Taking Resident Services to the Bottom Line

The benefit of providing service-enriched housing is increasingly outweighing the costs for affordable housing developers and finance partners, according to R4 Capital EVP Nicole Flores and Rainbow Housing Assistance Corp. Executive Director Flynann Janisse.

Nicole Flores & Flynann Janisse
Nicole Flores & Flynann Janisse

The affordable housing industry continues to innovate and expand to meet the complex needs of communities across the country. Each state guides the developments in their cities and towns based on a Qualified Allocation Plan (QAP), which is used to allocate the low-income housing tax credits necessary to finance affordable housing rental developments. In many states, the focus on supportive or transitional housing has meant a shift to service-enriched housing.

Providing services that go beyond the typical mandate for quality, safe and affordable housing is now becoming the norm, rather than the exception. For debt and equity partners alike, the ongoing availability and expense for these services is recognized as critical to the long-term success of affordable developments, especially those targeting special needs residents.

This trend toward service-enriched housing has become mainstream for many owners nationwide, and for good reason. The value of specialized tenant services contributes to the overall financial health of a community through lower turnover, reduced crime, lower maintenance costs, decreased police intervention and, generally, a more stable tenant base. The ability to tailor services to the unique tenant population for each property is critical to the overall success of such services.

For example, the rise of transit-oriented developments in many cities experiencing economic expansion has not necessarily meant that residents seeking housing in those developments are young, urban professionals who will simply jump on the light rail to work every morning. In many states, TODs are replacing properties once located in lower-income areas or Qualified Census Tracts. Despite the benefits of this type of urban planning, it often moves families and individuals to new environments outside of their traditional network. A single mother making such a move may still need job training skills, employment assistance, childcare, and parenting classes, as well as recreational facilities designed to allow her children to have a safe place to play and exercise. A resident’s ability to live in affordable housing close to transit unlocks his or her earning potential, in addition to several other ancillary economic benefits.

Importance of transit

Rainbow believes strongly in utilizing a local municipality’s public transit system to ensure residents have access to all their food, education, health care, social and employment needs. This not only helps foster greater civic engagement, but also involves city planners, managers, councils and other elected officials into affordable communities, promoting good dialogue on how to best address housing needs.

A greater number of QAPs are now including special points or preference for communities built with transportation policies in place. Purchasing a van to shuttle residents adds tremendous real and personnel expenses, whereas leveraging public transit is much more financially responsible. This also increases a municipality’s monthly ridership numbers for local routes, potentially justifying further expansion into underserved areas and connecting residents to business centers, creating a positive economic impact.

The tax credit program was designed as a brick-and-mortar housing program for low-income families and individuals. The federal authorizing legislation does not include, nor does it mandate, the provision of supportive services in affordable housing. However, many state agencies now require these services be provided at certain minimum levels for new development or substantial rehabilitation projects. Lenders and tax credit investors will require that such state-mandated services be included “above the line” as a part of overall expenses, potentially negatively impacting the overall debt service calculation and lowering available loan proceeds. As affordable developers and finance partners continue to evolve to meet diverse affordable housing needs nationwide, it is critical that the value of resident services remain central to the discussion in order to ensure resident growth and retention, along with the intrinsic value of these services to the bottom line, maintaining occupancy and cutting operational expenses.