantic City-Hammonton, NJ

1.9

14.0%

15.9%

Vineland-Millville-Bridgeton, NJ

1.7

18.0%

19.8%

Kingston, NY

1.5

12.3%

13.8%

Lewiston-Auburn, ME

1.4

9.7%

11.0%

Poughkeepsie-Newburgh-Middletown, NY

1.1

12.0%

13.1%

Decatur, IL

1.1

8.3%

9.4%

Elmira, NY

1.1

8.4%

9.4%

Trenton-Ewing, NJ

1.0

9.9%

10.8%

Lawton, OK

0.9

6.7%

7.7%

Rockford, IL

0.9

12.7%

13.6%

Bremerton-Silverdale, WA

0.8

6.2%

7.0%

Pittsfield, MA

0.8

9.0%

9.8%

Champaign-Urbana, IL

0.7

5.4%

6.2%

Seattle-Tacoma-Bellevue, WA

0.6

7.7%

8.4%

Ocean City, NJ

0.6

7.2%

7.9%

Eugene-Springfield, OR

0.6

5.7%

6.3%

Alexandria, LA

0.6

10.4%

11.0%

Binghamton, NY

0.6

8.0%

8.6%

Anderson, IN

0.6

10.8%

11.4%

Bangor, ME

0.6

8.8%

9.4%

Glens Falls, NY

0.6

11.0%

11.5%

Albany-Schenectady-Troy, NY

0.6

9.0%

9.6%

Wichita Falls, TX

0.5

7.3%

7.8%

Springfield, OH

0.5

10.4%

10.9%

Pine Bluff, AR

0.5

11.8%

12.3%

The table ranks the 25 U.S. metropolitan areas with the largest growth in the serious delinquency rate between March 2010 and March 2011. The serious delinquency rates in March 2010 and March 2011 are also shown. Source: Analysis of LPS Applied Analytics data by Local Initiatives Support Corporation, tabulated by the Urban Institute

September/october 2011 â&#x20AC;˘ Sustainable Communities

Refloating Housing >>

TOP 25 METROPOLITAN AREAS BY SERIOUS DELINQUENCY RATE, MARCH 2011 Serious Delinquency

90+ Days Delin-

Foreclosure

Rank

Metropolitan Statistical Area

Miami-Fort Lauderdale-Pompano Beach, FL

23.6%

5.4%

18.2%

Las Vegas-Paradise, NV

21.9%

8.8%

13.1%

Palm Coast, FL

21.2%

4.4%

16.8%

Port St. Lucie, FL

21.1%

5.2%

15.9%

Cape Coral-Fort Myers, FL

20.8%

5.8%

15.1%

Orlando-Kissimmee, FL

20.3%

5.5%

14.8%

Vineland-Millville-Bridgeton, NJ

19.8%

6.2%

13.6%

Punta Gorda, FL

18.9%

4.7%

14.2%

Tampa-St. Petersburg-Clearwater, FL

18.9%

4.5%

14.4%

Lakeland-Winter Haven, FL

18.7%

5.3%

13.4%

Bradenton-Sarasota-Venice, FL

18.1%

4.0%

14.1%

Deltona-Daytona Beach-Ormond Beach, FL

17.9%

4.8%

13.1%

Naples-Marco Island, FL

16.8%

3.9%

12.9%

Ocala, FL

16.6%

4.4%

12.2%

Sebastian-Vero Beach, FL

16.4%

3.8%

12.6%

Palm Bay-Melbourne-Titusville, FL

15.9%

3.9%

12.0%

Atlantic City-Hammonton, NJ

15.9%

4.6%

11.3%

Jacksonville, FL

15.6%

4.8%

10.9%

Kankakee-Bradley, IL

15.2%

5.3%

9.9%

El Centro, CA

15.0%

7.9%

7.1%

Riverside-San Bernardino-Ontario, CA

14.6%

7.7%

6.8%

Youngstown-Warren-Boardman, OH-PA

14.2%

4.5%

9.7%

Memphis, TN-MS-AR

14.0%

6.3%

7.7%

Stockton, CA

13.8%

7.3%

6.5%

Kingston, NY

13.8%

5.6%

8.3%

Rate*

quency Rate

Rate

The table ranks the 25 U.S. metropolitan areas with the highest serious delinquency rates in March 2011. Serious delinquency rate is defined as the share of all first-lien mortgages in foreclosure or that were delinquent for more than 90 days. It also shows the data for each type of loan separately. Source: Analysis of LPS Applied Analytics data by Local Initiatives Support Corporation, tabulated by the Urban Institute.

