Nearly one-third of our nation’s workforce, 41.7M people, make less than $12 per hour. For many of these Americans, public housing can provide a safe and affordable place to call home. However, our current inventory of public housing stock has aged to the point that many existing units are either in desperate need of major repairs or must be torn down and replaced with new and equally affordable units.
In 2010, the U.S. Department of Housing and Urban Development (HUD) estimated that the current supply of public housing would need $26B for improvements, a number projected to grow by over $3B each year. In response to this backlog, Congress created the Rental Assistance Demonstration (RAD) program in 2012. Administered by HUD, RAD was created to provide a method for Public Housing Agencies (PHAs), which manage existing public housing units, to preserve and improve public housing properties by partnering with private and non-profit developers through the Project-Based Section 8 program. To date, RAD has preserved 100k units of affordable rental housing in public housing communities across the United States, and Congress recently authorized an expansion of the program of up to 455k public housing units.
Working Toward Solutions
Fannie Mae is committed to partnering with affordable multifamily developers, PHAs, and our lender partners to support the revitalization of public housing across the United States. An excellent example of this partnership can be found at Jordan Downs in the Watts neighborhood of southern Los Angeles.
Originally built in the 1940s as transitional housing for World War II veterans, Jordan Downs was repurposed as public housing in the mid-1950s. This community of 103 buildings on 49 acres was the largest public housing community in Los Angeles. In 2012, the Housing Authority of the County of Los Angeles selected the Michaels Development Company and BRIDGE Housing as developer partners to revitalize and redevelop the community.
The redevelopment of Jordan Downs will double the number of affordable rental housing units and create an urban hub with retail, public parks, a community center, and proximity to the light rail line. The rental housing units will remain affordable to low-income residents (i.e., households with income between 30% and 60% of the area median income). Additionally, Century Boulevard, a large street in southern Los Angeles, will be extended through the property to connect Jordan Downs with the larger Los Angeles community.
This year, with our Delegated Underwriting and Servicing (DUS) lender partner Berkadia, Fannie Mae provided $16M in financing for Michaels Development to break ground on the second phase of this redevelopment project. This financing came in the form of a forward commitment via our popular MBS Tax Exempt Bond (M.TEB) product. The innovative structure combines the lower-cost benefits of Fannie Mae’s MBS execution with the attractive features inherent to a tax-exempt bond, resulting in a more streamlined and lower-cost execution for the affordable developer.
All across the country, from Los Angeles to Austin and Grand Rapids to Greensboro, we are working with affordable housing partners to support the financing needs of PHAs. We look forward to strengthening and expanding our work with PHAs across the country to ensure that they can continue to provide their residents with safe, healthy, and affordable places to call home.
*Perspectives by Fannie Mae 11/13/2018 via Economic Focus