The Federal Home Loan Bank of Boston awarded $16.4 million in grants and subsidies for advances during the two funding rounds of its 2001 Affordable Housing Program (AHP). The awards will fund 48 initiatives to create or preserve 916 affordable units.

Eighty-five members submitted 180 applications, seeking more than $55.5 million in subsidies on behalf of local housing developers and community agencies. Members in each of the six New England states won approval for at least one AHP award in each of the year's two funding rounds.

In 2001, all but one of the approved initiatives received a grant, with 21 projects receiving the maximum grant award of $400,000. The year's most modest grant, for $9,900, will help fund the rehabilitation of a house donated to Habitat for Humanity by the city of Middletown, Connecticut. The home's very low-income, first-time buyer will help renovate the house, and receive prepurchase and postpurchase counseling.

The Bank also issued 23 rate-subsidized advances to support this year's initiatives. Citizens Bank of New Hampshire will use the year's largest advance, for $3.25 million, to provide permanent financing for the purchase of a vacant lot on which 46 apartments for very low- and low-income elders will be built. The Bow, New Hampshire, development includes market-rate rentals, and is part of a campus that will eventually provide independent-living units. The initiative also received a $400,000 AHP grant to help pay land and construction costs associated with the affordable units.

Scoring and Other Changes Spark New Trends
The 2001 AHP saw several changes in the way the Bank administers and scores the program. Chief among these were increases in the amount of subsidy available — changes that were made in response to rising land and construction costs regionwide.

The maximum subsidy available per member increased from $800,000 to $1 million. Meanwhile, the maximum total subsidy (grants plus subsidies for discounted advances) per application increased from $500,000 to $800,000, and the maximum grant award increased from $250,000 to $400,000 per application.

As a result, the average subsidy per approved application rose from $201,029 in Round Two of 2000 to $324,975 in Round One and $361,152 in Round Two of 2001.

The first round of 2001 also saw two scoring changes take effect.

The Bank's first district priority changed, so that it now awards points in three categories instead of five. Its 25 available points are reserved for proposals that include down-payment or other eligible assistance for first-time home buyers, member financial participation, or promotion of economic diversity.

As a result, the categories of special needs and community involvement were eliminated from the first district priority.

This made for at least one dramatic shift in the type of applications submitted and approved. In the past, special-needs housing tended to dominate the rental applications. For example, in the second round of 2000, 68 percent of the approved rental applications were for housing serving those with specials needs. In 2001, that number dropped considerably.

A change was also made to the Bank's second district priority, which shifted from a "geographic priority" to "AHP funding as a percent of total permanent project resources." Now, initiatives that use AHP funding to cover between five and 10 percent of their development costs will receive up to 10 points, on a prorated basis. To qualify, the AHP funding must be a grant or an advance that will support permanent financing. Each of the first round's approved applications received at least three points in this scoring area.

For example, in Maine, Bath Savings Institution will use an AHP advance to provide $380,337 in permanent financing for the rehabilitation of two nineteenth-century buildings in the Brunswick historic district. The resulting 11 apartments will augment the area's affordable housing, preserve noteworthy architecture in Brunswick's northwest neighborhood, and help implement the state's "smart growth" plan. AHP funding will finance 100 percent of the acquisition and renovation of Gateway Apartments.

Elsewhere in Maine, Norway Savings Bank underwrote a grant application for Community Concepts, Inc., which will create or rehabilitate 16 apartments for very low- and low-income households in Fryeburg and Bethel. The $400,000 AHP grant will cover about 18 percent of the initiative's total costs; the member will provide a $1.4 million construction loan.

The new emphasis on AHP funding as a larger percentage of total permanent project resources affected the number of projects funded by the Bank. In the first round of 2001, the number of approved initiatives was nine fewer than in the second round of the 2000 AHP — even though the available AHP subsidy increased from $6.4 million to $8.1 million. The same decrease was seen in the second round of 2001: Twenty-three initiatives were approved, compared with 32 initiatives approved in Round Two 2000.

Members Show Strong Financial Support
The number of member institutions pledging financial support to the proposals that they underwrote rose again in 2001.

In Round One, 82 percent of the applications included evidence of such financial participation, up from 71 percent in the last round of 2000. That trend continued into Round Two, with 89 percent of scored applications receiving points in this category. All applications approved for an award in Round Two included some form of member financial participation.

In Tiverton, Rhode Island, Bank of Newport will provide a reduced-rate construction loan for the construction of four duplexes and one single-family home. The Cape Cod-style homes, which will be built to high standards for energy efficiency, are for sale to two very low-income and seven moderate-income, first-time buyers. The $282,000 AHP grant will be used for hard construction costs.

Similarly, Mascoma Savings Bank, FSB, will provide more than $1.5 million in construction credit for the Upper Valley Transitional Housing initiative in Lebanon and Enfield, New Hampshire, and Hartford, Vermont. The Twin Pines Housing Trust will acquire, rehabilitate, and construct 32 units for homeless families. A $400,000 AHP grant will fund hard and soft construction costs, and a $136,000 advance will support permanent financing.

For More Information
Each year, the Bank sets aside 10 percent of its net profits to provide grants and below-market-rate advances through the AHP. See the AHP section of this site for applications, eligibility and scoring guidelines, initiatives approved, and more. You can also contact the Bank's Housing and Community Investment Department by e-mail, at housing@fhlbboston.com, or by phone, at 1-888-424-3863.

This article was written for the Bank's Tools for Housing and Community Economic Development newletter (issue 17, Winter 2002).