Preservation Strategies
The public sector does offer different solutions, both at the state and federal level. For multifamily owner
s considering taking their subsidized properties market-rate, the government offers a few incentives. Under the 236 program, which requires that the property stay affordable for its first 20 years, owners can refinance while keeping their 236 subsidy in place. Upon contract renewal, most project-based Section 8 owners can receive a government payment that covers the difference between market-rate rents and the rents paid by low-income residents at the property.
When such funds are combined with the property’s management revenue, many owners of subsidized properties will recommit, according to O’Donnell. “If they’ve been in a regulated environment and protected from the market for the past 30 years, they might not really be ready for that [market-rate competition],” he says.
Apartments with modest rents and no subsidies receive no such federal benefits, although cities and counties may have their own programs to keep affordable properties in the mix. “Local governments can provide incentives by providing services, providing tax abatement, providing subsidies, or credits,” says Sal LeCesse, president and CEO of LeCesse Development in Orlando, Fla.
However, saving rental units is only part of the battle. “You can only preserve so much of the stock,” says David Cardwell, vice president of capital markets and technology for the National Multi Housing Council. “Some of it is not worth preserving. You have to deal with production. That’s a big-dollar issue. I don’t know what the politicians are going to do. At some point, they must address production.”
Until that happens, though, multifamily owners and developers are looking at a business opportunity all their own. “Throughout the country there are older apartments and older homes in need of repair,” Bozzuto says. “The opportunity to purchase those and make the improvements that are necessary is available to the industry.”
