Oak Park Villas, a Home Program Success Story, Jefferson County, Alabama
Oak Park Villas developed 40 units of new housing in a historically underserved community using mixed financing made possible by HOME Program Funds. This unique public/private development permits elderly citizens to have high quality, single-story housing at rents as low as $382 per month, including some utilities.
The development is located in the City of Lipscomb in Jefferson County, Alabama, which has long seen its housing stock neglected. In its low-density design, this housing enhanced the local community’s aesthetics, including large green spaces, while being accessible to an elderly population.
Vantage Development, LLC, had not participated in infill developments in blighted urban areas because of the particular financing and construction challenges posed. But with financing from Jefferson County, through its HOME Program funds, Low Income Housing Tax Credits from the Alabama Housing Finance Authority and private financing, Vantage succeeded in improving the community and the lives of low income elderly citizens with few other housing options.
A key consideration was keeping rents to the lowest possible levels for the long term to provide a permanent housing solution for the resident’s remaining lifespan. In Jefferson County, Fair Market Rents may be as high as $554 (after utility allowance deduction) for a one bedroom unit which is out of reach for the elderly on fixed incomes and often requires scarce additional government subsidies such as Section 8. Frequently unable to work and unable to acquire assistance, the elderly have few viable housing options. Oak Park Villas offers high quality, aesthetically appealing housing at realistically affordable rents without dependence upon other government subsidies. Reduced rents are key to reducing financing costs while allowing repayment of the County’s HOME Program investment.
The challenge was to create a structure that satisfied multiple objectives with the right combination of sources. The use of Low Income Housing Tax Credits (LIHTC) created equity that would reduce the need for debt financing. Private sources were tapped through Housing Enterprise of Central Alabama (HECA), a financial intermediary formed by a number of Birmingham area banks to foster affordable housing by providing financing where the private market is not meeting the needs. HECA provided a large construction loan as well as a $387,220 permanent mortgage at 4.5%, filling the gap between the $1.1 million in tax credit equity and the County’s HOME funds in the amount of $2,179,280.
By building low rents into the debt service structure, the stability of the project will be unaffected by budgetary shifts in Section 8 funding and avoids the vicious circle of having one government program paying off another. This independence from additional subsidies also actually adds additional affordable units to the market rather than just shifting the finite number of tenants with Vouchers from one project to another which destabilizes other local rental developments.
In light of this success and the cooperative arrangements established, and thanks to the HOME funding, it is hoped that Oak Park Villas will continue to be both a beacon for additional development in the area and a model for future developments.
|Content Archived: December 27, 2013|