Sustainable Communities â&#x20AC;˘ September/october 2011

adjusted rate of 8.44 percent of all loans outstanding as of the end of the second quarter of 2011, an increase of 12 basis points from the first quarter of 2011, and a decrease of 141 basis points from one year ago, according to the MBA’s National Delinquency Survey. The combined percentage of loans in foreclosure or at least one payment past due was 12.54 percent on a nonseasonally adjusted basis, a 23 basis point increase from last quarter, but 143 basis points lower than a year ago. However, MBA disagrees with the contention that there is a growing backlog of loans that are likely to be foreclosed on soon. “The percentage of loans 90 days or more past due continues to fall along with the foreclosure rate, and is at the lowest point since the beginning of 2009. Were there a growing backlog, we would expect to see the 90-plus day delinquent category increasing,” the MBA said. In other words, MBA is suggesting that the increase in the overall delinquency rate is an indicator of temporary problems due to the economic slump and will not result in a surge in foreclosures. Of course, there is no way to predict

if loans that are only slightly delinquent now will be brought current or end up in foreclosure down the road. “Looking across the nation, foreclosures continued to be highly concentrated in just a few states, with five states accounting for 52 percent of the foreclosure inventory in the second quarter,” according to MBA. The single biggest factor determining whether or not a state has a large backlog of foreclosures is whether the state has a judicial foreclosure system, meaning whether or not a foreclosure needs to go through the courts, MBA said. Of the 9 states whose percentage of loans in foreclosure is higher than the national average, all but one has a judicial system of foreclosure, MBA said. MBA explained that the requirement for court proceedings slows the foreclosure process down dramatically due to the limited capacity of local court systems to hear cases. MBA said it’s important to distinguish between the economic impediments to resolution and the legal impediments to resolution of delinquent mortgages in the discussion about how to get the housing market back on track. ❧

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are are thatthat learn about opportunities changing policies programs programs andand policies changing andand opportunities newnew about learn willwill YouYou critical to your mission and your financial success in challenging times, including: including: times, critical to your mission and your financial success in challenging • Learn about fast-changing financial dynamics technology technology andand dynamics financial fast-changing about • Learn • Master methods of financing projects projects of financing methods newnew • Master • Meet financing sources experts experts andand sources financing • Meet practice • Help set policy direction create alliances public policy & industry practice & industry policy public for for alliances newnew create andand direction set policy • Help Photo courtesy of McCormack Baron Salazar and Sunwheel Energy Partners. All rights reserved.

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Group Reznick Reznick Group is a top is a 20 topnational 20 national tax and accounting, accounting, tax and firm firm advisory business business advisory of of depth exceptional withwith exceptional depth estate in real knowledge knowledge in real estate services. tax credit and and tax credit services. www.reznickgroup.com www.reznickgroup.com Enterprise Enterprise

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September/october 2011 • Sustainable Communities 27 wendy@p4sc.org email 216-906-7861, Chaney: Wendy Wendy Chaney: 216-906-7861, email wendy@p4sc.org

By Andre Shashaty

Reuse of older buildings gets new priority; Affordable housing preservation promoted

Rehab, Preservation Retrofits

reservation and reuse of existing real estate assets, particularly rental housing, has taken a back seat to new development in the movement toward sustainability and social equity. But with new development activity

likely to remain at low levels for years to come, managing growth is fast becoming less important than preserving existing assets in our communities. In terms of community sustainability, utilization of existing buildings is a far better bet than new construction. They are already located in developed areas near transportation and utility services. No new infrastructure development is required. Much of the federally assisted rental housing stock is located in neighborhoods with access to affordable transportation options. The National Housing Trust said that 100,000 assisted units in 8 cities are within a half mile of existing or proposed rail stations. Reusing existing buildings is also far more resourceefficient than building new buildings, no matter how much â&#x20AC;&#x153;greenâ&#x20AC;? technology new projects might include or how many high-priced certifications they may obtain. Renovating an existing building consumes less energy than demolition and new construction. Existing buildings have embodied energy, that is, the energy required to derive, deliver, and install the raw materials

