The death of the BMHA....in Buffalo News (finally a step forward)

[Timmy]

http://www.buffalonews.com/145/story/94014.html

Affordable housing projects eyed by investment fund here
Stephen Karnath to run Buffalo office
By Jonathan D. Epstein NEWS BUSINESS REPORTER
Updated: 06/08/07 6:51 AM


SAVE EMAIL PRINT POPULAR + Larger Font + Smaller Font A national nonprofit investment organization focused on affordable housing projects has opened its first office in Buffalo, naming a longtime local housing veteran to oversee its projects throughout New York state.

The Chicago-based National Equity Fund (NEF) hired Stephen Karnath as manager for New York State acquisitions. In that role, Karnath, a 53-year-old Buffalo native and former state official, is responsible for linking banks and other institutions seeking to invest in affordable rental housing with projects throughout the state in need of cash.

In exchange for their money, investors receive millions of dollars in federal low-income housing tax credits that can wipe out or sharply reduce their annual bill. And the more strategic investment capital Karnath can bring into a project, the less debt is required to complete it, and the lower the rents that need to be charged to tenants.

“It’s fairly important because it’s such a significant tool for producing affordable rental housing,” Karnath said. “You can particularly see it in cities like Buffalo.”

National Equity Fund has lined up investors for Catholic Health System’s redevelopment of Our Lady of Victory Hospital in Lackawanna into the Victory Ridge Apartments for the elderly. It also helped with the move and expansion of Buffalo City Mission’s Cornerstone Manor women’s shelter, and the construction of 28 single-family homes in the Masten District by Belmont Shelter Corp.

“The fact that they’re opening an office in Buffalo clearly demonstrates their commitment to this area and helping everybody’s efforts to developing quality affordable housing, which is essential to the quality of life in any community,” said Michael D. Riegel, vice president for finance and administration at Belmont Shelter, which obtained financing through NEF for its last four projects.

Low-income tax credits have become the federal government’s preferred vehicle for encouraging the growth of affordable housing, supplanting programs like Section 8 under the federal Department of Housing and Urban Development. Today, much of the work in building affordable rental housing is done under Section 42 of the Internal Revenue Code, written about two decades ago.

Under that law, developers apply for tax credits to the IRS, which allocates them to the project. The developer then uses a firm or organization like NEF to essentially turn those credits into cash. Investors can also get other benefits from putting their money to work, but the credits are the primary gain.

Formed in 1991, NEF is the investment arm of Local Initiatives Support Corp. (LISC), a national

nonprofit that works with nonprofit developers to identify and support new construction projects. LISC provides money to pay predevelopment costs for projects and operating expenses for the nonprofits, and also assists the organizations in applying for federal or state tax credits. Then NEF steps in.

NEF partners with local community groups, developers, institutional investors, foundations and government agencies to boost financial investments in struggling urban neighborhoods and underserved rural areas. Many of the organization’s projects are developed by LISC partners, but it also assists unrelated projects, and not all LISC partners have to use NEF.

Despite its name, NEF is not actually a fund, but rather acts as a “syndicator” to broker the investment on behalf of developers. That means lining up a pool of banks and corporations to effectively “buy” the tax credits at a slight discount, currently about 90 cents on the dollar — nearly twice the 49 cents when the program first started.

It’s one of the only nonprofit syndicators, and most of its development partners — including in Buffalo — are also nonprofits, such as Belmont Shelter. It also specializes in special-needs housing.

“It’s the job of the syndicator to find the investors who have an interest in that particular project,” said Michael Clarke, LISC’s Buffalo program director. The tax credits are good for 15 years, but the law requires the project be maintained as low-income rental housing for the duration of that period. Developers, and investors, can lose their tax credits retroactively if they accept tenants who aren’t qualified.

So NEF makes sure that the developer or property manager complies with the regulations, maintain the properties, and operate them without losses.

NEF also coordinates investments in projects using state tax credits, historic tax credits or “new markets” tax credits, such as musician Ani DiFranco’s conversion of the former Asbury Delaware United Methodist Church into a performance venue and home of her Righteous Babe Records company. And sometimes it will even pool several projects together for multiple investors to spread the risk around.

Since its launch, NEF has invested in more than 1,500 projects with 80,000 rental units. Its portfolio exceeds $5 billion.

FINALLY BUFFALO CAN ABANDON IS MUNICIPAL HOUSING IN FAVOR OF MIXED INCOME AND LOW INCOME DEVELOPMENTS THAT WILL ACCEPT RENTAL VOUCHERS.

FINALLY WE CAN PUT OUR ENERGY INTO THE REHABBING AND SAVING OUR EXISTING HOUSING STOCK...AND BUILD NEW....BUT VIA THE PRIVATE SECTOR. NOW IF WE CAN ONLY HAVE THE BACKBONE TO ELIMINATE THE BMHA IN ITS ENTIRETY.

[kernwatch]

Timmy:

Your hopefulness about ending BMHA may be too optimistic. They just hired a new Executive Director (Dawn Sanders) & have had HUD operating subsidies exceeding $30 million annually.

Does anybody have access to their current budget? It was my efforts to reform BMHA & resultant prosecutions over 4 years that ultimately drove me from Bflo.

BMHA has operated in virtual secrecy, & has been a playground for political patronage & developer profits. And BMHA has had an especially destructive impact on the Black community, fostering permanant dependency & diverting Blacks from home ownership.

[Timmy]

I agree whole heartedly....any involvement with the BMHA is bad

I can only hope that they are elminated....but now I see brown is to much of a whore to do it....but Im hoping that this low income competition will be the death knell for the BMHA