Going, Going … Saved!

A combination of funding sources — and some creativity — helped a Colorado county save its affordablesenior housing.

By Shannon King

Douglas County, Colorado, located between the state’s two largest metropolitan areas, Denver and Colorado Springs, was the fastest growing county in the nation during the 1990s. Its population went from 60,391 in 1990 to 175,766 a decade later, a 191 percent increase. Located in the Front Range foothills of the Rocky Mountains, the county consistently attracts outdoor enthusiasts who also consider it a great place to raise a family.

However, as in many high-growth communities, one of the consequences of rapid growth is skyrocketing housing costs. Douglas County saw median home prices climb from $119,900 in 1990 to $237,600 in 2000, with similar increases in rental rates for apartment dwellers. And that number keeps going up. Between 2000 and 2005, the average sales price for all housing in the county rose 33.7 percent, topping out at $355,042.

Meanwhile, income has increased only nine percent in the last three years, making housing affordability a major issue. This trend is expected to continue, with 79 percent of the county’s new jobs paying less than $20 per hour, and 42 percent of them paying under $10 per hour (in 2000 dollars), according to the Douglas County Community Development Information Resource Group.

This jobs-housing gap certainly hurts schoolteachers, firefighters, police, retail employees, and service industry workers, but no one is more challenged by the housing crunch than seniors of modest means. Although the county’s comprehensive plan emphasizes the need for affordable housing for seniors, there are only 99 units of affordable senior housing in the entire county.

Two-thirds of those units are at the Oakwood Senior Apartments in Castle Rock, the county seat. The challenge of finding — and keeping — housing that is affordable to low- and moderate-income seniors was brought into sharp focus in August 2005, when the owner of the Oakwood complex proposed converting the units to market-rate condominiums.

The Oakwood apartment complex was built in 1984 and operated under the U.S. Department of Agriculture’s Rural Development 515 Rural Rental Housing Program. That program provides affordable rental housing to seniors and people with disabilities. An interest rate credit subsidy on the loan took the rate down to one percent, and qualifying tenants received rental assistance from the Rural Development program.

But last summer, the owner of the Oakwood Senior Apartments paid off the RD 515 loan before its 50-year term was over. He announced plans to convert the units into condos, and gave the senior residents notice that their rents would increase by $200 per month beginning in February 2006.

Out in the cold

By paying off the loan, the owner was no longer restricted in how much rent he could charge. Further, the subsidies that many residents received under the Rural Development program were no longer available to them. That double blow left many of Oakwood’s 89 senior residents searching for a new place to live. Suddenly, an apartment complex that had served the housing needs of low- and moderate-income seniors for more than 20 years and had a year-long waiting list was left with 34 percent of its units unoccupied.

Mindful of the impact that the loss of 64 affordable units could have, the Douglas County Housing Partnership — the housing authority that serves unincorporated Douglas County, as well as the cities of Parker, Castle Rock, and Lone Tree — acted immediately. In August, the housing authority contacted the owners of the building to ask about buying the complex, with the intent of maintaining it as affordable rental apartments for seniors.

The Douglas County Housing Partnership worked hard to put together a financing package that would allow it to purchase the complex at a mortgage rate it could afford. “Conventional rates were not going to work; the rents were too low to support the debt,” says Craig Maraschky, AICP, the housing authority’s executive director.

In looking for a way to buy the property, DCHP reached out to numerous funders and finally came to a collaborative solution. The agency created a public-private partnership with the property owner and worked with federal, state, and local officials to get commitments for both debt and equity. In the end, financing came from multiple sources, which is typically the case in affordable housing deals, Maraschky notes.

Let’s make a deal

The appraised value of Oakwood Apartments was $4.2 million, but the Douglas County Housing Partnership, after negotiations with the owner, got the complex for $3 million plus closing costs. To make up the loss, the owner took a $1 million charitable contribution. The negotiations were especially challenging because of the tight timeframe, although the owner was cooperative.

The Douglas County Board of Commissioners approved the reallocation of $646,000 of the county’s 2004 and 2005 community development block grant funds to support the acquisition. Recognizing the area’s need for affordable senior housing and the significant contribution from the county, the Colorado Division of Housing also provided $600,000 in HOME funds for the purchase. These funds, combined with $42,000 of DCHP funds, provided the much-needed equity portion of the finance package.

The critical piece of the deal came in March 2006 from the Colorado Housing and Finance Authority, which committed to a $2.1 million loan at 1.5 percent interest for 65 months. But with the support of HOME and CDBG funds, the acquisition would not have been feasible if CHFA had not agreed to such an extraordinarily low financing rate, a rate that was unprecedented, according to Jeff Watson, AICP, assistant director for community services in the Douglas County Community Development Department.

Generally, a loan with a 1.5 percent interest rate won’t be issued because the lender would lose money by doing so — and in fact, CHFA is taking a loss on this loan. Various options were considered, including low-income housing tax credits, but they were not feasible due to the extremely tight timeline.

CHFA recognized the dire need for affordable housing at Oakwood. Many residents may have faced homelessness had the acquisition not gone through.

DCHP bought the Oakwood Senior Apartments in April with the help of several other agencies. Thus it could honor its commitment to keep rent for existing tenants at $350 per month and rents for new tenants at $400. Keeping rents low was critical to the project because 97 percent of Oakwood’s senior residents have incomes at or below 50 percent of the area median income. With DCHP’s acquisition of the property, the complex will remain affordable to seniors in Douglas County for at least the next 30 years — a requirement imposed by the CDBG and HOME programs.

In June, residents of Oakwood, agency representatives, and guests celebrated the grand reopening of the Oakwood Senior Apartments, nestled at the foot of Castle Rock’s namesake monument. Thanks to a successful collaboration, the 64-unit complex will continue to provide decent housing and affordable rent for residents today and in the future.

Now what?

Across the U.S., the search for affordable housing is difficult for many, especially the most vulnerable — the poor, children, those with disabilities, and senior citizens. Planning for affordable housing for seniors will become especially important as baby boomers retire. The U.S. Census forecasts that the proportion of people age 65 and older will grow from 12.5 percent of the total population in 1990 to 17.7 percent in 2020, a 41.6 percent increase.

Senior citizens accounted for just 4.2 percent of the Douglas County population in 1990 and 2000. But forecasts from the Douglas County Community Development Information Resource Group indicate that ratio will grow to 10 percent by 2020, and to almost 20 percent by 2030. Douglas County demographics are changing, reflecting similar changes in an aging population nationwide.

Douglas County’s goal is to continue to integrate for-sale and rental affordable housing units into new development and redevelopment, and its comprehensive master plan specifically targets the needs of seniors.

The RD 515 program, under which the Oakwood Senior Apartments complex was originally built and financed, is the primary housing program in the U.S. Department of Agriculture’s Rural Development program. Today, however, the courts are leaning towards giving owners the opportunity to prepay their mortgages, which could lead to as many as 45,000 low-income households losing their housing. According to Craig Maraschky, a similar situation exists with prepayment of Section 8 properties. However, Section 8 tenants receive rent vouchers, whereas there was no additional assistance for the Oakwood Apartment tenants or for other seniors who lose their 515 umbrella.

Will local governments be proactive in providing housing for their most vulnerable citizens? Perhaps multijurisdictional housing authorities and passionate collaboration are part of the answer. As people face the possibility of losing their low-cost housing, it is important for government agencies to continue to make affordable housing a priority not only for seniors, but for other segments of the population, too.

Shannon King is a long-range planner for Douglas County, Colorado.