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To keep it "local" first, here's a report from Gary Nelson writing in Monday December 3rd's online edition of the East Valley Tribune:
East Valley Tribune-Dec 3, 2018
Primarily, according to a report prepared by a prominent Valley economist, Mesa faces a growing need for low-cost housing as a hefty portion of its population . . .
A sea of challenges awaits Mesa as it seeks to guide the development of its housing stock over the next decade.Primarily, according to a report prepared by a prominent Valley economist, Mesa faces a growing need for low-cost housing as a hefty portion of its population struggles with low incomes.
The city is gathering data and public feedback for its next housing master plan, which will go to the City Council in early 2019. The document will serve as Mesa’s framework for evaluating proposed housing projects across all income spectrums. . .
The new policies will be guided in large part by an extensive study of Mesa’s economic and housing conditions conducted by Elliott D. Pollack & Co., a leading Arizona economic analysis firm.
Despite Mesa’s relative affordability, according to the Pollack analysis, underlying economic conditions suggest many residents will continue to struggle on the housing front.
Based on numbers dating from the middle of this decade, Pollack said:
> Mesa’s household incomes are lagging - READ THE DATA
In 2000, Mesa’s average median household income was 5.6 percent higher than the statewide median.
By 2015, Mesa incomes had fallen to 4.5 percent below those of Arizona as a whole and a stunning 12.2% lower than those in Maricopa County.
> More than 81,000 Mesa residents were living in poverty – more than 17.2% of the city’s population.
> Mesa had lower percentages of residents with college degrees, and of residents with jobs in higher-paying fields, than its neighboring cities.
> While the overall cost of living rose 12 percent between 2010 and 2015, the cost of rent went up more than 21 percent.
A very low vacancy rate was pushing rents even higher.
Those factors spell trouble, Pollack said, for households earning less than $25,000 a year. As the report was written, Mesa needed about 30,000 more units to accommodate that cohort.
While the private sector meets the demand for Mesa’s middle-income and executive-level housing, government is left with the task of filling the gaps in its low-income stock. . .
NEXT CHANCE FOR PUBLIC INPUT: December 11, 2018
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AFFORDABLE HOUSING FINANCE
Industry Rides LIHTC Market Changes
Syndicators, investors discuss market changes, income averaging, costs
By Donna Kimura Published 27 Nov 2018
Source: https://www.housingfinance.com
Activity in the low-income housing tax credit (LIHTC) market gained momentum in the second half of 2018 after a sluggish start caused by the uncertainty created by the tax reform legislation.“After people did figure out what their tax liability was they sort of came back into the market in a stronger way,” said Tony Bertoldi, executive vice president of CREA. However, there’s still a big separation between pricing expectations in terms of what investors are expecting and what developers need to make deals work, he said at AHF Live: The Affordable Housing Developers Summit in November.
Despite the market changes, a number of investors and syndicators reported being on pace to have their best year, including Bank of America Merrill Lynch, CREA, and WNC.
The reason for this is the lion’s share of the investments continue to be driven by the need for banks to meet Community Reinvestment Act obligations. In addition, banks continue to be profitable and still have tax liability, which is contributing to the competitive market, said Scott Hoekman, president and CEO of Enterprise Housing Credit Investments. “The question is what happens next year,” he added, noting that some investors are expecting their yields to rise because interest rates are going up.
However, Hoekman does not expect to see a big dip in pricing at the deal level going into 2019.
Several syndicators and investors noted being very active in 4% LIHTC deals with tax-exempt bonds even though these transactions are more highly leveraged than 9% LIHTC transactions.
“Having been in the business as long as we have been, and we have a lot of deals that have gone through the 15-year compliance (period), we don’t find the 4s any more risky than the 9s,” said Christine Cormier, senior vice president at WNC.
Fannie, Freddie return
A few economic LIHTC investors, such as insurance companies, retreated from the market after tax reform and have not come back.
A few economic LIHTC investors, such as insurance companies, retreated from the market after tax reform and have not come back.
However, the return of Fannie Mae and Freddie Mac has helped fill that hole, said Bertoldi during the Tax Credit Equity Outlook Power Panel at AHF Live.
The government-sponsored enterprises were out of the LIHTC market for about a decade while under conservatorship but returned as housing credit investors in 2018. 
So far, their re-emergence has not had a big impact on the overall LIHTC market, according to several syndicators.
"I think we’re going to have plenty of investors and plenty of deals,” said Ronne Thielen, executive vice president at R4 Capital.
Income-averaging option
One of the biggest changes to hit the LIHTC program recently is the addition of the income-averaging option.
The Consolidated Appropriations Act of 2018 established income averaging as a third minimum set-aside election. One of the biggest changes to hit the LIHTC program recently is the addition of the income-averaging option.
Income averaging allows LIHTC-qualified units to serve households earning as much as 80% of the area median income (AMI) as long as the average income limit at the property is no more than 60% of the AMI.
> A project using the income-averaging option must make at least 40% of its units affordable to eligible households.
Previously, housing credit units were restricted to households earning no more than 60% of the AMI. The prior minimum set-asides called for having 20% of the units targeted to no more than 50% of the AMI or 40% of the units at no more than 60% of the AMI, and these options remain part of the federal program. However, income averaging offers another alternative for developments.
“From a social, policy (perspective), it makes so much sense. The real issue for us is the underwriting,” said Hal Keller, president of the Ohio Capital Corporation for Housing.
“... The devil is in the details. We’re in favor it, but we’re very curious about the financial impact.”
> A few income-averaging deals have closed in California, but many developers, investors, and housing finance agencies are still figuring out specifics, especially around compliance issues.
> Another hitch is that each housing finance agency is putting a slightly different spin on income averaging, so the option is not uniform from state to state.
Overall, investors have not wanted to see a lot of market-rate units in their LIHTC deals because they do not receive housing credits for those units and they bring market risk to the properties.
Now, with the option for some LIHTC units to go up to 80% of the AMI, everyone will need to test those rents against market-rate apartments in the area and make sure there’s a discount, said Hoekman, noting that he thinks investors will accept the option as long as there’s strong underwriting in place.
Income averaging could be a good tool for not only making deals work but for also accomplishing what the industry wants to do in the greater communities, Hoekman said.
Cost containment
The LIHTC industry is also trying to figure out how to contain rising development costs.Thielen said R4 Capital recently closed on the financing for an 84-unit development in downtown Los Angeles that will be constructed with purpose-built shipping containers from China. This design is expected to significantly reduce the hard costs of constructing the community, which will be home to people who have been homeless.
“It’s something that’s new, and it’s very unique at this point,” Thielen said.
Victoria O’Brien, senior vice president at Key Community Development Corp., added that KeyBank invested in a deal that had a modular construction component. “A lot of the risk in that is making sure that the off-storage materials are secured,” she said.
In that instance, the developer was able to avoid the Davis-Bacon wage requirements, which helped keep costs down, according to O’Brien.
Session moderator Michelle Norris, executive vice president at National Church Residences, noted that a recent study prepared by Abt Associates for the National Council of State Housing Agencies found that the development for a housing credit development was only slightly higher than for a market-rate property.
“This is a social program as well as a real estate program,” Norris said.
“That’s a hard thing to try to explain to people—that there is cost for that social program.”
New moves
The panel also discussed the LIHTC program’s role in preserving affordable housing as well as in bolstering the health-and-housing connection.
CREA is working on closing its first assisted-living LIHTC deal.The panel also discussed the LIHTC program’s role in preserving affordable housing as well as in bolstering the health-and-housing connection.
“I think it’s a product that we’ll be seeing much more of particularly with the aging population,” Bertoldi said, noting that these are very complex projects, and operating an assisted-living development is a different business than that of managing conventional affordable housing properties.
Bank of America Merrill Lynch has been involved in financing supportive housing developments for a number of years, said Susan Moro, senior vice president at the bank.
"These deals have evolved to serve more integrated populations and do carry hard debt. As a result, it’s important to understand the funding streams, project reserves, and service providers, she said.
Longtime syndicator WNC recently closed a California preservation fund, Cormier said.
Preservation also continues to be high on Bank of America Merrill Lynch’s radar, with the company completing a number of notable Rental Assistance Demonstration deals, according to Moro.
