Message from Traci: Predictability and coordination are keys to boosting housing production.
Dear friends,
Oregon Housing and Community Services (OHCS), Oregon’s state housing finance agency, is engaged in an effort to improve how it deploys resources. The intent is to boost production of affordable rental housing in alignment with Governor Kotek’s call to action. Anyone concerned about the impacts of Oregon’s housing crisis should stand in support of OHCS’s goal. If achieved, the result will be to deliver a bigger number of needed homes to vulnerable residents at lower cost to taxpayers and housing owners. These outcomes are achievable. Significant opportunities to increase the efficiency of our affordable housing finance system exist.
“OHCS’s biggest opportunities to cut waste and boost production lie in improving coordination and predictability of financing policies, timelines, and award decisions systemwide.”
As OHCS continues its public engagement process, two critical questions are emerging: Where will the search for cost-saving opportunities be focused, and how will OHCS use its influence to make change? The answers are important. OHCS’s biggest opportunities to cut waste and boost production lie in improving coordination and predictability of financing policies, timelines, and award decisions systemwide. To define the scope of its effort too narrowly is to miss major opportunities to realize efficiency gains—and potentially to worsen inefficiencies and inequities that exist.
An early and correctible step in the wrong direction is the finance agency’s proposal to require housing projects to advance to within six months of starting construction before they apply for funding from OHCS. This requirement could be ruinous to smaller housing providers that don’t end up winning funding awards. (Consider that the cost to bring an average-sized 50-unit multifamily housing project to construction near-readiness can easily top $1.5 million, not including land costs.) Culturally specific organizations would be among the worst impacted.
“OHCS should attempt to reduce, rather than increase, financial risk shouldered by community housing providers.”
OHCS should attempt to reduce, rather than increase, financial risk shouldered by community housing providers. The affordable housing finance system as currently structured encourages small organizations to pour resources—their own and borrowed funds—into planning, designing, and assembling financing for projects that have no certainty of being fully funded and built. These expenditures have huge opportunity costs. Inefficiencies built into the system increase the size of at-risk investments.
As the primary distributor of tax credits and other essential funding sources to housing project sponsors, OHCS holds the levers to largely do away with this excess. It can alter the way it funnels projects through the pipeline to reduce costly investments in uncompetitive projects. It can—as it has proposed doing—provide technical advice and feedback to project sponsors, at multiple points early in the project planning process, to increase transparency and predictability.
“In addition to making changes on its own, OHCS can work with local public funding jurisdictions to coordinate funding policies and calendars.”
In addition to making changes on its own, OHCS can work with local public funding jurisdictions to coordinate funding policies and calendars. Local investments are essential to meet statewide production goals year after year. Better coordination between state and local funders will prevent headaches and waste that occurs when project sponsors stretch to meet conflicting policy and timing requirements.
From our perspective as an engaged participant, OHCS has started its process of investigation in the right way. It is offering open, structured opportunities for those on the ground to give input and feedback. If OHCS and other participants continue to work together with open minds, the process has a chance of creating positive change. At HDC, we intend to continue participating actively and to bring constructive ideas to the table. We see in OHCS’s effort an opportunity to create a better coordinated, more predictable housing finance system, which empowers Oregon housing providers to craft projects that meet community needs, knowing they will have a path to get them funded in a reasonable way.
In partnership,