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Rehabilitation

Since unsubsidized affordable SMMF properties tend to be older or have deferred maintenance, they often require some level of rehabilitation to bring them up to code or improve their quality.

This section provides an overview of how the following factors affect the rehabilitation of unsubsidized affordable SMMF properties:

  • Zoning and building codes
  • Health and safety needs
  • Energy efficiency
  • Disaster resilience
  • Existing residents and community members

It also provides tips and examples of how to address these factors while maintaining the property’s affordability.

ZONING AND BUILDING CODE REQUIREMENTS

PARKING REQUIREMENTS

Meeting minimum parking requirements can be a challenge when preserving unsubsidized affordable SMMF properties, particularly for older properties that have less parking than is now required. In some instances, these requirements may mean you need a larger site to create an efficient parking arrangement.

Recognizing that this is a barrier for small-lot owners, the City of Miami has created an exemption to its parking requirements for smaller buildings (10,000 square feet and under) that are located near transit and not immediately adjacent to single-family zoned areas.xxix

Muniz-Stewart, S. The Miami Parking Debate. The Real Deal. Available at https://therealdeal.com/miami/2016/06/15/the-miami-parking-debate.

Atlanta’s new zoning ordinance is also poised to reduce the burden of parking requirements. Recommendations include eliminating or reducing minimum parking requirements for “missing middle” housing types, which includes low- to medium-density buildings, and older properties, which would directly impact the city’s unsubsidized affordable SMMF supply.xxx

City of Atlanta Department of City Planning. Atlanta Zoning Ordinance Update: Phase II. Available at www.atlantaga.gov/home/showdocument?id=39209.

PERMITTED DENSITY

More substantial rehabilitation of unsubsidized affordable SMMF properties may experience issues with allowable density. For instance, if part of the preservation strategy includes creating more units to increase cash flow without raising rents, that may trigger issues with allowable units per acre (or even allowable building height, if the rehabilitation plan would expand the building envelope). This issue was raised by stakeholders in Miami, where developers noted they had to find buildings in zones with much higher allowable densities than they needed just to make their projects financially feasible.

NONCONFORMING STRUCTURES

Given the age of unsubsidized affordable SMMF properties, they may no longer conform to current zoning regulations. In other words, these properties may be a nonconforming structure, meaning the structure may have met zoning requirements when it was built, but subsequent changes to zoning requirements include new standards that the lot and/or structure do not meet. Nonconformance can be the result of wholesale updates to the zoning code or adoption of zoning overlays for specific areas. Rehabilitation of nonconforming structures often triggers a requirement to bring the property into conformance, which can be costly.

Recognizing this requirement can be a disincentive to rehabilitate deteriorating housing, some local governments have offered regulatory relief for certain types of preservation projects. For instance, much of Atlanta’s SMMF housing is in neighborhoods that have been rezoned to single-family districts. If the SMMF structures remain vacant for more than one year, they would need to be rebuilt as single-family properties. To support rehabilitation of these properties and advance local goals around diversifying the housing stock and expanding housing availability near transit, Atlanta passed an exception to its current zoning requirements for some of the most commonly affected SMMF properties (4 to 12 unit buildings built before 1946) as long as rehabilitation does not increase the building’s square footage and maintains the property as entirely residential.xxxi Atlanta also offers proactive rezoning in certain areas to address clusters of nonconforming structures that may be preventing rehabilitation.

See Section 6.H. of the Atlanta Zoning Ordinance 18-O-1581: http://atlantacityga.iqm2.com/Citizens/Detail_LegiFile.aspx?ID=16064&hig....

BUILDING CODES

While building codes are often cited as a key barrier to rehabilitation of existing buildings, particularly older buildings, trends in building code reform have been favorable for unsubsidized affordable SMMF preservation. It is increasingly recognized that having the same building code standards for rehabilitation and new construction projects has prevented quality rehabilitation from taking place (or at least made them more costly). This recognition has resulted in an increasing number of specific rehabilitation codes across the country. Research has shown these differentiated code requirements have resulted in significant cost savings in rehabilitation projects, particularly for smaller projects.xxxii

Mattera, P. (2006). Breaking the Codes: How State and Local Governments are Reforming Building Codes to Encourage Rehabilitation of Existing Structures. Available at www.goodjobsfirst.org/sites/default/files/docs/pdf/breaking_the_codes.pdf.

