A joint venture has started construction on a $123 million overhaul of a 40-year-old, 406-unit affordable housing property in East Orange. The investment group, which includes Community Preservation Partners and L+M Development Partners, announced this week that they've purchased the Harman Towers complex on Walnut Street for $94 million and will invest mare than $29 million in improvements. They added that affordable housing mandates for the community were set to expire in 10 years but will now be extended for 30 years as part of the purchase agreement. The project is Community Preservation Partners’ first in New Jersey. "We’re proud to add another state to our growing Eastern portfolio and the Harman Towers project is a great way to make our New Jersey debuts said Seth Gellis, a vice president with the Irvine, California-based affordable housing developer. In keeping with our mission of enriching lives and strengthening neighborhoods, we're giving the Norman Towers a complete facelift in addition to new amenities and community activity areas to revitalize the quality of life for the senior residents. “Built it 1980, Harman Towers has not received any major renovations since the original construction, according to a news release. But the rehabilitation by CPP and L+M will bring much-needed upgrades to individual apartments such as energy-efficient appliances, new cabinets and countertops. CPP also plans enhancements to the common areas both inside and out, including an expansion of the community roam and the remodeling of additional spaces, a new computer room and fitness center, along with new landscaping, lighting, built-in grills and outdoor dining areas. Construction is expected to take about two years. "Much of our work in northern New Jersey is focused not just an revitalizing properties but also ensuring that those living in them can remain in their homes," said Jeffrey Moelis, L+M's managing director of preservation. be are proud to work with CPP as well as our government and financial partners, including the City of East Orange, the Hew Jersey Housing and Mortgage Finance Agency, Freddie Mac, HUD, and Wells Fargo to deliver essential upgrades and preserve affordability for seniors at Norman Towers. “L+M, which is known locally for high-profile projects such as the restoration of Newark's Hahne & Co. building and the former Hew Jersey Bell tower, also has other preservation projects in its Hew Jersey portfolio. In 2019, the company closed on financing to preserve and modernize 268 units of Section 8 housing at Zion Towers in the South Ward, allowing far immediate repairs on the severely neglected building and guaranteeing affordability for the next 30 years. The company also recently finished work an more than $30 million of capital improvements at Georgia King Village, a Section 8 complex in the West Ward, including facade improvements, boiler plant replacement, extensive apartment renovations, enhanced security, the addition of a children's library, revamped open space and the installation of a free WiFi network for residents. In East Orange, the firm will bring that focus to one of the city's best-known and mast visible housing communities. "L+M Development Partners, CPP and Wells Fargo share a longstanding commitment to meet the urgent need for affordable housing in low-to-moderate income communities, said Alan Wiener, head of Wells Fargo Multifamily Capital. We are proud to be a part of the Norman Towers project, which will provide supportive housing for low-income seniors and will help to transform the communities of East Orange, New Jersey. “The project also drew praise from local officials. This significant investment by Community Preservation Partners and L+M Development Partners is a game changer for the revitalization of residential properties in the city" Mayor Ted Green said. This pandemic has reinforced the real value of living in a 'home' that nurtures the mental, physical and spiritual well-being of those who live in it. These planned renovations will set the standard for affordable and contemporary senior living in the City of East Orange.“Fifth Ward Council member Alicia Holman said she appreciated the new owners of Harman Towers listening to and incorporating resident feedback into the construction plans."I am very excited about this project.“ she said. ”Harman Towers was very well maintained under the former owners and I am in full support of this project not only for the residents who live there, but for the Norman Towers Complex remaining open and accessible as a venue for community-wide meetings."Council member Mustafa Brent added: Providing the highest quality of service and living conditions are cornerstones of any successful community, and East Orange is working to become a leader in this regard. “Meantime, CPP President Anand Kannan said the move into New Jersey represented an important step far the firm. "One of the best things about adding another state to our portfolio is the preservation that comes with it — not just of the buildings themselves, but the affordability as weII, Kannan said. This is a critical aspect of what we do — every new development is a chance to deepen and extend affordability, ensuring those in need can lead rich, fulfilling lives in the communities they've come to love.“
By: Belinda Lee, Director - Development
The Low-Income Housing Tax Credit (LIHTC) program has been an essential component of affordable housing finance since it was enacted as a part of the Tax Reform Act of 1986. Originally created as a tool to encourage public-private partnerships to increase the low-income housing stock, it has been modified several times. Since inception, it has supported the generation of more than 3.5 million affordable housing units nationwide.
Through the LIHTC program, state and local LIHTC-allocating agencies have the authority to allocate approximately $10 billion in federal funds each year to issue tax credits for the acquisition, rehabilitation, or new construction of rental housing targeted to lower-income households. Generally, the state and local agencies award LIHTC credits to private affordable housing developers through a competitive process. Then, developers typically sell the credits to private investors to obtain funding.