Sustainable Communities â&#x20AC;˘ September/october 2011

it takes to construct a building. The embodied energy lost when a building is demolished is not easily replaced. It takes 65 years for a new energy efficient building to save the energy lost when demolishing an existing building, according to information provided by the National Housing Trust, a national non-profit engaged in housing preservation through public policy advocacy, real estate development, and lending. (http://www.nhtinc.org/) Preserving and reusing all kinds of real estate makes good sense for communities concerned about sustainability from an environmental perspective. But for many developers and governments, the highest priority goes to preserving affordable housing. This is because it not only embodies the energy it took to build, but represents a substantial investment of taxpayer dollars in most cases. Affordable housing is also a critical resource that is not likely to be replaced as it is lost. Energy efficiency upgrades in affordable rental housing

AFTER: The project looks completely different after rehab, with a new entryway and extensive work on common areas, systems and unit interiors. It has 199 one-bedroom apartments ▲

▲ BEFORE: Inglewood Meadows before rehab was drab and rundown and at risk of conversion to market-rate rental use due to the approaching expiration of its federal rental assistance contract

are a cost- effective approach to lower operating expenses, maintain affordability for low-income households, reduce carbon emissions, and create healthier, more comfortable living environments for low-income families.

HUD plays critical role The U.S. Department of Housing and Urban Development (HUD) oversees more than 22,000 privately owned multifamily properties, and more than 1.4 million assisted housing units. These homes were originally financed with FHA-insured or direct loans and many are supported with Section 8 or other rental assistance contracts. HUD is actively working with private sector owners and investors to preserve the affordability and long-term viability of multifamily housing. Many HUD properties were financed 30 to 40 years ago. Housing subsidy contracts are expiring on thousands of privately owned multifamily properties with federally insured mortgages. The expiration of their contracts mean they are in danger of being con-

verted to market-rate use. They are also threatened by physical deterioration and obsolescence. The California Housing Partnership focuses on preservation of assisted housing in the Golden State. It says there are 150,000 apartment properties in the state that are subsidized and regulated by HUD, 18,700 subsidized by the US Department of Agriculture (USDA), 300,000 with Housing Choice Vouchers funded by HUD through local housing authorities, and 44,000 public housing units, and 204,000 units that have received allocations of Low Income Housing Tax Credits (LIHTC). The partnership estimates that 68,000 of these federally subsidized affordable apartments in California are at-risk of conversion to market rate in the next five years, with an additional 74,000 becoming at-risk in the following 15 years. HUD is making important progress toward streamlining rules governing its programs to facilitate the preservation of more projects. At a recent conference on preserving at-risk housing, Margaret Salazar, Senior Housing Program Specialist from the Office of Multifamily Housing Programs at HUD, outlined a series of administrative steps the agency was taking to remove roadblocks to preservation. She said HUD was planning rule changes to: • Allow certain nonprofit owners of HUD-assisted properties to receive modest distributions of cash from the properties they own.

September/october 2011 • Sustainable Communities

>> 29

Rehab, Preservation & Retrofits

The biggest item in the HUD budget is money to fund Sec. 8 rental assistance contracts. The money has survived political battles in the past, but in today’s budget cutting frenzy, no one knows what might end up on the chopping block. Meanwhile, many state governments have already cut back on the programs they offer for affordable housing development and preservation. For preservation of projects that are in reasonable condition and do not require a deep subsidy to be affordable, there is good financial news. There are programs popping up in many states that rely on a funding source other than government: utility companies. A majority of states implement utility-funded energy efficiency programs, often paid for through charges included in customer utility rates. These programs are a significant and growing source of resources for residential energy ▲ BEFORE: Regency Towers, with 104 units, was built in 1997, and was retrofits that remain largely untapped by the one of three Sec. 8 seniors housing projects acquired and rehabbed by multifamily sector. Thomas Safran & Associates Utility energy efficiency program budgets have significantly increased since 2006 and could reach • Authorize certain nonprofit owners to receive mod$12 billion nationwide by 2020. est proceeds from the sale of a property to a qualified If multifamily energy retrofits are to occur at scale, utilipreservation purchaser. ties will need to develop energy efficiency programs that • Allow certain project owners to access Residual address the unique nature of the multifamily sector, accordReceipts for project improvements including energy efficiency. • Make it easier to use Federal Housing Administration (FHA) mortgage insurance combined with Low Income Housing Tax Credits (LIHTC). • Make it easier for owners to use the LIHTC for the acquisition and rehab of older assisted housing.

