When affordable housing development Adare Manor opened in September 2019 on Fairview Avenue in Boise, it was fully occupied within three months and has had a waitlist ever since. It is one of nearly 50 affordable housing developments in Boise.
The rent ranges from $662 per month for one bedroom to $1,104 for a three-bedroom unit, with income limits ranging between $26,400 and $52,440, which align with federal income guidelines for affordable housing.
As of this month, the median rent for a regular two-bedroom apartment in Boise is $1,303, according to ApartmentList.com.
Even at those high prices, vacant apartments are difficult to come by in Ada and Canyon counties — vacancy rates at the end of 2020 were 1.05% and 0.9%, respectively.
City and county officials across the state have identified a need for more affordable housing as the state continues to grow, but it’s much easier said than done. And a void of state-level investment or incentive to build affordable units makes the proposition that much more difficult, developers and officials say.
Nearly a dozen funding sources were cobbled together to support Adare
Thomas Mannschreck owns Thomas Development, a Boise-based company that has developed more than 75 affordable housing complexes representing nearly 4,000 apartment units, including 134 units that make up Adare Manor. Mannschreck said Adare is built with the same finishes as many high-quality apartments in the area, but 11 layers of local, federal and private investments had to come together to create a workable funding structure.
State dollars are not involved in affordable housing developments across the state. Unlike 46 other states that use a housing trust fund to support projects, Idaho has a state housing trust fund that was created in 1992 — but it has never been funded.
Cory Phelps, vice president of project finance at the Idaho Housing and Finance Association, said affordable housing comes down to how much permanent debt can be supported while still complying with the rent restrictions that come along with federal funding.
“We really only have federal resources, we don’t have any state resources when it comes to trying to fill that gap,” Phelps said. “… We just don’t have a lot of what we call gap financing.”
Adare is unique in that it began with about $1.6 million in real estate owned by the city of Boise, leased to the developer for $100 per year.
“That’s a direct benefit,” Mannschreck said. “We would’ve had to come up with the resources to purchase that ground.”
About $2 million in funding came from block grants allocated to the city of Boise and the Idaho Housing and Finance Association by the U.S. Department of Housing and Urban Development. Four other city of Boise programs contributed funding to the project, as well as $700,000 from Capital City Development Corporation, the urban renewal agency for the city.
The permanent mortgage of $9.2 million is backed through tax exempt bonds through the Idaho Housing and Finance Association and amounts to a little over $12 million at a 3.75% interest rate.
By contrast, the Housing and Urban Development grants hold a 1% interest rate, which helps keep rents manageable.
“One of the premonitions on these affordable housing deals is that when these resources come in, that it puts a bunch more money in the developer’s pockets — that’s not the case,” Mannschreck said. “The real benefit is what I just said, the ability to charge lower rents.”
Developments are also often dependent on an entity willing to invest in the property in order to reduce its income tax liabilities based on the amount of increase in revenue the housing is expected to generate over a certain period of time.
In Adare’s case, American Express was the investor, and the low-income tax credit they purchased amounted to $11 million.
While Mannschreck was trying to secure the funding for Adare, the 2017 bill passed by the U.S. Congress that lowered corporate income tax rates and threatened the development’s viability.
“Anecdotally, two developments that we were working on in Albuquerque (New Mexico) and Phoenix (Arizona) were not able to move forward because of the reduction in tax equity pricing on those two deals,” Mannschreck said. “… Without all of that, we’d have to jack our rents up. Then we’re just another market-rate apartment community.”
The long-term commitment to affordable housing is significant as well. Auditors from every side of the development’s financing review the incomes and rents correlated to each unit, along with American Express auditors and others.
“The chance for mischief is somewhere between zero and nonexistent,” Mannschreck said.
State budget chief says they are determining role of state versus private sector
Phelps said from his perspective, more state resources would make affordable housing projects more financially feasible.
“If a developer is looking to build affordable housing, they’ll probably look to where there’s more resources,” Phelps said. “We are getting a little more interest (from developers), but if you’re a developer and Oregon has all these resources, it just makes it easier for you to make the deal work. The more resources you have, the more housing you’re going to be able to build. It’s all about finding all of the necessary financial components to cover the cost of the project.”
Oregon has a robust list of grants and tax credits available for affordable housing, along with a long list of more than 2,700 developments by county.
Mannschreck has been frustrated by what he said is a universally non-supportive atmosphere from state entities and the Idaho Legislature on affordable housing. No bills surrounding affordable housing advanced in the Legislature this session, and Gov. Brad Little did not mention it as one of his priorities in his State of the State address in January.
“Now we have this $800 million surplus, and we could take a fraction of that — $40 million, let’s say — and create hundreds of developments with resources that are already available,” Mannschreck said. “The affordable housing crisis is not just a Treasure Valley issue. It’s everywhere.”
Alex Adams, Little’s chief budget officer, said the governor has been hosting industry roundtables throughout the state and one of the themes that comes up at nearly every meeting is affordable housing.
“It’s safe to say we’re having discussions of what role the state can play in that,” Adams said.
However, some of the American Rescue Plan Act dollars that are contributing to the surplus may not help resort areas like Ketchum, where affordable housing is desperately needed, because the area’s median income is too high.
Adams said the governor’s office has also let local government partners know that if any state administrative rules are impeding the development of affordable housing, they would be happy to take a look. But so far, he said, most of the red tape that has been identified is with local agencies, not state administrative rules.
As far as options like proposing appropriations to the state housing trust fund or tax credits for affordable housing, Adams said he couldn’t comment without seeing specific proposals.
“We’re continuing to have conversations … and trying to answer the question of what the role of the state versus the private sector is,” he said.
Mannschreck has all but given up on action from the Legislature. Several years ago, he pushed for a change to property tax law that would exempt the value of the tax credit from annual assessments. The bill passed the House but died when it reached the Senate committee.
“The Idaho Legislature has a very ill-advised — and so far as I know, unique among the 50 states — view of how affordable housing should be for tax purposes,” Mannschreck said.
Despite his frustrations with the state and the complicated nature of the work, Mannschreck said he continues to work in this niche of the market because of the people it helps. At an affordable property he owns in Butte, Montana, a young woman with children approached him and asked if he was the owner. When he said yes, she started to cry.
“She said, ‘This is the nicest place I’ve ever lived in my whole life. Will you please build more so my friends can move in?’” Mannschreck said. “And what’s that worth?”