The recent economic and financial crisis, high unemployment, and slow recovery are exacerbating the need for affordable housing, yet Connecticut’s inventory continues to fall short. According to the 2010 U.S. Census, there is only one affordable rental unit available for every three low-income households in need. Of the more than 435,000 renter-occupied units, more than 204,000 (47 percent) are paying more than 30 percent of their income for housing costs, which is considered “cost-burdened” under federal standards. However, one solution to this problem is already right in front of us – existing market-rate rental housing. With the scarcity of available land, higher cost of new construction, longer time frames required to build new multifamily developments, and community resistance, converting a portion of existing market-rate rental units to affordable units is a practical and timely option.
CHFA has launched a new initiative to offer financing for multifamily properties, providing the owners are willing to designate a percentage of the units as affordable. In December, CHFA’s Board of Directors approved financing for the first of these conversion projects in Groton and East Windsor. As a condition of the loan, the owner is designating 184 of 468 apartments in the developments as affordable housing, some reserved for tenants with incomes at or below 80% of Area Median Income (AMI) and some for tenants with incomes at or below 60% of AMI.
In return for adding affordable units, the developer receives the long -term financing not traditionally offered by commercial lenders. The longer financing terms will allow the developer to make on-going improvements to the property for many years to come, ensuring lasting, good-quality affordable housing for residents.
The conversion of existing market rate to affordable units also provides an alternative strategy for towns to achieve the affordability threshold that would exempt them from the Affordable Housing Land Use Appeals Act.
CHFA is continuing to reach out to commercial real estate brokers and property owners, looking for opportunities to finance developments that are interested in converting market rate apartments to affordable rents and creating mixed-income communities in the process.
Eric Chatman is the Connecticut Housing Finance Authority president and executive director.
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