Testimony of
Karen Kerns Dresser
Ohio Capital Corporation for Housing
Before the
Commission on Affordable Housing
And Health Facilities Needs for Seniors in the 21st Century
September 24, 2001
Columbus, Ohio

My name is Karen Kerns Dresser and I am Director of Policy and Program Services with the Ohio Capital Corporation for Housing.

Ohio Capital Corporation (OCCH) is a statewide non-profit organization whose mission is to cause the production, rehabilitation and preservation of affordable housing in Ohio. Founded in 1989, OCCH has worked with public, private and non-profit developers to create more than 7500 units of affordable housing in 150 developments across the state using the low-income housing tax credit program. These projects represent an investment of more than $380 million in equity capital through Ohio Equity Fund partnerships. Ohio Capital also provides training, technical assistance and consulting on a range of affordable housing issues, and has committed over $1 million of its retained earnings to residents development programs in our investment properties.

As you well know, the country's elderly population is expected to double in the next 30 years. Even today, 30 percent of elderly householders pay more than 30 percent of their income for shelter. Indeed, low-income seniors with few assets - nearly 1.7 million households - pay more than half of their income for shelter. So this hearing is certainly timely.

Today, I intend to focus my remarks on the use of low-income housing tax credits in the development and preservation of affordable rental housing for seniors. As part of this discussion, I have some suggestions regarding improvements in the tax credit program, The HOME program and the Community Development Block Grant program.

As a background for my recommendations, I would like to show you how a typical tax credit project is structured in Ohio.

It is important to understand that tax credits equity and a commercial bank loan alone will not provide the financing needed to achieve the affordable rents that we and our non-profits partners are committed to achieve. Complicated layered financing (a subsidy sandwich if you will) is necessary to provide affordable rents for residents earning between 30% and 50% of median income. Generally a successfully tax credit project involves private investment equity, public funds, and funds, and some type of non-profit or philanthropic contributions.

At the back of your packet, you will find three project profiles describing developments that Ohio Capital has helped finance.

The first, Renaissance Apartments in Toledo, consists of 54 units in the historic Renaissance building in downtown Toledo. As you will note, the financing is complicated. It includes equity from Ohio Capital and National City Bank, CDBG funds from the City of Toledo and HDAP (or HOME funds) from the State of Ohio. This layered financing permits the project to offer average rents of $470 a month.

The second, Ridgeview Manor in the small town of Johnstown Ohio, is new construction with 21 affordable units. Again, the financing is complex - including equity from Ohio Capital, a low-interest loan through the Federal Home Loan Bank's Affordable Housing Program, and HOME grant from the State of Ohio. Average rents in this development are $450 a month.

The third development, St Leonard's Center is 100 percent new construction in Centerville, Ohio - a suburb of Dayton. Again, a very complex financing - several equity agencies, a commercial bank loan, a loan from the loan affordable housing fund, a contribution from the Franciscan at St. Leonard, additional loans from the Franciscan at St. Leonard's, and additional loans and grants from Montgomery County and the Ohio Housing Trust Fund. Average rents are $310 a month.

As you can see, committed developers have found a way to make these projects work, but conflicting federal programs requirements make the work very difficult.

The following are specific recommendations for Federal Program changes.

• Remove the restrictions on the CDBG program regarding direct investments in new construction. This would clearly help in housing production.



• Provide one set of rules for CDBG and HOME programs, when they are used in combination with housing tax credits. Ideally, the low-income housing tax credit rules would apply, and would be deemed to satisfy HOME and CDBG requirements. These regulations should include those related to income and rent targeting, monitoring, reporting, environmental reviews, and subsidy layering reviews.
  
  These changes are consistent with the Hierarchy of Compliance principle that is being used by the Millennial Housing Commission as it works to provide recommendations for federal housing program reform. The Commission is forming detailed suggestions for the HOME and CDBG rule changes.



• Finally, with regard to the low-income housing tax credit program, I would like to recommend your support for some pending legislation. H.R. 95, and S677 are companion bills that provide several financial amendments to IRS legislation governing the tax credit program. Specifically, these bills provide for Mortgage Revenue Bond purchase price reform, repeal the ten-year rule, and provide flexibility in income caps for rural tax credit projects. These amendments are NCSHA's top priority and I hope you will support them.

I would be remiss today if I didn't also speak about the level of funding needed in order to preserve and develop affordable rental housing - including senior housing. By next year, the Low-Income Housing Tax Credit program will have achieved a 50% increase in credit authority. However as my examples have shown, significant additional subsidy is needed if tax credit projects are to work for the truly needy.

You can also see from my examples that private investors and developers, local government, non-profit sponsors and state government have stepped up and invested their own resources in these projects. But additional federal development funds are needed - preferably through the HOME program or a new federal matching grant program for affordable housing productions and preservation.

Finally, I would like to take a few minutes to talk about the importance of social and health related services in elderly tax credit developments. I can tell you unequivocally that the presence of service coordinators in Ohio Capital's elderly housing developments makes an incredible difference - the difference between night and day in the lives of residents.

While traditional public housing, and increasingly, 202 housing have some access to funding for service coordination, - most "stand alone" tax credit projects do not. In most cases, supportive services and service coordination come through a patchwork of funding systems if they are available at all.

Although the State tax credit allocation agency requires a service coordinates plan for special needs housing projects - including elderly housing - they do not provide funding for service coordinators.

In Ohio, the State Housing Trust Fund provides some limited funding for service coordination. The Ohio Capital Corporation uses over $300,000 annually from our own retained earnings for a Resident Development Fund in our developments. But this doesn't begin to meet the real need.

Others will have specific recommendations regarding the issue of service coordination. Ohio Capital simply wants to work with you and your colleagues to provide answers to this important question.

Thank you for the opportunity to be with you today.