Utility programs hold promise The preservation of federally assisted affordable housing faces significant hurdles, too. Older projects often need a great deal of subsidy to allow them to be brought up to code and to ensure that they remain affordable to low-income people. In the ongoing political struggle over the federal budget, funding for preservation is under very intense scrutiny. When Congress returns to the task of how to cut spending this fall, many current housing assistance programs will face cuts or elimination.

▲ AFTER: The $6.15 million spent on rehabilitating the project made it virtually new except for the walls. Work included replacement of all building systems, cool roof, low-e windows, boiler, chiller, HVAC, and all new Energy Star Appliances in all units.

Sustainable Communities • September/october 2011

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Rehab, Preservation & Retrofits

to the National Housing Trust. While nationwide data is >> ing unavailable, most utility-funded programs typically focus

Preserving older assisted housing is one of the most effective ways to turn around a neighborhood and make a community stronger and more energy efficient. Just ask the mayor and the citizens of Inglewood, California. That’s the town most people never notice as they fly in or out of Los Angeles International Airport, which is located there. However, it’s home to 116,000 people. And several hundred of them lived in pretty rundown assisted housing until Thomas Safran & Associates (TSA) came along. TSA is a developer and owner of affordable housing. It owns and manages over 3,300 units of affordable rental housing in California. TSA bought 8 older, federally-subsidized buildings in the LA area four years ago, two of which are located in Inglewood. They are Inglewood Meadows with 199 units and Regent Plaza, with 104 units. With great attention to quality, TSA did extensive rehab on both buildings, including new entries and high-quality landscaping that makes them look like new. When the mayor of the city saw the good work TSA did on those properties, he asked the firm to buy and preserve a third Sec. 8 seniors housing project that was located across the street called Regency Towers. To help cover the cost of rehab, the city put up a $5 million loan on advanta▲ Meridian Manor is a 109 unit senior housing apartment building located in geous terms. the heart of Seattle’s Northgate neighborhood that was at risk of conversion to TSA is known for its focus on high market-rate rentals. The Seattle-based nonprofit developer Housing Resources quality design, provision of amenities for Group teamed up with Union Bank, the City of Seattle, HUD and other public residents and very good management and sector sources to acquire the property, renovate it, and provide long term tenant relations. “While building and manfinancing to preserve the affordability of these senior apartments. aging profitable housing for our investors, our highest goal is to enhance the world in which we live and to enrich the lives of the people who the installation of solar photovoltaic generating systems reside in our buildings,” said Thomas Safran, the founder on low-income multifamily housing. MASH has two tracks. and principal. Track 1 incentives provide fixed, upfront capacity-based Several of the properties TSA rehabbed were subject to Sec. incentives for solar PV systems that offset common area 8 rental subsidy contracts from the federal government. TSA and tenant loads. The MASH Track 1 incentive rates are rehabbed all eight using an equity investment from Union Bank, $3.30 to $4.00 per watt. Track 2 offers higher incentives to and debt financing from Citibank. The five project-based Sec applicants who provide quantifiable “direct tenant benefits” 8 contracts were expiring, and TSA got them renewed for 20 (i.e. any operating costs savings from solar that are shared years, guaranteeing a stream of rental income. with their tenants). Residents pay 30% of income for rent. The maximum The Public Utilities Commission oversees the utility-run income to be eligible for either project for a one-person program. It says 271 MASH Track 1 projects are currently household is $35,880. reserved, with capacity of more than 16.7 megawatts. Other Critical to the work of TSA and other rehabbers is the eligible projects are on waiting lists and will only be funded availability of federal housing tax credits. The credit if a reserved project drops out.

first on single-family and small rental properties rather than multifamily properties (5 units or more), the Trust said. In many states, utilities are partnering with state housing agencies and affordable housing owners to develop successful multifamily energy efficiency retrofit programs. In California, affordable housing owners reacted enthusiastically to The Multifamily Affordable Solar Housing Program (MASH), which provides financial assistance for