Despite positive reforms, some building code requirements still create hurdles to the preservation of unsubsidized affordable SMMF properties, particularly when they trigger the same requirements as new construction. For instance, many developers interviewed for this toolkit cited building code requirements designed to increase resilience to natural disasters (e.g., hurricane codes or floodplain protections) as a financial challenge. On the other hand, more resilient buildings can result in lower insurance premiums and significant cost-savings when disasters occur, despite the higher upfront cost. See below for more discussion about resilience and unsubsidized affordable SMMF preservation.

It is important to be aware of any building code requirements during the property identification phase of your project and adjust assumptions about your costs accordingly. For instance, some developers noted the surprising cost of new fire sprinkler systems, which often need to be added to unsubsidized affordable SMMF properties but may not be accounted for during property identification.

HEALTH AND SAFETY NEEDS

ASBESTOS AND LEAD-BASED PAINT REMOVAL

Two of the most common health and safety concerns when rehabilitating a property involve asbestos and lead-based paint removal. If the property in question was built before 1978, it is likely that one or both of these will need to be remediated.

The level of rehabilitation may inform what level of mitigation to pursue. For instance, if a property has been relatively well- maintained and requires little more than refinancing to maintain affordability, encapsulation may be a suitable (albeit temporary) solution. Meanwhile, substantial internal renovations may require the complete removal of hazardous materials. Some jurisdictions offer financial assistance for hazardous material removal, such as Atlanta’s Lead-Based Paint Hazard Control (LHC) and Lead Hazard Reduction (LHR) grant programs available through Lead Safe Atlanta.

THE COST OF REMEDIATION

ASBESTOS

If a property’s tank or pipe insulation is not fiberglass, it likely has asbestos insulation. According to one estimate, asbestos inspections can cost between $500 and $1,000, and the cost of removal is usually between $10 to $15 per linear foot. Alternatively, encapsulation costs $5 per linear foot.xxxiii

LEAD-BASED PAINT

Lead-based paint inspections generally cost between $200 and $400. The cost of removal usually runs between $8 to $17 per square foot, encapsulation costs roughly $4 per square foot, and enclosing lead paint costs approximately $10 per square foot.xxxiv While removal can be more costly dollars-wise, it is the most effective approach, if it is financially feasible.

Community Investment Corporation. The Rehab Checklist: An Apartment Building Owner’s Guide. Available at www.cicchicago.com/wp-content/uploads/2013/04/RehabChecklist.English.201....
For more information about estimates for lead paint removal, see HomeAdvisor: www.homeadvisor.com/cost/environmental-safety/remove-toxic-lead/.

 

INCORPORATING ACCESSIBILITY

Nationally, one-quarter of SMMF buildings were built in the 1970s and 1980s, and some are much older.xxxv Older properties may not offer accessibility features for persons living with disabilities or others, such as seniors, that would benefit from more accessible features.

An, B. et al. (2017). Understanding the Small and Medium Multifamily Housing Stock. Report prepared by Enterprise Community Partners, Inc. and USC Price School of Public Policy. Available at https://www.enterprisecommunity.org/resources/understanding-small-and-me....

Creating more accessible homes is important in and of itself. But when older properties use public funding, they are subject to federal accessibility requirements through the Americans with Disabilities Act (ADA) of 1990 and Section 504 under the Rehabilitation Act of 1973.

Developers using federal funding and undertaking more significant rehabilitation of unsubsidized affordable SMMF properties with 15 units or more need to provide accessible units under Section 504. Developers who receive funds from federal, state or private sources will need to comply with ADA requirements in public areas of their multifamily property (parking lots, rental office and laundry and community rooms).xxxvi

Section 504 requirements apply to developers that receive federal financial assistance, such as Community Development Block Grant or HOME funds, for substantial rehabilitation (a project that has 15 or more units and the cost of the alterations is 75 percent or more of the replacement cost of the completed facility). Under these circumstances, a developer needs to make a minimum of 5 percent of units, or at least one unit, whichever is greater, accessible to persons with mobility disabilities and an additional 2 percent of units, or at least one unit, whichever is greater, accessible to persons with hearing or visual disabilities.