Only rental properties (e.g., apartment buildings, single-family homes, smaller multi-unit buildings) qualify for LIHTC. To qualify, the owners or developers of the affordable housing project must meet certain income tests for tenants and rent. Projects must pass one of the income tests below and agree to comply with these parameters for a minimum of 15 years (though some state agencies may require compliance for 30 years):
LIHTC offers investors a dollar-for-dollar reduction in their federal tax liability in return for providing capital to support the development of affordable rental housing. This investment helps subsidize the construction of low-income housing, enabling the units to be rented at rates below the market value.
Investors can claim LIHTC credits, which are calculated by multiplying a credit percentage by the project's qualified basis, over a 10-year period once the affordable housing project is available for tenants. The tax credit is distributed pro rata over this period and can be applied to the construction of new rental buildings or the renovation of existing ones. LIHTC is designed to cover 30 percent or 70 percent of the costs for low-income units in a project. The 30 percent subsidy, known as the automatic 4 percent tax credit, applies to new construction with additional subsidies or the acquisition of existing buildings. The 70 percent subsidy, or 9 percent tax credit, supports new construction without any extra federal subsidies.
LIHTC is essential for the funding of affordable housing projects for several reasons:
By making housing more accessible, LIHTC contributes to improved health and educational outcomes for residents, ultimately promoting social stability and enhancing quality of life. Its ongoing significance in combating housing insecurity makes LIHTC a vital tool for policymakers, developers and communities alike.
Affordable housing refers to housing that is reasonably priced, allowing low- and moderate-income individuals or families to live comfortably without spending an excessive portion of their income on housing. Typically, the standard guideline is that housing costs, including rent and/or mortgage payments and utilities, should not exceed 30% of a household's gross income.
Affordable housing can come in various forms, including government-subsidized housing, public housing projects, and private developments that offer reduced rents or prices. The goal is to ensure that everyone has access to safe and decent living conditions regardless of their financial situation.
Market Rate vs. Affordable Housing
While housing affordability is currently an issue across the United States, there are several key differences between housing categorized as “affordable” versus “market-rate”. Understanding these differences is essential for addressing housing needs and creating policies that promote inclusivity and accessibility in housing markets.
Importance of Affordable Housing
According to the Pew Research Center, in 2020, 46% of American renters spent 30% or more of their income on housing, including 23% who spent at least 50% of their income this way. The same study indicated that about half of Americans (49%) see the availability of affordable housing as a major problem in their local community. Affordable housing is a cornerstone of a healthy society, contributing to individual well-being and broader economic and social stability. Key benefits of affordable housing include:
Originally published on Forbes Business Councils by Seth Gellis, President of CPP.
With the continued urgent need for more affordable housing across the country, industry experts and academics are looking for solutions, whether they involve preserving existing communities nationwide or creating additional units where they are needed most.
According to a recent study by the National Low Income Housing Coalition, there is a shortage of 7.3 million available affordable rental homes for the lowest-income renters in the U.S. While it’s a complex issue, one overlooked path to financing is the option to increase the use of private activity bonds (PABs), which pair with 4% low-income housing tax credits (LIHTCs).
Volume cap, a “use it or lose it” resource provided by the federal government to the states based on a per capita formula, allows tax-exempt financing to be issued for affordable housing at a lower interest rate. The lower interest rates offset the lower net operating income that debt is sized from as a tool to help keep project sources and uses in balance. This ensures a greater level of capitalization, reducing the need for other sources and increasing the funding available for construction activity.
This important resource is allocated and awarded by state finance agencies, some of which unfortunately do not use all the resources made available to them. This means that if a state agency has unused volume cap and a deal is unable to make it through the funding cycle for that state in a timely manner, the resource and accompanying economic and social benefits are lost for good.
So, what can affordable housing professionals and organizations do to ensure the volume cap does not go to waste or to use it in the most efficient manner possible?
One solution is to work with local bond issuers and agencies that support them.
Local bond issuers play a major role in identifying the projects most impactful for their community and often can reduce the overburdened load that housing agency staff must deal with.
At my company, we find that an average deal may take nine months to close, plus an additional year to complete the development or preservation of the property (with a few more months of time tagged on for an IRS Form 8609 to be issued). We consider that a quick turnaround. But when entities do not use a local issuer for the deal, the acquisition or renovation timeline can extend for an additional one and a half to two years—sometimes making the deal untenable.
Across the U.S., many affordable properties are in immediate need of preservation; and many of these deals use LIHTC as a part of their financing. Completing these deals as quickly as possible is integral to reducing the loss of affordable units and preserving options for communities.
According to a 2024 report from Harvard’s Joint Center for Housing Studies (JCHS), there was a loss of 2.1 million units with rents below the maximum amount affordable for the lowest income group since 2012. While creating new affordable housing units is a part of the solution, new construction alone won't be able to keep up with the need, especially if communities are losing more units than are being created.
I've found that when local leaders, community advocates, developers, lenders and agencies can work together, it creates efficiencies and the strongest outcomes in affordable housing development and preservation. Communities should have a say in their local housing choices. Local leaders and community advocates have the best understanding of residents’ needs and where and how to invest, and good developers will listen.