What’s old is new again 32

Sustainable Communities • September/october 2011

—continued on page 37

New York invites multifamily properties to weatherization program participation

wners of multifamily housing might feel like an uninvited guest crashing the residential energy retrofitting party. Billions of dollars in federal money is available for retrofitting housing, but in many states and cities, most or all the money goes to single-family homes. Bucking that trend is New York State, where a concerted effort is being made to steer a significant portion of Weatherization Assistance Program (WAP) funds to apartment buildings. New York State Homes and Community Renewal (HCR) is using WAP to help apartment owners save energy while also creating jobs for area businesses and a better quality of life for apartment residents who are predominantly low and moderate wage earners. It is working with owners of affordable housing of all sizes, both subsidized and market-rate. One of the biggest participants is the Community Preservation Corp. (CPC),

▲ The Civill Senior Housing in Coeymans, NY

which was awarded a $5 million grant to provide energy-saving upgrades to over 1,200 affordable apartments in upstate New York. It helps that the statewide administrator of WAP funds is the New York State Homes and Community Renewal (HCR), said Duncan Barrett, chief operating officer of Omni Housing Development LLC and chairman of the New York State Association for Affordable Housing (NYSAFAH), the trade association for New York’s affordable housing industry statewide. HCR is also the tax credit allocating agency, a statewide PHA and the regulator of much of the state’s older affordable multifamily stock, including an extensive portfolio of state-financed deals. This helps compensate for the fact that a large proportion of local WAP subgrantees in New York and other states prefer to focus on single-family homes and avoid the complexity of multifamily. One of the projects Omni has retrofit using WAP money is The Civill Senior Housing in Coeymans, NY (pictured on this page). It consists of a single attached building with a threestory section built in 1873 (as a school) and a two-story section built in 1930 (as a gym). It was converted into 28 apartment units using the low-income housing tax credit program. The project received $129,000 in WAP and about $20,000 in owner funding from the project’s replacement reserve account. The retrofit work included replacement of the boiler, hot water heater and light fixtures, new refrigerators and some infiltration work. Barrett said the process for obtaining the WAP grant and bidding out the retrofit work was cumbersome. However the efficiency measures WAP financed are projected to reduce operating utility costs by $10,000 per year.

September/october 2011 • Sustainable Communities

>> 33

Rehab, Preservation & Retrofits

>> Energy

Savers Program Increases Resources, Broadens Scope John Brauc owns this 26-unit apartment building which provides quality, affordable and energy-efficient units at a desirable address in the Chicago neighborhood of Logan Square. Energy-related rehab work consisted of new windows, high-efficiency hot water tanks, six furnaces, watersaving shower heads, thermal exterior doors, and high-efficiency hallway light fixtures and bulbs.

▲

hicago–Government and business leaders here have long understood the importance of preserving market-rate affordable apartments. Now they are taking a new track in that effort, with a program to make such properties more energy efficient that could be a great model for other cities and the nation. Launched in January 2008, Chicagoland Energy Savers resulted in completion of retrofits on 5,500 apartment units as of August 1, 2011. The Community Investment Corp and CNT Energy, a division of the Center for Neighborhood

Technology, launched the Energy Savers program to help owners of multifamily buildings control one of the largest operating costs in their buildings: utilities. Projects chosen to participate receive free energy audits from CNT and assistance with designing energy retrofits. So far, the average annual savings on utility bills is 30%. Originally funded by $3.25 million from CIC, the John D. and Catherine T. MacArthur Foundation and the Grand Victoria Foundation, Energy Savers provides low-cost fixed-rate subordinate financing through CIC to fund the retrofits when needed. Since the program began, 15,500 apartment units have been audited and 5,500 units retrofitted (numbers are as of August 1, 2011). Of the units retrofitted, approximately 1,500 units involving 64 loans or grants totaling $4.1 million have been processed through the CIC Energy Savers Fund; the remainder were self-financed by owners. None of the CIC loans are in ▲ The heating bills for The Broadmoor, a 1922-vintage building located in the default. North Side Chicago neighborhood of Rogers Park, are now 38% lower than before its retrofit. “I think Energy Savers is a great incentive for people to upgrade their The average expenditure for energy buildings to a more efficient system, like we did at The Broadmoor, that otherwise improvements has been $2,500 per unit. would not be affordable any other way,” said Louis Sopcic. For a typical 24-unit building, the annual