ENERGY EFFICIENCY

SELECTION OF THE RIGHT PRODUCTS

Some energy efficiency measures can be incorporated into small- scale rehabilitation efforts with little to no additional cost, if you know the right products to use (e.g., which lighting fixtures reduce energy consumption). These products are generally comparably priced to other less efficient products and reduce your operating costs over time. This can be especially important if you want to use Housing Choice Vouchers, since public housing payment standards are based on both rent and utilities. A guide for selecting appropriate, energy-efficient products for smaller-scale rehabilitation efforts in the Southeast has been provided in Tools & Downloads.

TEAM EXPERTISE

Certain energy efficiency or green building measures may require specialized expertise to implement. To help you find qualified technical assistance providers, Enterprise Community Partners, Inc. has compiled a Technical Assistance Providers Database of qualified experts in topics related to the design, development, and construction of energy- efficient, environmentally friendly, and safe affordable housing.

TRANSACTION COSTS

While energy-efficient measures are not costly to incorporate, the transaction costs, such as the cost and time to conduct energy audits or measure and verify cost-savings, do not scale.xxxvii You may also lose some volume efficiency when buying energy-efficient products in smaller quantities. Pursuing a portfolio of unsubsidized affordable SMMF rehabilitation projects at the same time can address this barrier.

ENERGY EFFICIENCY FUNDING

You can obtain free energy audits and grants for implementation through existing programs. Property owners in Atlanta can receive a free energy audit through Georgia Power, and nonprofit owners or developers in Miami can be eligible for a free energy audit and grant support to implement energy efficiency upgrades through the GoodUse grant program. It is also important to note that some local jurisdictions require energy audits on a regular basis. One of these jurisdictions is Atlanta, where properties that are 25,000 square feet or larger are required to complete an energy audit every ten years, which may affect some unsubsidized affordable SMMF properties.

Energy efficiency can be more costly in older SMMF properties if they require broader systems updates (either to meet existing codes or extend the property’s lifecycle). In these instances, green rebate programs and other financing (like Property Assessed Clean Energy programs) may be available to cover the upfront capital costs. For the latest information on resources available to finance energy efficiency improvements, consult the Database of State Incentives for Renewables & Efficiency. When pursuing these resources, be aware of any requirements that may impact your broader project (e.g., caps on total preservation cost or cost-per-unit).

 

PROJECT SPOTLIGHT: ENERGY EFFICIENCY

Atlanta developer Civitas planned to incorporate energy-efficiency measures into a small multifamily property in the city’s Westside from the start. These measures would reduce operating and maintenance costs, access more favorable financing for the project, and improve tenants’ quality-of-life.

These improvements were also motivated by the capital needs of the property. Upon purchase, staff at Civitas found that entire systems needed to be replaced. They knew it would no longer be cost- or time- efficient to make smaller improvements over multiple development phases. Instead, they decided to upgrade the building systems and, through these upgrades, make the systems more energy-efficient.

Making these upgrades meant that Civitas needed to revisit its phased approach to rehabilitation. Initially, the phases served as a way for current residents to move into units as they were rehabilitated or provide two years for them to find housing elsewhere. However, improving the building systems meant that current tenants needed to move out more quickly. To mitigate the negative effects of this change, staff at Civitas worked closely with current tenants, community members and local elected officials to ensure a smooth relocation process, which included economic incentives for moving expenses and rent reimbursements.

Civitas used a range of energy-efficiency measures in this property. They installed water-efficiency measures, like aerators on the sinks and showers and low-flow toilets, and replaced the building’s heating system, windows and lightbulbs. Through these energy-efficiency measures, Civitas significantly reduced their operating costs and were able to access incentives through Georgia Power and lower-cost financing through Fannie Mae and Freddie Mac.

ICAST. Multifamily Green Rehabilitation Resource Guide. Available at www.icastusa.org/wp-content/uploads/2017/01/ICAST-Multifamily-Green-Reha....

