A sea change may be coming in the way the homeless are being housed.
While there’s still a need, especially in cold weather, for the traditional shelter with cots and curfews, a new emphasis on permanent, supportive housing is taking this kind of living option away from the shelter model into the realm of for-profit real estate development.
Hunt Capital Partners is on the leading edge. The Los Angeles-based syndication unit of the Hunt Companies is a big capital markets player. It has raised more than $1.5 billion in Low Income Housing Tax Credit equity for affordable housing projects, some of which target permanent solutions for the homeless.
HCP recently announced the closing of $4.2 million in LIHTC equity for the construction of Rhododendron Place in Vancouver, Washington. The project will consist of newly built studio apartments, with 23 of them set aside for homeless people. Half of the total will go to very low-income residents, with incomes up to 30 percent of area median incomes; the other half, to low-income renters with incomes up to 50 percent AMI.
While the overall homeless population has declined since 2010, new research puts the current total at 661,000 nationwide. That’s 100,000 higher than the official number from the Department of Housing and Urban Development.
Projects like the one in Vancouver are designed for the special needs of homeless people. For example, they rarely have much in the way of furniture, so the units will come with some basic furnishings -- a single bed frame, mattress, side table, desk and chair. Supportive services will also be offered through Columbia Mental Health Services.
“These include child and family services, youth services, mentoring, drug and alcohol treatment, employment services, medical, supported housing and treatment programs, to name a few,” according to Dana Mayo, Hunt Capital executive managing director.
Mayo says: “Our investment in this development will provide affordable housing for the homeless and equip them with resources to help break the cycle of poverty.”
The total development cost for the project is $7.78 million. Hunt Capital Partners “syndicated” the complicated tax credit deal, meaning it found investors who could use a tax break to get one by investing in low-income housing. Investors can either be a single entity or a consortium of investors. In this case, it was a multi-investor fund.
Hunt’s local partners, the Vancouver Housing Authority and Columbia Non-Profit Housing, have long had an emphasis on housing the homeless. CNPH provided a $2.1 million construction-to-permanent loan and VHA provided a $1.2 million C2P loan for Rhododendron Place.
The LIHTC is a complex program that has managed to finance over 2 million affordable homes since 1986.
Since it involves the tax code, it is overseen by the Internal Revenue Service. But it is administered by state housing finance agencies, which award the credit to real estate developers who put forward projects like Rhododendron Place. Then the credits are sold to investors through syndicators like Hunt Capital.
The tax credit can be a potent weapon for constructing permanent housing for the homeless, thus providing more units feeding the philosophy of “rapid rehousing” of homeless people to prevent them from becoming homeless long-term.
In Minneapolis, for example, of the 3,000 homeless people served in 2016-2017 by the Adult Shelter Connect program affiliated with Simpson Housing Services, 40 percent were placed into subsidized rental housing, with 7 percent of them going into housing immediately from the shelters.
Hunt Capital Partners now has helped finance a total of four developments for homeless or developmentally disabled people, two in Florida, one in Texas and the one in Washington state.
In Jacksonville, Florida, it raised $9.2 million in a multi-investor syndication to build Sulzbacher Village, a 124-unit development with 70 slots reserved to permanently house homeless women with children. The other 54 are temporary homeless units. Support services include an on-site health clinic.
Local buy-in was important, as Jacksonville “has decided it wants to end homelessness, not manage it,” says Cindy Funkhouser, president and chief executive of Sulzbacher, who vows that no homeless woman with a child will ever be turned away from its doors.
St. Paul, Minnesota is another good example of this forward-thinking change in philosophy. One property has gone from a shelter where people slept on mats on cold, concrete floors to a massive $115 million multi-part development through Catholic Charities.
Named for the head of the Catholic Workers Movement, an early advocate for the homeless, Dorothy Day Place will have multiple buildings and feature an enormous 320-bed shelter. The plan calls for 193 units of permanent housing completed in the first building phase, and an additional 177 units of permanent housing completed by the end. A new wing will provide transitional housing, where the working homeless -- of which there are many -- pay $7 a night rent for their period of residency. Then, if they have met certain conditions, the rent money is rebated to them to help pay some of their move-in costs when they transition into a permanent apartment.
Dominium of Minneapolis was the syndicator for the LIHTC tax credits on this deal, but there was only a single investor, U.S. Bank of Minneapolis. The project also tapped New Markets Tax Credits for the commercial/supportive part of the project.
Freelance writer Mark Fogarty and research assistant Priestess J. Bearstops contributed to this report.