A not-so-glorious golden age for senior residences
A woman enters and approaches the receptionist. “I need an apartment in two weeks. My landlord is selling the house I’ve been living in for 20 years,” she says wearily. “I’ve been looking for three months and there’s nothing I can afford.”
“I’m sorry, but our waiting lists are closed for most of our properties,” the receptionist says with a sympathetic smile. “Our waiting lists are closed because it takes someone over six years to get a unit.”
“Six years,” she gasped. “I am 82 years old. Where will I live for the next six years? »
And so the conversation goes, repeatedly, senior after senior, thinking that all they have to do is sign up and they’ll have housing. Unfortunately, it doesn’t work that way.
The need for affordable housing for seniors is great, especially for those trying to get by on Social Security. Many older people have health problems, which limit their ability to work. Even if they can work, it is extremely difficult for older people to get a job.
The only apartments for someone who has a single source of income like Social Security is a U.S. Department of Housing and Urban Development subsidized unit, a Section 8 project-based unit, or a housing choice voucher , because their rent is subsidized by the government. You must also be on the Section 8 waiting list, and it also closes when there are too many people on the list.
It’s been more than 10 years since Congress funded Section 202, the main federal program to build affordable housing for seniors. As an alternative, nonprofits like PEP Housing are building projects for seniors using tax credits and other sources. When using tax credits, landlords must charge higher rents to service debt and meet investor demands. Older people living on Social Security cannot afford higher rents. Seniors in this group have been waiting six years or more for subsidized apartments that allow them to pay 30% of their income. Since no units have been built in the last 10 years using Section 202 funds, the demand far exceeds the supply.
Building affordable housing is complex. In just five years, the cost of construction has almost doubled. Add in a pandemic, supply chain shortages, COVID, and lumber prices reaching staggering levels, and it’s a perfect storm. The “great resignation” and staff shortages make the task even more difficult.
The funds allocated by the state, cities and counties are long-term loans, usually with 3% interest. Some jurisdictions charge fees to apply funding, loan fees, and 75% of any excess funds to repay accrued interest. As properties age, many of these loans mature and can easily exceed $1 million.
On top of that, many of the exemptions we once received for impact fees and building permits have disappeared since cities and counties lost redevelopment funds. Because senior residences have no impact on schools, until recently they were exempt from school impact fees. This no longer applies. We pay the school impact fee like anyone else.
Affordable housing developments have become an important source of revenue for local governments. For example, a small rehabilitation project to house seniors affected by a federally declared disaster, such as the Tubbs fire, was valued at $170,000 by the city of Santa Rosa. If we are to meet the demand for seniors who need affordable housing, we must rethink the model, and the government must provide unpaid, repayable loans, with tuition waivers and reduced impact fees. or deleted. Additionally, compliance fees are charged by multiple funders instead of having one government agency monitor the project for all.
For example, if PEP Housing claims 4% tax credits, the developer bears the cost of a bond issue instead of using a construction loan. We pay at least five attorneys, including our own, the bond attorney, and the attorney for the lender, syndicator, city, county, etc. This adds approximately $500,000 to the cost of a project.
The requirement to pay prevailing wages adds another million dollars or more, and we need to hire a prevailing wage monitor. Building green requires you to hire a green building instructor, and so on. For a recent $34 million project, we paid $1.5 million in impact and construction fees and $500,000 in bond and financing costs.
Housing is a basic human right and everyone deserves safe and decent housing. The current model is unsustainable. Few units are being built due to excessive costs, and without significant changes, the demand for affordable housing for seniors will never be met.
Mary Stompe is executive director of Santa Rosa-based PEP Housing.
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