DISASTER RESILIENCE MEASURES

Resilience means “the capacity of individuals, communities, housing, infrastructure, institutions and businesses within a community to survive, adapt and grow as they confront a variety of extreme and chronic stresses.”xxxviii As the number and severity of disaster events increases across the United States,xxxix resilience is not only key to maintaining the fabric of our communities; It is also a smart financial investment which can save property owners money, by promoting efficiencies, eliminating building deficiencies, and potentially reducing insurance premiums.xl

VULNERABILITY OF UNSUBSIDIZED AFFORDABLE SMMF PROPERTIES

The size and age of unsubsidized affordable SMMF properties mean they are particularly vulnerable to disasters:

  • AgeUnsubsidized affordable SMMF buildings tend to be older and inconsistently maintained. As a result, properties may not meet the latest standards for disaster preparedness (e.g., hurricane codes in Miami). They can be more susceptible to leaks and structural impacts from extreme weather, like wind and flooding.

  • SizeSince construction materials and methods may differ based on property size, unsubsidized affordable SMMF properties can have different risks to hazards than larger properties. Strategies for increasing the resilience of SMMF properties through rehabilitation are discussed in more detail below and in Appendix 2.

UNDERSTANDING YOUR RISK

It is important to understand the local hazards surrounding your preservation project, because different areas of a community are vulnerable to different types of disasters. The context around your project will affect how you incorporate resilience into your rehabilitation efforts, which disaster-related requirements apply to your project, and which resources are available. Appendix 2 provides a framework for assessing your project’s hazard risk. Enterprise Community Partners, Inc. is also creating a resilience portfolio assessment tool to help you understand the specific exposure rating of your building. Based on your inputs, it will create a risk score based on social vulnerability and climate risk. The tool covers those hazards most common to the United States and territories.xli

REDUCING DISASTER RISK AND MAINTAINING AFFORDABILITY IN REHABILITATION

The following strategies can help keep costs low and improve resilience during rehabilitation:

  • Investing in resilience and energy efficiencyMaking these improvements can reduce your operating costs, making it financially feasible to keep rents lower. These improvements can range from simpler measures like weatherization up to the replacement of full systems. The average payback on these investments is seen in less than three years, depending on the project scale.xlii There are a variety of funding and rebates available to support the upfront investment in these measures. For example, Property Assessed Clean Energy (PACE) financing is available in many markets around the country and provides low-interest loans to cover 100 percent of the hard and soft costs of energy efficiency, renewable energy or other resilience projects that you repay via assessments on your property tax bill.

    Bay Area LISC and Build It Green. Green Rehabilitation of Multifamily Rental Properties: A Resource Guide. Available at www.novoco.com/sites/default/files/atoms/files/greenrehabmultifamilyrent....
  • Investing in preventative maintenanceSealing leaks and cracks not only prevents longer term problems that protect the structure from deteriorating, such as mold, but also reduces your long-term financial exposure.

  • Having redundant building systemsHaving back-up systems, such as electrical and heating systems, helps a property maintain habitability and property owners repair systems with greater speed.

  • Selecting materials with co-benefitsCertain materials have multiple benefits (or “co-benefits”) when used. For instance, light- colored materials, including finishings and paint, reduce heat intrusion to keep rooms cool and withstand moisture.

For examples of more resilience improvements that can be made when rehabilitating an unsubsidized affordable SMMF property, See Appendix 2.

A national study conducted by FEMA noted that each dollar invested in pre-disaster mitigation leads to an average of $4 in savings from avoided damages. These investments can also help lower energy use, reduce operational expenses, and lower insurance premiums.
Definition adapted from 100 Resilient Cities.
The United States is experiencing a significant trending increase in the number and severity of disaster events across the country as a result of increased exposure, vulnerability and extreme weather caused by a changing climate. In 2018 alone, the United States experienced 14 separate billion-dollar disaster events. The average number of billion-dollar disasters over the past three years was double that of the country’s long-term average. These risks include extreme flooding, wind, and heat, all of which can have significant impacts on housing structures and can lead to loss of units, increased expense, and loss of income. Knowing that these trends are projected to continue, it is imperative that we protect housing and communities through investments in disaster resilience and mitigation. Moreover, investing in resilience before disaster strikes is one of the most cost-effective ways to protect residents and property while strengthening their ability to weather the increasingly severe storms ahead.
This tool will be made available on Enterprise Community Partners, Inc.’s website in Spring 2020.

