FAA News: Sadowski Funds at Work
SAIL Program Helps Fill Multifamily Housing Gaps
By Wendy Annunziata
The Viridian apartment community in St. Petersburg has a fitness center, a recreation room, a computer lab, a library, a community garden, and a tree-shaded patio and deck. The 11-story building features apartments with open floor plans, energy-efficient appliances and floor-to-ceiling windows, many with views of downtown and Tampa Bay.
And the rent is about half that of the luxury apartments two blocks away.
A community for seniors age 62 or older, the Viridian was renovated six years ago with the help of the State Apartment Incentive Loan (SAIL) program, which helps developers build or rehabilitate housing for low-income people, including working families, the elderly and the disabled. The $19.8 million project took about a year and received about $5.9 million in SAIL money.
“We took the walls down to the studs,” said Debra Koehler, president of Sage Partners, which renovated the building, built in 1971. Among the upgrades: new drywall, paint, appliances, flooring, window treatments, kitchen cabinets, designer countertops, lighting, faucets, sinks and toilets. The rent is $624 for a studio or $669 for a one-bedroom apartment, although some residents pay much less, with funds from other programs making up the difference.
Carolyn Williams, 79, has a one-bedroom, 650-square-foot Viridian apartment and pays $254 a month, including utilities. A resident for 24 years, she loves the renovations, especially her updated kitchen.
“I know everybody in this building,” she said. ”I love it here, and it’s home.”
SAIL-funded projects debunk the myth that affordable housing means drab, bare-bones tenements.
For example, two properties built by the Wilson Company in Orlando and Tampa feature many of the amenities found in luxury apartment communities. Both the Wexford in Tampa and the Wellesley in Orlando boast a clubhouse, a large swimming pool, a business center and a fitness center, plus beach volleyball and basketball courts.
Many projects built with SAIL funding are “indistinguishable from other developments,” said Jaimie Ross, president and CEO of the Florida Housing Coalition, an affordable housing advocacy group. “In some cases, they look better than the ones around them.”
Some house people with special needs, such as the disabled or the elderly. Others house people who work but don’t make a lot of money.
“The people who live in SAIL developments work,” said Mark Hendrickson, executive director of the Florida Housing Finance Agency from 1981 to 1994. “It’s just that they’re lower-wage workers,” such as retail clerks, nursing assistants or people in the service industry. These are “hard-working people who just don’t have high-wage jobs.”
Cinthia Perez is one of those people. Perez, 25, lives in a two-bedroom apartment at Brookside Square in St. Petersburg with her two daughters, ages 5 and 6. She works in the leasing office of another apartment community nearby and makes about $27,000 a year.
Blue Sky Properties recently renovated Brookside using $4.8 million in SAIL funds, which covered about a quarter of the total cost of the project. The renovations, which took about seven months, included replacing the roof, windows, lights, doors, kitchen cabinets, and flooring. The 142-apartment community was also relandscaped using environmentally friendly plants that are watered with a new reclaimed water system.
“I love the energy-efficient things, the new windows, the appliances,” said Perez, who pays $500 a month in rent, plus electricity. “It helps with the electric bill. It’s a good place. … And there’s a nice playground for the kids. The girls love it.”
There are income restrictions for those who live in apartment communities built with SAIL funding, based on a county’s area median income, or AMI, as determined each year by the U.S. Department of Housing and Urban Development. For example, at Brookside, the income limit for a three-person family is 60 percent of area median income, or a maximum of $31,980. At some communities, a certain number of apartments are set aside for those with extremely low incomes. At the Viridian, for example, 19 of the 188 apartments have been set aside for residents making 33 percent or less of the area median income, so the limit for one of those residents is $13,695.
Hendrickson, president of the Hendrickson Company and a consultant to the housing coalition, said the SAIL program began in the late 1980s and was considered very innovative for its time.
Funding for affordable housing can be tricky because of the lower rents involved. When the amount of rent money generated by an apartment community is restricted, builders can’t support as much debt.
“With more income (from higher rents), you can have more debt,” Hendrickson said. “There’s a gap between your debt and equity and the cost of building the units.”
Years ago, that gap was often filled with grant money. But the creators of SAIL had another idea. Rather than using one-time grants to fund low-income housing, they pushed the idea of using loans.
“The idea was: How do we get the private sector to provide loan money and have the government fill the gap?” Hendrickson said. “And loans make more sense to fill that gap.
“Rather than a grant, make it a loan, so if the project works out, the developers repay the loan and you can recycle the money (for more projects). And if the project doesn’t work out, you can forgive the debt.”
The early success of the SAIL program helped lead to the passage of a landmark affordable housing law, Hendrickson said. In 1992, Florida enacted the William E. Sadowski Affordable Housing Act, which increased the documentary stamp tax on real estate transactions to raise money for affordable housing. In addition to funding SAIL, Sadowski money is used for a variety of state and local programs, including those that help provide transitional housing for the homeless and those that help lower-income people buy or refurbish houses. Today, the Florida Apartment Association is one of more than 30 organizations that make up the Sadowski Coalition, which advocates for using all Sadowski money to fund affordable housing programs instead of diverting it to other uses or sweeping it into the state’s general fund.
“SAIL worked so well that it was one of the reasons we were able to pass Sadowski,” Hendrickson said.
Money from Sadowski funds, as well as money repaid from SAIL loans, helps fund the SAIL program today. But despite the program’s success, funding became a challenge during the recession that began about a decade ago. As the state’s budget got tighter, lawmakers began to divert Sadowski funds to plug gaps in others areas, such as education, Medicaid and environmental programs.
“During those years, we didn’t see much SAIL allocation at all,” said Cecka Rose Green, communications director for the Florida Housing Finance Corp., which administers SAIL.
“After that, as housing has recovered, the funding (for Sadowski programs) has improved. This year, we got probably the highest allocation we’ve had in about 10 years,” Green said.
The total amount of SAIL money for 2016-17 is about $113 million, including funding from the state and the repayment of older SAIL loans, according to Hendrickson and reports on the Florida Housing Finance Corp. website.
The economic impact of SAIL in this fiscal year, which began July 1, will be significant, Hendrickson said. A formula used by the housing finance agency shows that SAIL will help create 8,238 jobs this year, with a total economic impact of $1.043 billion, he said.
Developers submit applications for SAIL funding to the Florida Housing Finance Corp., which scores and ranks the applications. The agency’s board of directors ultimately decides who will get the money. In most cases, the SAIL loan cannot exceed 25 percent of the total development cost.
According to the agency, the loans currently have interest rates of 1 percent or 0 percent, depending on the type of development, and are for 15 years or less, although the length of the loan can vary. Even in this era of record low interest rates, that’s several percentage points lower than the interest rate a developer might get on the private market, said Shawn Wilson, president of Blue Sky Communities, which has renovated several properties with SAIL money, including Brookside Square.
Back in 2009, when Sage Partners was preparing to renovate the Viridian in downtown St. Petersburg, SAIL loans had a higher interest rate — 3 percent — but rates on the private market were more than double that, said Koehler, so the SAIL money was vital.
“SAIL is so important,” said Green of the Florida Housing Finance Corp. “It’s important for these projects because once a developer has received his funding from the bank or the county or the city, there’s always a piece missing. What SAIL does is fill in that gap so the project can move forward. That’s why SAIL money is so in demand.”
Editor’s note: More information about Sadowski Affordable Housing Trust Fund and its importance to the apartment industry can be found in recent issues of Multifamily Florida magazine. In addition, watch this website for legislative updates.