Working with local issuers increases the ability for local jurisdictions to control the terms and circumstances that preservation or new development must follow in addition to minimum state provided standards. When deals and terms are localized, it creates the largest impact for the community. Specific benefits may include:
• The community is empowered to decide the priorities they wish to address. Developers should foster dialogue with local housing advocates and community leaders to discuss and outline their wish list. Unsurprisingly, the goals are often the same.
• Related improvement projects (e.g., street, sewer, LEED), social service requirements, crime prevention programs, prevailing wage, are benefits that are, by and large, staying within their community (should they choose). This autonomy also relieves pressure on developers by having an equal partner in the myriad decisions.
• Locals control within the development what is done, where it’s done and who does it within the community. For example, they may have checklists or requirements (e.g., Section 3 that requires a local workforce) that directly benefit the local community and economy.
Affordable housing developers looking to finance their deals may have the opportunity to work with a local issuer to get the deal done. I recommend you keep these best practices in mind:
Just like when working with any financial partner, organization is paramount. As a developer, that means having the deal structure solidified, financial documents in place and a single point of contact for the local issuer identified. The more streamlined you can make the process, the better.
Developers likely understand that one of the key benefits of working with a local issuer is the ability to help impact the local community in specific ways. But, for that impact to be felt in the biggest way, developers must take the time to truly understand the local community and its needs.
Developers need to reach out early in the process to understand if the issuer has sufficient volume cap, and what their processes may be. Creating a relationship early makes the processing, organization and understanding of their needs much easier.
Ultimately, the ability to work with local agencies carries many benefits and can make developers and investors nimbler in their work solving the nation’s affordable housing crisis.
By: Belinda Lee, Director - Development
The Low-Income Housing Tax Credit (LIHTC) program has been an essential component of affordable housing finance since it was enacted as a part of the Tax Reform Act of 1986. Originally created as a tool to encourage public-private partnerships to increase the low-income housing stock, it has been modified several times. Since inception, it has supported the generation of more than 3.5 million affordable housing units nationwide.
Through the LIHTC program, state and local LIHTC-allocating agencies have the authority to allocate approximately $10 billion in federal funds each year to issue tax credits for the acquisition, rehabilitation, or new construction of rental housing targeted to lower-income households. Generally, the state and local agencies award LIHTC credits to private affordable housing developers through a competitive process. Then, developers typically sell the credits to private investors to obtain funding.
Only rental properties (e.g., apartment buildings, single-family homes, smaller multi-unit buildings) qualify for LIHTC. To qualify, the owners or developers of the affordable housing project must meet certain income tests for tenants and rent. Projects must pass one of the income tests below and agree to comply with these parameters for a minimum of 15 years (though some state agencies may require compliance for 30 years):
LIHTC offers investors a dollar-for-dollar reduction in their federal tax liability in return for providing capital to support the development of affordable rental housing. This investment helps subsidize the construction of low-income housing, enabling the units to be rented at rates below the market value.
Investors can claim LIHTC credits, which are calculated by multiplying a credit percentage by the project's qualified basis, over a 10-year period once the affordable housing project is available for tenants. The tax credit is distributed pro rata over this period and can be applied to the construction of new rental buildings or the renovation of existing ones. LIHTC is designed to cover 30 percent or 70 percent of the costs for low-income units in a project. The 30 percent subsidy, known as the automatic 4 percent tax credit, applies to new construction with additional subsidies or the acquisition of existing buildings. The 70 percent subsidy, or 9 percent tax credit, supports new construction without any extra federal subsidies.
LIHTC is essential for the funding of affordable housing projects for several reasons:
By making housing more accessible, LIHTC contributes to improved health and educational outcomes for residents, ultimately promoting social stability and enhancing quality of life. Its ongoing significance in combating housing insecurity makes LIHTC a vital tool for policymakers, developers and communities alike.
Affordable housing refers to housing that is reasonably priced, allowing low- and moderate-income individuals or families to live comfortably without spending an excessive portion of their income on housing. Typically, the standard guideline is that housing costs, including rent and/or mortgage payments and utilities, should not exceed 30% of a household's gross income.
Affordable housing can come in various forms, including government-subsidized housing, public housing projects, and private developments that offer reduced rents or prices. The goal is to ensure that everyone has access to safe and decent living conditions regardless of their financial situation.
Market Rate vs. Affordable Housing
While housing affordability is currently an issue across the United States, there are several key differences between housing categorized as “affordable” versus “market-rate”. Understanding these differences is essential for addressing housing needs and creating policies that promote inclusivity and accessibility in housing markets.
Importance of Affordable Housing
According to the Pew Research Center, in 2020, 46% of American renters spent 30% or more of their income on housing, including 23% who spent at least 50% of their income this way. The same study indicated that about half of Americans (49%) see the availability of affordable housing as a major problem in their local community. Affordable housing is a cornerstone of a healthy society, contributing to individual well-being and broader economic and social stability. Key benefits of affordable housing include:
