Sustainability and Affordable Housing- A Marriage Made in Heaven

What an exciting time it is for developing affordable housing! 

In my early years of development (the late 80’s and 90’s), the stigma of “low-income housing” was severe. Seeing the conditions that some families lived in due to lack of financial stability stuck with me. I was really driven to bring dignity to household’s experiencing income insecurity through developing high quality affordable housing. I realized at a very early age with my father becoming permanently disabled when I was 12 years old and witnessing the financial, not to mention the emotional, impact that it had on my own family growing up, how everyone, especially children, can become victims of financial circumstances which are completely outside of their control. It is my belief that creating housing any family could take pride in living in offers a boost to its residents, and facilitates a motivational mindset that people need when hardship strikes. 

I could never understand how political elections never focused on Affordable Housing. Really, affordable housing just means that everyone, no matter what their income level is, should not be paying over 30% of their earnings to have a safe, comfortable, and in my mind “beautiful” place to live. Without focusing on our affordable housing crisis, we cannot truly address most of the socioeconomic issues we face today. Yet, no one really liked talking about it.  It seemed so fundamental to me—solving this one thing begins to impact so many other important areas in our lives in a positive way.  

For the majority of my career, I focused on taking beautiful historic buildings that had sat vacant for decades and rehabilitating them, utilizing the Low-Income Housing Tax Credit program. Everybody won in this scenario. The tax credit investor often received CRA credit along with a federal tax credit and return on their investment; the City generated income through permitting, fees, and  PILOTS on a previously vacant underutilized buildings; the neighborhood  was positively impacted with life being brought back to a once vacant/ blighted structure; but most of all, the new residents, with income levels between 20%-60% AMI,  had an opportunity to live in a completely renovated,  beautiful historic apartment with granite counter tops, energy efficient stainless steel appliances, and modern amenities, with affordable rents including utilities at approximately 30% of their income.  This is not subsidized housing—it is simply affordable housing where residents under 60% (now up to 80%) pay approximately 30% of their income for their housing costs. The affordable (low) rents are driven by the equity generated through the sale of the low-income housing tax credit, which is used not only during construction to help build the project, but in the end to buy down any permanent mortgage necessary to complete the capital stack.  Bottom line is the lower-end mortgage allows the developer to reduce the rents necessary to cover the debt service. 

At the beginning, I didn’t realize that a building’s reuse (historic rehabilitation) almost always offers environmental savings over demolition and new construction. I was doing it for the simple reason that the buildings were too beautiful to not rehabilitate—they were like pieces of art with each having their own unique features, personality, and name.  There was Coronado, El Dorado, Seville, Sarasota, LaFer, LaVogue, and so on, they were like my adopted European children.   

As you get older, and especially when you have grandchildren, your focus begins to change. What can we do to make our world better for our children and our grandchildren? I have learned over the years that combining historic rehabilitation with the most state-of-art energy upgrade’s is a double win. This work will allow us to reduce our energy costs, which can allow for lower rents while seeing an immediate positive impact on climate change. The challenge has always been that it was difficult to pencil out the cost of significant energy upgrades such as GEOTHERMAL, Solar, Co- Generation, and Wind.  I think that finally the time has come that we are seeing a change in how our country and our government is prioritizing both. The passing of the Inflation Reduction Act: includes 2 dozen tax provisions which are designed to create clean energy efficient buildings, save on energy costs, and reduce the carbon footprint. They have increased the percentage of credit that can be received from installing various significant energy upgrades; including Solar, GEO, Wind, and Co-Generation and in certain areas identified as low-income communities or energy communities they offer a bonus credit. 

These important tools will allow developers to prioritize the most state-of-art energy upgrades, and focus on designing projects which reduce energy consumption, thus reducing our carbon footprint while maintaining affordability.

As I said, it is an exciting time in the Affordable Housing Industry! As for me, the unintended consequences of concentrating on historic rehabilitation, energy efficiency, and affordable housing could be a trifecta—and an absolute winner as part of the solution expanding the critical development of affordable housing. 

I am thrilled to see the outcome of incorporating the most state-of-art energy upgrades on our most recent historic rehabilitation of a 1939, 177-unit multi-family community on the Detroit River.  This rehabilitation included removing a 90+-year-old inefficient steam heating system and replacing it with a Geothermal field and ground sourced heat pumps, cool white roofs, nest thermostats, LED lighting, energy efficient appliances, and increased insulation.  Beach Club Detroit won both the State of Michigan and City of Detroit energy savings award for a 59.6% savings the first year alone with just the completion of phase 1 of our energy plan.  Once we complete phase 2 of our energy savings/carbon reduction plan, installing solar and Co-Gen, the outcome will create naturally occurring work force housing (no LIHTC) with all rents being below 80% of AMI. 

I for one am excited to see how incorporating energy efficiency upgrades on top of the tools available to create affordable, income restricted housing, will produce the housing of the future. Combining these tools to build quality, affordable, energy efficient housing will benefit individuals and families and allow them to have more disposable income and reduce the stresses of trying to make ends meet.  This is the time to realize that solving ONE issue, affordable housing, will create a ripple effect on good things to come for all of those who will benefit by paying 30% or less of their income to have a place to call home.  It will allow us to have an increase in disposable income, which helps pay for childcare, health care, groceries, and even a night out for dinner, a movie, and maybe a trip to Disney for our children!  One thing I know for sure is it alleviates many emotional stresses that come with living under conditions of financial instability.  So on top of every other socio-economic benefit that providing quality, affordable housing  will assist with,  it will make us happier as a whole and our country a better place to be!