Sustainable Communities • September/october 2011

savings add up to $10,000 per year. Recently the capacity of the program increased in two ways. First, its geographic reach now includes not just the CIC northern Illinois service area of Cook, DuPage, Lake, McHenry, Kane and Will counties, but also Kendall County and the city of Rockford; and the loan capital in the CIC’s Energy Savers Fund has increased by $7.5 million for the next three years under an agreement with the MacArthur Foundation, Chicago Department of Environment, Chicago Metropolitan Agency for Planning, and PNC Bank. Basic terms of the financing are as follows: • Term: 7 years, 7- to 15-year amortization • Loan to Value Ratio: Up to 90%, including first mortgage • Loan to Cost Ratio: Up to 100% of costs • Minimum Debt Service Coverage: 1.15 on total debt • Interest rate: 3% fixed • Loan Fee: 3% • Construction interest: Prime + 3% CIC has continued making loans at a time when many other banks have drastically reduced lending. In some cases, CIC has also taken over the first mortgage, according to a

summary of the program prepared by the Climate Leadership Academy Network and the Institute for Sustainable Communities in partnership with Living Cities A key part of the appeal of the program to property owners is the comprehensive one-stop assistance it offers. CIC has many years of experience working with owners of smallto mid-sized properties who are generally small operators without a lot of financial or accounting sophistication. Owners who participate in the program receive an annual performance report for at least two years, beginning one year after project completion. The report uses pre- and postproject utility bills to verify expected reductions in energy use. If savings are significantly different than projected, program staff members return to the site to diagnose why and provide further recommendations (usually about operational adjustments). The program is one of the six key initiatives of a Rental Housing Action Plan devised by The Preservation Compact. Guided by ULI Chicago with support from The John D. and Catherine T. MacArthur Foundation, the Compact aims to preserve and improve 75,000 units of existing affordable rental homes that might otherwise be lost to condominium conversion, demolition, or rising costs.

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To learn more or place your advertising, contact: Wendy Chaney at 216-906-7861 (Eastern time zone) Andre Shashaty at 415-453-2100 x 303 (Pacific zone)

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EFFICIENT BUILDINGS TODAY ? This is the perfect editorial environment for any company selling services or products intended to make buildings more efficient. High-quality, original editorial attracts readership from the executives who are buying products and services related to: • Energy efficiency • Water conservation • Indoor air quality • Renewable energy generation • Reduced utility costs • Financing • Energy audits • Green building • Construction • Asset management • Property management —continued on page 34

September/october 2011 • Sustainable Communities

Rehab, Preservation & Retrofits

FHA mortgage insurance key factor in converting school to affordable housing

ittsburgh–With the help of a new expedited processing program from the Federal Housing Administration (FHA), an abandoned school here has been converted into highly efficient housing for seniors, including a substantial number of very affordable units. The former South Hills High School in the Mt. Washington neighborhood here has been converted to 106 units of senior apartments – 84 units of which are affordable and 22 which are non-income restricted. The project also has about 12,000 square feet of commercial space on the ground floor. The school sat vacant and in disrepair for 20 years until the Urban Redevelopment Authority of Pittsburgh (URA) ap-

proached a.m. Rodriguez Associates, inc. in 2005 to look into possible reuses of the building for senior housing. After 4 years of planning, designing and fund-raising the project began construction in June 2009, thanks to financial support from the states Redevelopment Assistance Capital Program. In 2005, the board of education spent $3.5 million, demolishing and abating parts of the building and repairing the roof on the school so that it could more easily be converted into the mixed-use facility that the Mount Washington Community envisioned. a.m. Rodriguez Associates, inc. submitted a proposal to the Pennsylvania Housing Finance Agency (PHFA) to rehabilitate the prop-

▲ The former South Hills High School in Pittsburgh has been converted to 106 apartments using tax credits and FHA mortgage insurance.

Sustainable Communities • September/october 2011

erty to the 106 units of senior apartments. The project was initially awarded tax credits in 2008 and then an additional allocation in 2009, for a total of $1.7 million in annual credits, the most PHFA had ever awarded to one project. PHFA also awarded the project $1.5 million of their PennHOMES soft funds, which is the maximum amount allowed per project. One of the challenges of reusing large buildings for affordable housing is that the volume of space is often greater than typical new construction. In this case, the building has 155,000 square feet. It also has very large windows. With this challenge in mind, a.m. Rodriguez Associates, inc., in collaboration with Sota Construction Services applied to the Pennsylvania Energy Development Authority (PEDA) and was awarded a $500,000 grant to install a 27kW Photovoltaic Solar Array and 65kW co-generation turbine, both of which produce electricity on site and reduce utility bills by approx. $35,000/year. The developer estimated that the project is generating 30% to 40% of its electrical power on site and that this will reduce its carbon footprint substantially. In addition to the Co-generation Turbine, a 2,000 gallon hot water storage tank was installed to capture heat from the turbine for use in generating hot water.

