How many jobs> can $1 billion help create?
That is how much the Obama Administration has distributed to 25 states under a new program designed to jumpstart the stalled construction of rental housing developments around the country. The government hopes the program, part of the American Recovery and Reinvestment Act of 2009, will create thousands of jobs for contractors, engineers, architects and general construction workers, and provide affordable housing options for middle-income families.
Most of the housing developments targeted by the program have been hobbled by the fallout of the recession. Many were put on hold after a primary source of their funding for developers was cut off.
The problem was that the conventional lure to fund housing projects had begun to carry less weight with investors. Traditionally, states housing authorities award so-called tax credits to developers for the construction or rehabilitation of affordable rental housing. Developers then sell those tax credits to investors, who can use them to offset their tax liabilities. But as the economy turned sour last year, the demand for these tax credits disappeared as did developers financing, says John McIlwain, a senior resident fellow for housing at the Urban Land Institute, a Washington, D.C.-based nonprofit education and research institute that studies residential real estate development.
Under the program, the 25 states that receive federal assistance will distribute that money among the developers in exchange for their unsold tax credits. That funding should help restart construction on their sites.
But don t hold your breath in hopes of getting work or a roof above your head right away. The money s journey into the right hands will take time, and most states are unlikely to see construction begin within the next six to nine months, McIlwain says. After that, these projects will take another two years on average to be completed. (That may actually be a good thing, he says, as rental prices are falling now in most parts of the country.)
As more housing units become available in a super-saturated national market, some homeowners may worry that their already-devalued homes will lose even more of their worth. However, many of the states that have received funding so far don t have a terrible oversupply of housing, says Celia Chen, a senior director of housing economics at Moody s Economy.com. (Notably absent from the list of government assistance are the states with the top foreclosure rates in the country: Florida, California, Nevada and Arizona.)
Here s a glimpse at how 10 states are planning to use the Recovery Act funds they have received so far. To see if your state is among the 25 that have received money so far, click here.
Funds received: $34 million
Unemployment rate: 8%
Foreclosure filings: 1/ 1,106 households. Down 32%.*
The $34 million allocated to the state of Connecticut will help work resume at four developments that received tax credits in 2008. Located in Manchester, Westport, Hamden and Norwich, these sites will provide 184 housing units reserved for families who earn up to 60% of the median income in each of these communities, including the conversion of a historic mill building in Manchester into 57 apartments. The Connecticut Housing Finance Authority estimates that 832 jobs will be created for these projects to be completed. In three to four months we ll have people working on these sites, says CHFA President Timothy Bannon.
District of Columbia
Funds received: $33.7 million
Unemployment rate: 10.7%
Foreclosure filings: 1/ 951 households. Down 23%.
Twenty-one developments have applied for a share of the $33.7 million received by the District of Columbia Department of Housing and Community Development. Projects include the construction of a 138-unit building for low- and moderate-income senior citizens that will not be completed until 2015 and a complex of 41 live/work lofts for artists that will begin construction by December and is scheduled to open doors in March 2011.
Funds received: $164 million
Unemployment rate: 10.6%
Foreclosure filings: 1/ 560 households. Down 0.04%.
An estimated 3,500 jobs will be created in Indiana as the state prepares to distribute $164 million among affordable rental developments, says Jacob Sipe, the multi-family manager at the Indiana Housing and Community Development Authority. Among the developments that will likely qualify for this financing: the construction of a building with 35 one- to four-bedroom apartments in Evansville and the rehabilitation of an 80-unit complex in South Bend to improve its energy efficiency.
Funds received: $23 million
Unemployment rate: 7%
Foreclosure filings: 1/ 899 households. Up 31%.
The Sunflower State, which received $23 million in late May under the Recovery Act, can lay claim to the first completed project saved by the federal program. The Woodland Hills complex in Osawatomie, which provides 24 housing units for senior citizens, was three-quarters completed when the developer ran out of money earlier this year. Thanks to a $2.3 million grant, construction resumed, and the complex will open its doors later this month. The rest of the funds have been earmarked for another 11 to 15 housing developments. Later this year, Kansas will receive another $22 million. A total of 620 housing units will be created, says Catherine Couch, a spokesman for the Kansas Housing Resources Corporation.
Funds received: $114 million
Unemployment rate: 6.6%
Foreclosure filings: 1/ 1,976 households. Up 34%.
Still struggling to rebuild the destruction brought on by Hurricane Katrina, Louisiana continues to face a shortage of affordable housing, says Brenda Evans, the program administrator for the low-income tax credit program at the Louisiana Housing Finance Agency. This year is the first since 2005 that the state will not award special tax credits to assist residential reconstruction in the area affected by Katrina; that will make the competition for Recovery Act funds even tougher. So far, 60 developments have applied for a slice of the $114 million the state received from the Treasury.
Funds received: $44 million
Unemployment rate: 7.2%
Foreclosure filings: 1/ 3,539. Up 50%.
The bulk of the money awarded to Maryland -- $38 million -- will be used to complete six developments, creating an estimated 850 jobs for construction workers, engineers and architects, says Patricia Sylvester, the director of multi-family housing at the Maryland Department of Housing and Community Development. The projects include a mix of new construction and the rehabilitation of existing rental properties in urban (Baltimore, Annapolis) and rural areas (Frostburg, Chestertown). Construction is scheduled to start this summer or in early fall.
Funds received: $50.8 million
Unemployment rate: 8.2%
Foreclosure filings: 1/ 752 households. Down 45%.
The $50.8 million received by Massachusetts will help build roughly 300 housing units, according to the Massachusetts Department of Housing and Community Development. But the process may take a while: the Department plans to open a competitive process by August, in which private developers can submit applications. The agency hopes to distribute all of the funds by the end of next year.
Funds received: $78.3 million
Unemployment rate: 14.1%
Foreclosure filings: 1/ 326 households. Down 4.72%.
Michigan is perhaps the state most palpably in need of employment opportunities. The home of the auto industry hopes to create as many as 12,000 jobs with the recovery cash it will dedicate to construction and renovation over the next few months. The state already has received 100 applications from affordable-housing developers and at least 60 more are likely to be received by the end of this week, says Steve Lathom, a policy manager at the Michigan State Housing Development Authority. The Authority plans to start issuing awards over the next 30 days.
Funds received: $21.2 million
Unemployment rate: 10.8%
Foreclosure filings: 1/ 446 households. Down 12.5%
The Ohio Housing Finance Agency has received five applications so far for some of the $21.2 million in its tax-credit exchange program, says Kevin Clark, the housing credit allocation manager at OHFA. Foreclosed single-family homes that need rehabilitation and have been funded with tax credits in the past may also qualify for this assistance. That could widen the field of potential applicants to include smaller contractors that work on more limited projects.
Funds received: $53 million
Unemployment rate: 10.7%
Foreclosure filings: 1/ 763 households. Down 23%.
The Tennessee Housing Development Agency has sent letters to the developers of 47 projects to inform them that they qualify to receive funding in exchange for their tax credits, received between 2007 and 2009. Should all developers submit the paperwork requested to receive funding, as many as 4,815 units would be constructed or refurbished over the next three years, says THDA director of public affairs Patricia Smith.
* Data as of May 2009, percent-change since May 2008. Source: RealtyTrac. >