The Bank’s AHP is funding an increasing number of initiatives calling for the renovation or refinancing of existing housing

Bowdoin Lodging Houses

Round two of the 2008 Affordable Housing Program (AHP) included an unusually large number of applications seeking funding to renovate existing affordable housing. The properties have been operating as affordable housing and several had been financed with Low Income Housing Tax Credits.

“Some of these buildings have been operating for more than a decade and are now in need of rehabilitation,” says Christine Rogers, senior community investment manager at the Federal Home Loan Bank of Boston (the Bank). “It often makes more economic sense to rehab and bring an existing structure up to current standards than build a new building.”

Sarah Lamitie (left), vice president at member Boston Private Bank & Trust Company, and Ellen Tan, chief executive officer at Commonwealth Land Trust, during a pre-renovation tour of Bowdoin Lodging Houses in Boston.

Ms. Rogers says some of these properties are at risk of not being preserved as affordable housing without a recapitalization strategy. “Margins are so thin to start with on many affordable developments that maintenance often gets deferred,” she says. “I think we’re going to see more recapitalization as Low Income Housing Tax Credit-financed properties reach the end of their 15-year compliance period.”

“Many existing structures need a rehab to ensure they remain marketable and up to date,” adds Tobi Goldberg, senior community investment manager at the Bank. “It’s a question of keeping our existing affordable units in the inventory.”

In many instances, these initiatives also include a refinancing component. “In the current environment, it makes more sense for service agencies to look into recapitalizing,” says Ms. Goldberg. “I think it’s exciting that we’re paying attention to preservation. The sponsors need adequate funding to keep these projects viable.”

Interior view, Bowdoin Lodging Houses, Boston

Rehabs funded by the AHP in the last round included Bowdoin Lodging Houses, a three-building, 115-unit, single-roomoccupancy development on Beacon Hill in Bos ton. Acqui r ed by sponsor Commonwealth Land Trust in the early 1990s, Bowdoin Lodging Houses plans to refinance existing debt that was coming to term and carry out much-needed renovations, including upgrades to improve energy efficiency, says Ms. Rogers.

The recipient of a $544,113 interest-rate subsidy and a $3 million advance through member Wainwright Bank & Trust Company, Bowdoin Lodging Houses provides housing for formerly homeless residents with mental and physical disabilities. In addition to the current award, Bowdoin Lodging Houses received an AHP award in 1999.

Ms. Rogers says the Bowdoin facility is an example of an affordable development that is unlikely to generate high income, relying instead on refinancing and other fund-raising strategies to continue operating. She notes that Bowdoin’s stairways, boiler, roof, and plumbing all needed updating at a time when its financing was coming due. The AHP, she adds, plays a key role in preserving this housing when it is under mounting pressure on two fronts.

Bowdoin’s refinance structure involves the repayment of two existing first mortgages and the continuation of support from several other major funders, including the Housing Innovations Fund (HIF) and the Neighborhood Housing Trust. It also anticipates $750,000 in housing stabilization funds from the state Department of Housing and Communi ty Development and $550,000 in Community Development Block Grants from the City of Boston.

Three Cathedral Square
Three Cathedral Square Another rehab funded in round two of the 2008 AHP is Three Cathedral Square in Burlington, Vermont. Developed by the Cathedral Square Corporation, the initiative received a $794,547 grant and subsidy, and a $2.45 million advance through member Chittenden Trust Company.

The AHP award will support the renovation and preservation of an existing downtown senior development built in 1979. Part of the planned renovation includes the implementation of solar panels and high-efficiency heating units to reduce operating costs. “If a building is hemorrhaging heat,” notes Ms. Rogers, “it’s the nonprofit that pays for it.”

Cathedral Square Corporation has owned the building and managed the site’s capital improvements since it was built 30 years ago. But the building, which represents a significant portion of the city’s affordable senior housing stock, now needs a major capital infusion to extend its life, notes Ms. Goldberg.

The sponsor will use tax-credit equity to refinance an existing loan and use the AHP to fund the rehab, which includes updating elevators, roof, and solar panels, among other things.

“All of these developments are basically using the subsidized advance to restructure market-rate debt and better position them for long-term operating,” says Mary Ellen Jutras, the Bank’s assistant vice president/deputy housing director.

“The trend is to use the below-marketrate subsidized advance to take out higher- rate debt and leverage more funds,” she adds. “Affordable housing can’t carry much debt because it doesn’t generate enough income to cover it. For projects that can carry some debt, the subsidized advance is a great way to go.” ■

Take a video tour of Bowdoin Lodging Houses