a.m. Rodriguez Associates, inc., and, Sota Construction Services, Inc., had completed several LEED Certified rehabilitations in the past, but none of them included the alternative energy production strategies used at South Hills Retirement Residence. An efficient water-source heat pump system was installed which can also use the excess heat from the cogeneration turbine so that the boilers are not needed during milder temperatures. The building is projected to receive the LEED for Homes Gold designation. The FHA has tried to make it easier to use its mortgage insurance programs for projects with low-income housing tax credits by speeding up its processing time. This was the first project in the area to use the new expedited processing capability. “It was incredibly quick,” said Barbara M. Sullivan, senior vice president of Bellwether Real Estate Capital, LLC, the originator of the FHA loan. “We probably could not have done the deal without this expedited processing because of the deadlines under the tax credit program for when the project had to be placed in service,” said Victor Rodriguez, senior vice president operations & administration for the development company. The equity investor in the project was John Hancock. ❧

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program has two tracks, one that offers a 9% tax credit through a competitive process and one that offers a 4% tax credit as a routine offering to any eligible project that obtains an allocation of private activity tax-exempt bonds. The demand for 9% credit far exceeds the limited supply, while bonds and 4% credit are readily available in most states. One of the most active investors in affordable housing in the west is Union Bank. The institution sees preservation of existing affordable housing as a crucial need for communities as well as an important business opportunity, said Annette Billingsley, senior vice president and head of the Community Development Finance (CDF) division. The bank finances many of Safran’s projects. “You get a sense of the pride he takes in his work. He builds and manages to the highest standards, from bricks and mortar up to services he brings to residents,” said Johanna Marie Gullick, vice president and Southern California market manager. The bank’s appetite for equity investments in 4% or 9% tax credits generated by preservation projects is very strong, said Billingsley. After a slow down in the investment market in 2009, investor demand is very strong for 9% credits generated by projects in major cities like LA and San Francisco. This has pushed up the amount of equity that project sponsors can

raise. The high prices being paid have trickled down to 4% deals to some degree, she added. The resurgence of investor interest in 4% credits is good news for developers doing preservation deals. In 2009, there were very few 4% transactions (or 9% deals for that matter). In 2010, the market improved. Now, there is strong demand for the equity generated by 4% deals, primarily for banks with investment mandates under the Community Reinvestment Act. “In California, it’s a bank driven market, and the banks are driven by CRA,” Billingsley said. To make preservation deals work, Sec 8 contract renewals are critical since they obligate the government to pay the rent of eligible tenants, creating a stable source of cash flow. Actually, the Sec. 8 contract is a kind of source as it leverages permanent debt by providing additional revenue. Some projects are feasible with just tax credits and rental subsidies, but others require additional soft loans to help cover higher aquisition and rehab costs. Regency Towers was very cutting edge, said Billingsley. Union Bank retained a percentage of ownership in the property but syndicated a portion as well. One of its investors was Google. It was the first tax credit deal in which Google invested, Billingsley added. Union Bank is actively involved in equity investing and debt financing for all kinds of affordable housing primarily on the West Coast in California and the Pacific Northwest. ❧

September/october 2011 • Sustainable Communities

GHG Emission Allowances:

Pioneering mandatory emissions control program hits turbulence

New Hampshire governor vetoes withdrawal measure; New Jersey prioritizes incentives for wind, solar power

he nation’s first system for controlling greenhouse gases (GHG) and financing energy efficiency through the auction of emission allowances faces serious challenges as it enters its fourth year of operation. The Regional Greenhouse Gas Initiative (RGGI) was the first mandatory system in the United States to require fossil fuel-based electricity generators to purchase emissions allowances for every ton of greenhouse gas emitted. The program has achieved a great deal as it completes its third year of operation, but it faces some major challenges too. “RGGI harnesses the market’s capacity to search out the cheapest emissions reductions, and rewards climate-friendly innovation in the electric power sector,” states the RGGI website. Participating states include Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont. However, New Jersey’s governor has announced that his state will leave the program. In New Hampshire, the governor used his veto power to prevent the state from withdrawing from the program.

