Arlington Community Foundation Shared Prosperity Initiative:
Final Report on Construction Buy Down Pilots to Achieve Affordability at 30% AMI June 2023 This paper describes a 2020 Arlington Community Foundation (ACF) pilot program that invested longterm capital in nonprofit housing developer projects with a goal of locking-in 30% AMI units for 20-30 years. Our goal was to test the feasibility, costs and process of buying down 60% AMI committed affordable units to achieve long-term 30% AMI affordability using private funding sources. We are grateful to our nonprofit housing partners, AHC, APAH and Wesley Housing, for their assistance in designing and executing this pilot. Program Design In 2020, ACF deployed a $3M donation from Amazon to test buying down “bricks and mortar” committed affordable units1 from 50-60% AMI to 30% AMI rent levels through awards to three nonprofits—AHC, APAH and Wesley Housing. In total there were 20 units that were funded for this demonstration pilot.
The mix of projects across the three sites included both new construction and refinancing of existing projects. • For new construction, the deeper affordability commitment can be reflected in the project’s legal and financial documents from the start, ensuring long-term compliance. • For existing projects, any mid-term change in capital investment, cash flow or affordability restrictions would likely trigger broader implications for existing lenders and investors, as well as legal costs to complete the changes. This barrier limited the pool of potential existing projects to those planning on undergoing a refinancing or rehabilitation/recapitalization in the near term. At that point, the additional investment and affordability restrictions could be fully incorporated into the updated legal and financial structure. The housing nonprofits agreed to honor the 30% AMI unit commitment for either 20 or 30 years per their contracts with ACF and, to the extent practicable, reflect those CAFs in the project’s legal documents. Rather than specifying a precise level of investment in advance, each nonprofit proposed the number of units, the dollar amount needed and the number of years of affordability that worked best for their project’s circumstances. This resulted in variation in terms as shown in Table B-1 below. ACF did not place any additional expectations on the nonprofits for long-term compliance. To limit administrative burden and confusion, they were expected to use the same compliance rules, such as income certification and rent increases, that applied to other units in the project. This piggy-back We use “bricks and mortar” to refer to subsidies that are tied to specific housing projects or units, in contrast to tenant-based subsidies that follow a resident to any qualifying unit (e.g. Housing Choice Vouchers or local housing grants). 1
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