Managing Scattered-Site Affordable Rental Housing
I recently attended a Federal Reserve Board forum called “Making Lemonade Out of Lemons: New Opportunities for Scattered-Site Affordable Housing.” At the forum, individuals familiar with scattered-site management in its for-profit, nonprofit, and public housing iterations gave brief remarks on their experiences.
A representative from Redbrick Partners, a REIT that owns many scattered-site homes in multiple markets, suggested that they need 300-500 units to achieve any kind of scale. At this level, they can find local property management teams that can specialize and gain efficiency in different facets of the business (e.g., maintenance, marketing, etc.). The company focuses on moderately-priced units because they fetch higher rents, require less maintenance upon acquisition, and can be more easily sold when the time comes.
A representative from Chelsea Neighborhood Developers, a nonprofit development company, discussed their experience with scattered-site units in the Boston area. Her suggestions for a successful scattered-site strategy included adequately rehabbing each unit and developing an efficient way to finance the properties (i.e., refinancing all into one lump-sum mortgage to reduce paperwork). Chelsea was able to rehab their properties, establish reserves, and refinance using 4% tax credits and bonds. But Neighborhood Stabilization Program (NSP) funds in Boston do not sufficiently lower the cost of purchasing, rehabbing, operating, and managing scattered-site properties to make them feasible for nonprofits to operate at affordable rents, and tax credits aren’t a viable option right now.
Finally, an individual from the Oakland Housing Authority discussed his portfolio of 1600 scattered-site units in 268 properties. Challenges associated with managing this portfolio include: high maintenance costs because the units aren’t standardized (e.g., different paint colors, plumbing, etc.); high transportation costs and a significant amount of staff time associated with visiting the sites; and the difficulty of finding a private property manager to oversee day-to-day operations.
Together, these observations left me wondering what the implications are for cities using NSP dollars to create rental housing affordable to households earning <50% of area median income. Are there nonprofit housing developers who can afford to manage these properties themselves? Can affordable, scattered-site properties be managed without a significant ongoing operating subsidy? How are cities dealing with this dilemma in their use of NSP funds? Any thoughts would be much appreciated.
A representative from Redbrick Partners, a REIT that owns many scattered-site homes in multiple markets, suggested that they need 300-500 units to achieve any kind of scale. At this level, they can find local property management teams that can specialize and gain efficiency in different facets of the business (e.g., maintenance, marketing, etc.). The company focuses on moderately-priced units because they fetch higher rents, require less maintenance upon acquisition, and can be more easily sold when the time comes.
A representative from Chelsea Neighborhood Developers, a nonprofit development company, discussed their experience with scattered-site units in the Boston area. Her suggestions for a successful scattered-site strategy included adequately rehabbing each unit and developing an efficient way to finance the properties (i.e., refinancing all into one lump-sum mortgage to reduce paperwork). Chelsea was able to rehab their properties, establish reserves, and refinance using 4% tax credits and bonds. But Neighborhood Stabilization Program (NSP) funds in Boston do not sufficiently lower the cost of purchasing, rehabbing, operating, and managing scattered-site properties to make them feasible for nonprofits to operate at affordable rents, and tax credits aren’t a viable option right now.
Finally, an individual from the Oakland Housing Authority discussed his portfolio of 1600 scattered-site units in 268 properties. Challenges associated with managing this portfolio include: high maintenance costs because the units aren’t standardized (e.g., different paint colors, plumbing, etc.); high transportation costs and a significant amount of staff time associated with visiting the sites; and the difficulty of finding a private property manager to oversee day-to-day operations.
Together, these observations left me wondering what the implications are for cities using NSP dollars to create rental housing affordable to households earning <50% of area median income. Are there nonprofit housing developers who can afford to manage these properties themselves? Can affordable, scattered-site properties be managed without a significant ongoing operating subsidy? How are cities dealing with this dilemma in their use of NSP funds? Any thoughts would be much appreciated.
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© 2012 Created by Center for Housing Policy staff.