Sustainable Communities • September/october 2011

Gov. John Lynch said withdrawal would result in New Hampshire ratepayers continuing to pay as much as $6 million in additional electricity rates, while forfeiting more than $12 million of funding annually. “Withdrawing from RGGI would be a blow to our economy and to our state’s efforts to become more energy efficient and energy independent,” Lynch said. According to an independent economic assessment of the program conducted by the University of New Hampshire, the cumulative impact of RGGI through the end of 2010 has been a cost of $11.7 million, and a benefit of $28.2 million in allowance revenue. “Through this initiative we have invested significantly to help increase the energy efficiency of homes, public buildings, and businesses. In many cases, these funds help to leverage additional private resources to achieve even greater benefits,” Governor Lynch wrote.

New Jersey withdraws New Jersey Gov. Chris Christie is one of the few Republican office holders who publicly acknowledges that climate change is a real concern and that human activity is at least part of the problem. But Christie is prioritizing other approaches over participation in RGGI, which he described as a failed approach to reducing greenhouse gases: “First, RGGI allowances were never expensive enough to change behavior as they were intended to and ultimately fuel different choices. When RGGI began the industry projected that the cost of allowances would eventually be as high as twenty to thirty dollars a ton compared to the current price of less than $2 per ton, at which point the cost would have been sufficient to affect a decision of energy producers to choose lower carbon fuels or more efficient production technologies. This is not the case. It has not happened.” Second, Gov. Christie argues, New Jersey’s carbon emissions are already below the goals for 2020 set out in New Jersey’s Global Warming Response Act, the legislation that permitted the state to participate in RGGI. He said this was due to increased use of natural gas, and the decreased use of coal. Third, given that New Jersey now has multiple laws that provide significant market incentives for wind, solar, and instate natural gas generation, Gov. Christie claims that any benefits that the RGGI tax may have had are now miniscule. “Fourteen laws have been passed since the Global Warming Response Act was passed authorizing us to join RGGI. These fourteen laws all accomplish the goals of promoting clean energy without the need to participate in RGGI at all,” he stated. At the same time that he announced the state’s withdraw

from RGGI, Christie revealed a plan to ban new coal-based generation of energy in New Jersey. “We will no longer accept coal as a new source of power in the state and we will work to shut down older plants that emit high greenhouse gases. We need to commit in New Jersey to making coal a part of our past.” Christie said he would work to make New Jersey number one in offshore wind production. He also announced an effort to expand development of solar energy generation on brownfields and landfills.

Auctions lack bidders The website Law & the Environment confirms that RGGI is not realizing very high demand for carbon dioxide allowances. In its most recent auction, although the number of bidders was up, the percentage of allowances purchased was down. Thirty-one bidders purchased just under 18% of the 42,189,685 current compliance period allowances offered for sale by the 10-state group (including New Jersey). The previous low for demand for these allowances dates from the last auction in June, where 25 bidders bought only 30% of the available allowances, also at the floor price of $1.89. Under RGGI, electric generators with over 25 megawatts (MW) of fossil fuel-based capacity must purchase emissions allowances for every ton of greenhouse gas emitted. Generators that reduce emissions will be required to purchase fewer allowances, and may sell surplus allowances to generators less able to meet emission reduction targets. RGGI thus harnesses the market’s capacity to search out the cheapest emissions reductions, and rewards climatefriendly innovation in the electric power sector, according to the organization’s web site. The inaugural auction of RGGI emissions allowances was held in September 2008, and ongoing quarterly auctions have raised hundreds of millions of dollars for states to invest in clean energy programs. The majority of this auction revenue is dedicated to energy efficiency programs that save consumers money, reduce emissions, and deliver economic benefits across the region. One of RGGI’s most important design precedents is the decision to auction allowances rather than give them away for free, and to invest auction proceeds in energy efficiency. Emissions from power plants covered by the RGGI program have declined significantly since the program was established. In 2009 regional emissions fell 34% below the ten-state cap, and in 2010 emissions were 27% below the cap. The decline in emissions was principally caused by reduced generation from fuel oil and coal, and increased generation from natural gas, renewables, and nuclear, as well as by investments in energy efficiency across the region, RGGI said. ❧

September/october 2011 • Sustainable Communities

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