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Senior housing boosted by state funding formula

NORTH BAY – Nonprofit developers are expecting more public financing for affordable senior housing following a successful campaign to change a key state loan program.

In November, Gov. Arnold Schwarzen-egger signed a bill requiring that a minimum portion of state affordable housing loans be made for senior projects. The bill, AB 927, applies to the state’s Multifamily Housing Program, a low-interest, deferred-payment loan program and California’s main source of state funding for affordable housing.

The legislation requires the state to fund senior projects in proportion to California’s population of seniors.

“It will probably increase production in senior units by a few percent,” said Russ Schmunk, assistant deputy director for the state’s Department of Housing and Community Development, which oversees the Multifamily Housing Program. According to Mr. Schmunk, current population estimates require that, under the new legislation, about 16 percent of the program’s funds go to senior projects. Senior projects still have to meet the same set of criteria as other developments to win funding, Mr. Schmunk said.

“A senior project that does not score well on the evaluation criteria won’t necessarily get funded,” he said. “They still have to be competitive.”

Senior housing advocates are marking the bill as a key victory because it creates more certainty about the amount of senior housing that can be created through the multifamily funding program.

“It will make life easier for people who are on the front lines who are trying to pull deals together,” said Rick Taylor, associate director of public policy for Aging Services of California.

According to Mr. Taylor, the new law came at a key moment as the state prepares to allocate more than $203 million remaining from California’s Proposition 1C bond measure, which passed in 2006. The state is now pursuing a permanent source of funding for the multifamily program, which prior to 2006 had been funded by money from Proposition 46. If that effort is successful, the new law will put senior housing developers in a favorable position for future financing, Mr. Taylor said.

“Hopefully, if there is a permanent source of funding, senior projects are going to get an equitable piece of the pie,” he said.

Even if a permanent funding source is found for the program, developers of affordable senior housing will still have to seek other funding sources for projects, which are sometimes financed through a dozen or more different sources. In the wake of their state victory, senior housing advocates are supporting separate legislation that would lead to more funding at the federal level.

A bill sponsored by the American Association of Homes and Services for the Aging – Aging Services of California is a state affiliate – would make several changes to the federal Department of Housing and Urban Development’s Section 202 grant program.

“At the federal level, it’s really the only program specifically targeted toward building affordable senior housing,” Mr. Taylor said of Section 202.

Section 202 has become an increasingly important funding source, particularly since new rules adopted in 2006 allowed developers to combine grants with equity financing from federal tax credits.

“We’ve done three projects now with 202 funding, and we view it as kind of the way of the future,” said Bob Dreher, director of new housing development for Petaluma-based PEP Housing.

The proposed bill, known as the Section 202 Supportive Housing for the Elderly Amendments Act of 2007, would give local officials more authority in processing grant applications, instruct HUD to be more flexible in approving new funding and make it easier for project owners to use grant money to refinance, among other provisions.

To date, no interest groups have publicly opposed the bill, which was passed by the House in December. A Senate version awaits a hearing in the Committee on Banking, Housing and Urban Affairs.