DISASTER RESILIENCE
in Miami, FL

Miami’s coastal location and subtropical climate make it particularly vulnerable to natural disasters. The primary natural hazards affecting Miami and the surrounding area include hurricanes, coastal flooding and rising sea levels. Hurricanes and tropical storms impact the city regularly, often resulting in flooding and damage to public and private property. Developers should be aware of the various state and local policies and programs focused on helping residents and businesses protect their homes and other physical assets.

KEY POLICIES AND REGULATIONS

HURRICANE ZONES

Properties in the Miami area are subject to the Florida Building Code’s higher standards for hurricane protection. If your unsubsidized affordable SMMF property is located in a South Florida High Velocity Hurricane Zone (HVHZ) and was built or last rehabbed prior to 1995, you may need to incorporate additional measures to protect the building from hurricanes. Rehabilitation projects where the cost of repairs and alterations exceeds 25 percent of the existing building value or where structural repairs and alterations are involved will trigger these requirements.xliii

For more information about South Florida’s High Velocity Hurricane Zone requirements, see Setting New Standards for Safety: The Florida Building Code: https://floridabuilding.org/FBC/publications/FBC.pdf.

FLOODPLAIN PROTECTIONS

Unsubsidized affordable SMMF properties will face stricter flood- prevention requirements, including building elevation, if they are located in floodplain areas that have sustained substantial damage or if they are going to be substantially improved.

ZONING ADAPTATIONS TO THE CHANGING CLIMATE

As part of its focus on resilience and sustainability, the City of Miami’s Zoning Code, Miami 21, was amended to include provisions to address the impacts of climate change and sea level rise. These amendments include the following:

  • Density bonuses for exceeding green building certification levels (as per Section 3.14.3 of Miami 21);
  • Freeboard elevation allowances to provide greater protection from storm surge as seas rise; and
  • Resilience reviews as part of the approval of special area plans.

INCENTIVES AND REQUIREMENTS FOR GREEN BUILDING

There are also incentives and requirements related to sustainability and resilience in the City of Miami. These incentives and requirements include the following:

  • Expedited permitting for green buildings;
  • Permit fee waivers and expedited permitting for residences in the City of Miami that plan to install rooftop solar power; and
  • Discount on flood insurance for policy holders living in a Miami-Dade County flood zone. Residents receive a 15 percent discount on insurance premiums due to the City’s participation in the National Flood Insurance Program. A 5 percent discount is available for those living outside of a flood zone, except on preferred risk policies. Developers can refer to the FEMA Flood Map to determine whether their properties are in a designated flood zone.

SUPPORTIVE RESOURCES AVAILABLE

Miami-Dade County makes various resources available for property owners to improve sustainability and resilience. Examples include the following:

  • The Save Energy and Money (SEAM) Program is a revolving loan fund that pays upfront capital costs for energy and water efficiency projects and is repaid by subsequent savings.
  • The Property Assessed Clean Energy (PACE) program allows property owners to receive upfront financing for energy-related improvements, then repay the debt through a special property tax assessment.

Through their respective websites, the City of Miami’s Climate Ready Miami Initiative and the Miami-Dade County Office of Resilience provide updated information to residents and businesses on policies and programs related to sustainability and resilience in the Miami area.

EXISTING RESIDENTS AND COMMUNITY MEMBERS

There are a variety of points in the preservation process where residents and community members can influence the success of your rehabilitation project:

  • Identifying unsubsidized affordable properties for preservationExisting community members are a vital source of information on the local demand for different types of housing, which can inform your assessment of different properties. They may also be aware of key risks associated with properties in their neighborhood, including potential code violations or hazards, which can also inform your rehabilitation plan.

