How a Georgia bond deal made a difference in affordable housing
A bond underwriter has embarked on a unique two-pronged approach to tackle the lack of affordable housing in the South East.
KeyBanc Capital Markets has priced the Clayton County Housing Authority, Georgia’s $ 41 million tax-exempt bond for Mount Zion Villas and Mount Zion Apartments. In addition, KeyBank Real Estate Capital has secured $ 28.1 million in fixed rate financing from Fannie Mae for the construction of the properties.
They consist of two affordable housing communities: Villas at Mt. Zion, an independent living community for seniors of 96 units for those 55 and over, and Flats at Mt. Zion, a multi-family community of 210 units for families with children. . These affordable housing communities plan to offer special services focused on education and the social and emotional health of residents.
Both properties are being developed with the help of Fannie Mae’s MBS as a tax-exempt bond guarantee financing.
MTEBs can be used as new fixed rate bond issues in conjunction with the low income 4% housing tax credits.
They are structured to reflect mortgage backed securities and are rated Aaa by Moody’s Investors Service and AA-plus by S&P Global Ratings. This is a fixed-term contract and a monthly salary.
The program was designed to help individuals and families with income limits between 50%, 60%, and 70% of the region’s median income, as determined by the US Department of Housing and Urban Development.
“The MTEB program is a program that Fannie Mae really designed several years ago to provide their credit strength to support the low income housing tax credit market,” said Sam Adams of the group. public finances from KeyBanc Capital Markets to The Bond Buyer. “There has been a lot of talk about how to use tax credits for the development of affordable housing in this country, some of which does not fit well into the traditional real estate market, not from a housing perspective. credit, but simply from the point of view of transactions. “
He said demand for the titles has been solid.
“Currently in the market, demand for affordable housing bonds is very strong, especially for bonds that have a social impact,” Adams said, noting that affordable housing bonds, as many investors have discovered , are in fact a very strong asset class.
“Unfortunately, there is a great need for affordable housing in this country and therefore, from a credit point of view, it is actually a very attractive asset class,” he said.
The bond transaction was structured in two series: MTEB Series A and Short Term Bonds Series B. The tranches consisted of $ 19.95 million of Series A MTEB and $ 8.05 million of Series MTEB. B for apartments and $ 8.15 million from MTEB series A and $ 4.85 million from MTEB series B for villas.
Series A MTEBs due 2039 have been valued at par for a yield of 1.99% and short-term Series B securities due 2024 have been valued at par for a yield of 0.24%.
KeyBank Real Estate Capital has secured 4% unfunded permanent term loan commitments from Fannie Mae MTEB of $ 8.15 million for villas and $ 19.95 million for apartments. The profits will be used to repay construction loans.
The developments are a joint venture between Zimmerman Properties and TriStar LLC, which was formed to build and operate affordable housing communities that provide innovative services to residents. Facilities include a swimming pool, exercise area, computer library, playgrounds, outdoor garden, wellness center and early learning center.
The ELC will be comprised of Star-C Inc., an Atlanta-based 501 (c) 3 nonprofit that will provide free on-site services, including a K-5 after-school program, classes on healthy lifestyles and diet. , community gardening and summer camp.
“Great developers like this and great partners like Fannie Mae are really doing all they can to make an impact on affordable housing – and there really is a growing need for that – and a lot of it. current legislation is the target, many that could help expand this effort, ”Adams said.
President Joe Biden has backed a plan to create, preserve and sell homeowners and nonprofits nearly 100,000 additional affordable homes over the next three years, with a focus on income market segments low and intermediate.
Federal agencies have been tasked with working with state and local governments to boost housing supply using existing federal funds to spur local action, explore federal rules to help state and local governments reduce exclusion zoning and initiate learning and listening sessions with local leaders.
Some housing experts have noted the growing need for solutions.
“Our country is in an affordable housing crisis, and this is something we should have started years ago and now we are woefully behind in turning it around,” Amy Ford, vice president of strategic partnerships for Silvernest, roommate finder and roommate. sharing platform, said The Bond Buyer.
Ford noted that for many Americans, housing costs are rising at a rapid rate.
“Research from the Joint Center for Housing Studies at Harvard University shows that 20.4 million US renter households are burdened with costs, paying more than 30% of their income for housing,” she said. “For areas in the southeast, like Shreveport, Sarasota and Macon-Bibb, we see that number exceeds 50%.
Ford pointed out that 62% of low-income renter households nationwide are heavily affected by costs, which means they pay more than 50% of their income for housing.
“Homeowners face their own challenges, scrambling to cover rising housing costs and paying off their mortgages, many of which have been forborne and will soon expire. The standard single family home is out of reach for so many and difficult to maintain for thousands and thousands of people, ”she said.
She said there was no instant solution to this situation, but that it was necessary to act quickly and bring new solutions to the table.
“One creative solution emerging to help curb the affordable housing crisis is house sharing, where a landlord rents spare rooms to long-term roommates,” said Ford. “By sharing the home, homeowners can earn extra income to help with home maintenance, pay taxes, cover insurance, and make any necessary changes to the home. Roommates can live more affordably in a shared house than renting a unit alone and can often live closer to their workplace.
Regarding land and property reallocation, Invest Atlanta and the Department of Planning recently released a Request for Proposal for the redevelopment of a vacant 1.3 acre city-owned parcel across from the city Hall. The city wants to redevelop the site to create affordable housing focused on affordability of lifestyle, a combination of income and use, and sustainability.
The Invest Atlanta’s board of directors approved a Housing Opportunity Bond program in January, which includes $ 50 million in taxable levy bonds and $ 100 million in taxable income bonds.
It will be the third and largest housing opportunity bond issue sponsored by the city government to fund housing programs, according to Invest Atlanta, the city’s economic development authority. Previous issues took place in 2007 and 2017, totaling $ 75 million.
In Louisiana, New Orleans Mayor LaToya Cantrell on Tuesday signed an ordinance to move forward with a cooperative agreement with the New Orleans Redevelopment Authority, outlining the terms and responsibilities for redeveloping properties owned by the city.
In Florida, a state law passed this year establishes an infrastructure plan to prioritize investments in state and local affordable housing programs. The law provides funding on a recurring basis and over the next fiscal year, affordable housing programs will receive more than $ 200 million.