Jim Mork writes: "The definition I've heard of "affordable housing' is 30 percent of income."
Vicky clarifies: Mr. Mork is thinking of the HUD Section 8 program requirements calling for the tenant to pay 1/3rd of his/her "income" as rent, with the Federal government picking up the balance each month. Example: If Riverside Plaza charges $1,000 for a 2BR apartment, and its occupant has income of $200 per month, the tenant pays $66 per month and the Federal government pays $934 per month. "Affordable housing" is much more vague. These two words enable clever developers to dupe our government into lending millions of extra dollars to build housing that isn't affordable at all. Example: Stone Arch Apartments. The land value, according to tax records, is $536,800. According to Steve Minn/MCDA, construction costs for the 221 apartments are $22,282,739, architectural fees are $465,000, interest during construction is $705,077, site improvements and demolition costs are $450,000, and "relocation" fees are $550,000. Assuming these costs are valid (which is a big assumption without seeing any detail) the reported cost to build the project is $24,989,616, or $25 million to make the arithmetic easy - roughly $113,000 per apartment. A private lender would require the owner(s) to have at least 10% equity in the project, and might therefore lend $22.5 million. If making money in real estate the old fashioned way, the owners would end up with a $25 million project and a $22.5 million mortgage. Our public lenders aren't so strict. They allow the developer to add $2,741,117 in "developers fees" and another $2,576,552 in "other fees and soft costs" and another $1,663,200 in "acquisition costs" and another $857,028 in "construction contingency." Now the cost of the project is up to $32,827,513, or $148,541 per unit. Now one must wonder what kind of affordable housing do we actually get for all of this extra money. Well, since someone at HUD decided the AMI (area median income) for Minneapolis is $53,700 for a single person, and $82,800 for a family of five, we get "affordable rents" of: $805 for a studio (if the tenant's income is 60% AMI) $863 for a 1 BR $1,035 for a 2 BR $1,196 for a 3 BR, etc. When all is said and done, we get nothing. The owners, and the recipients of all of those "fees" have a rather nice score on their hands. Not to mention the limited partners in the project who bought a hefty tax shelter for the next ten years (IRS Section 42 tax credits - cannot report how much without seeing the books - but the bigger the losses, the better for the limited partners.) One could argue effectively that each time we do one of these deals, we actually REDUCE taxes collected in Minnesota, and Federal. Hope this isn't too long - but I don't want to be accused of leaving something out. Arithmetic by, Vicky Heller Cedar-Riverside and North Oaks TEMPORARY REMINDER: 1. Send all posts in plain-text format. 2. Cut as much of the post you're responding to as possible. ________________________________ Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Unsubscribe, Digest, and more: http://e-democracy.org/mpls