  • Acquiring the propertySince many unsubsidized affordable SMMF owners live near the properties they own community members are likely both aware of good candidates for preservation in their neighborhood and know the owner directly. With this knowledge and relationship, community members can help you formulate an owner-engagement strategy to acquire the building.

  • Obtaining approvals from local governmentAs with any development, a small group of vocal community members can have a great impact on the likelihood of obtaining approvals from local decisionmakers. Critical approvals for unsubsidized affordable SMMF preservation may include land acquisition (if the property is publicly owned), financing awards, and land-use approvals.

  • Finding tenantsMarketing the units once they come online will require strong communications with surrounding community members, who may be prospective tenants or who may be able to recruit tenants.

COMMUNITY ENGAGEMENT FOR UNSUBSIDIZED AFFORDABLE SMMF PROJECTS

Unsubsidized affordable SMMF preservation projects tend to have fewer requirements and less time for community engagement, relative to larger scale preservation efforts, new construction or preservation of subsidized units. However, it is still critical to build trust and communicate regularly with the surrounding community, given the many ways they can impact your preservation process and outcomes.

See Appendix 3 for a deeper dive on best practices in community engagement during rehabilitation.

BUILDING & MAINTAINING STRONG COMMUNITY RELATIONSHIPS

Regularly attend community meetings

These events may include town halls, council meetings, neighborhood meetings, or stakeholder meetings to support public planning processes.

Research the historic context

Community experiences from past development projects can greatly influence expectations for future projects. Prepare to acknowledge this history and explain how your project will be consistent with or different from that experience. Local newspaper archives and community outreach can help you understand this context.

Identify resident leaders

Establish a regular feedback loop with resident leaders. These leaders may come from schools, community centers, social service agencies, faith-based institutions and other groups that are embedded in a community.

Have an easily accessible online presence

Ensure your website is easily search-able and leverage social media. Pair this with clear and consistent messaging before, during and after rehabilitation.

Communicate the community benefit of your project

This may include key health and safety needs that will be addressed through rehabilitation. Consider messages that uplift existing assets in the community and/or are grounded in expressed community goals.

 

SPECIAL CONSIDERATIONS FOR ALREADY OCCUPIED PROPERTIES

If your unsubsidized affordable SMMF property is already occupied, there are several additional considerations to keep in mind (each of which underscores the importance of strong engagement with residents and community members):

Jakabovics, A. et al. (2017). Small and Medium Multifamily Housing Units: Affordability, Distribution, and Trends. Report prepared by Enterprise Community Partners, Inc. and USC Price School of Public Policy. Available at www.enterprisecommunity.org/resources/small-and-medium-multifamily-housi....
  • Tenant-based voucher useWhile unsubsidized affordable SMMF properties do not have project-based subsidies prior to preservation, current tenants may be using Housing Choice Vouchers to pay rent. In fact, early research on unsubsidized affordable SMMF properties suggests they are often home to voucher recipients.xliv If current residents are using vouchers, this will trigger federal relocation requirements.
  • DemographicsDepending on how you are financing your preservation effort, you may have restrictions on who can live in the units after the project is complete (e.g., subsidies that require a share of units serve low-income households). You should carefully consider how funding requirements align with the demographics of current tenants before adding restrictedfunding or financing to your capital stack. If there is a mismatch between funding or financing requirements and existing residents, you risk displacing them, which will not only damage the community and your reputation but also your bottom line (e.g., relocation costs, legal issues, or significant push-back from community members that delays or stops your project).
  • Tenant opportunity to purchaseIn some municipalities, tenants have the right to collectively purchase the property they live in before it is sold. If that is a possibility, it is even more important that you build trust with the existing tenants and their neighbors and that you clearly communicate the value of your rehabilitation plan to them, including how it meets core community needs and goals.

RELOCATION TIPS

  • Work with property managers who have experience with the current residents and relocation processes. They can help inform and coordinate moving timetables and other logistics.
  • Bring on an experienced compliance specialist who has experience with tenant relocation regulations and can manage the entire process.
  • Create a clear way to prioritize who gets to move back first, if at all. Use lease terms and impact on housing subsidies to help inform this prioritization.