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MHEG & MHDF Updates
MHEG is Expanding! Pat Michaelis, VP Business Development
MHEG is expanding its geographic footprint into New Mexico, Arizona, Nevada, Utah, Wyoming, Montana, and all of Texas. If you are considering developing in these states, here’s what is happening at MHEG.
MHEG’s mission is to “Change lives for a better tomorrow by helping create safe, quality, affordable housing.” To grow the mission, MHEG must secure additional investors to increase capacity. Both require syndicating additional LIHTC developments. Thus, we are expanding.
Within MHEG’s current footprint, $91 million 9% LIHTC credits will be allocated in 2022. The allocation pool grows to $213.4 million with the addition of our new states. Clearly, significantly increasing development opportunity for MHEG and partners.
MHEG has a history of growing and expanding our footprint and the people we serve. Originally established in Nebraska in 1993, MHEG added Kansas, Iowa, and Oklahoma between 2001 and 2005. We expanded again in 2013 into South Dakota, Minnesota, Missouri, Arkansas, Colorado, and Northern Texas. MHEG spent the last year making initial contacts and performing due diligence with plans to begin syndication in 2022 in our new footprint.
We understand we are not the only ones thinking growth. Due to limited allocations in each state, expansion is on the minds of many. We value and appreciate the relationships we have established. If you are considering expanding into New Mexico, Arizona, Nevada, Utah, Wyoming, Montana, and Texas, we welcome the opportunity to explore the possibility as your partner. This year I’ve been charged with leading the process of raising capital from small and mid-size institutional investors throughout our now seventeen-state footprint. Since inception, MHEG has partnered and fostered investment with our local and regional community banks to further our mission of providing quality, affordable housing for low-income households while assisting banks with their CRA goals.
Community Bank Investments Andrea Frymire, VP Community Investments
With 59% of our developments being rural in nature, we appreciate our community banks providing their local perspective on a wide range of issues from demographics, location, and economic viability. Our investor partners have long enjoyed the benefits of having deals in their backyard to help make their communities better and to provide banking opportunities.
Our investors are generally driven by economic returns. Our Funds are charactered as low risk and low-levered (typically 25% or less), consist of mostly new construction developments, spread between rural and urban locations with a diverse mix of counterparties. We conservatively underwrite both rents and expenses. The result is that we have never experienced a foreclosure or any recapture of tax credits. In addition, our portfolio generally outperforms industry benchmarks. This conservative underwriting and strong portfolio performance help explain our success in raising more and more capital each year.
COVID really brought home the need for quality, affordable housing to the public, but our investor partners have led the charge in helping us provide housing to families, seniors, and veterans for almost 30 years.
I do hope to meet all of you in person this year, as time allows. If you or your peers need CRA assistance, please let me know. I value your continued partnership and appreciate the trust you have placed in us!
NE Creates More Affordable Housing With Bond Deals Ryan Harris, Director of Acquisitions
In 2021, Nebraska Investment Finance Authority (NIFA) updated their Qualified Allocation Plan allowing tax-exempt bond deals to receive an allocation of State LIHTCs equal to the amount of Federal LIHTCs. NIFA approved three bond deals with State LIHTCs in 2021, Victory Park View in Lincoln, Nebraska which had a combined bond allocation of $29 million and will receive over $2.3 million of annual Federal and State LIHTCs. This additional resource was leveraged to generate 262 units of affordable housing among three deals and generate nearly $60 million of development in the State.
Gatehouse Rows is a 98-unit family deal by Hoppe & Son in Lincoln. Total development costs are just under $20 million. The fourth phase of Highlander – a partnership between Seventy-Five North and Brinshore Development – is a 70-unit addition to the campus in Omaha and will provide both apartments and townhomes to qualified families. Development costs are just under $27 million. Victory Park View is the latest addition to the Victory Campus in Lincoln, developed by Burlington Capital. The project consists of rehabbing two existing buildings, totaling 94 family units with a preference to housing veterans. Total costs are over $12 million.
These deals will help serve part of the increasing need for affordable housing in the state of Nebraska and were made possible by NIFA’s efforts to include the State LIHTC program on tax-exempt bond deals. NIFA has also increased their Federal/State bond allocation for 2022 up to $35 million, furthering their commitment to utilize the State LIHTC resource to create affordable housing.
Government Affairs Update Joshua Yurek, VP Government Affairs & Community Outreach
Last fall, the Affordable Housing Tax Credit Coalition announced that The Residence at Lamar in Wichita Falls, TX, was selected as a recipient of the Charles L. Edson Tax Credit Award for the category of historic preservation. The Edson Award recognizes the best developments in affordable housing. The Residence at Lamar development by Overland Property Group and syndicated by MHEG, is an adaptive reuse and renovation of an existing historic, four-story building designated for persons 55+. Constructed in 1929, the original building was a furniture store, a retail store and then served as the Maskat Shrine Temple.
Since its reintroduction, the Affordable Housing Credit Improvement Act (AHCIA) (S. 1136 and H.R. 2573) continues to gain more support. The legislation reforms provisions of the Low-Income Housing Tax Credit (LIHTC) program by increasing the Housing Credit allocation and making the Housing Credit a more effective tool, particularly in rural areas, to encourage additional development. The legislation currently has strong bipartisan support, including 155 cosponsors in the House and 32 cosponsors in the Senate. Within the MHEG footprint, we have members that have cosponsored the AHCIA from CO, IA, KS, MN, MO, NE and OK. It is exciting to note that the entire Kansas delegation has cosponsored the legislation!
While affordable housing, including a significant expansion of the Housing Credit, was a major element of the Build Back Better legislation that the House passed in November, the legislation ultimately stalled in the Senate in December. Several members had concerns with various provisions in the legislation, but the most vocal objections came from Senator Joe Manchin (D-WV). Although his objections over the bill’s cost and potential impact on inflation killed the Build Back Better legislation in its current form, he has recently laid out some high-level priorities for a bill that he could potentially support.
In the meantime, as you all know, rising inflation has increased the cost of construction. Sadly, on top of the considerable inflation challenges facing the affordable housing industry, the Housing Credit is now facing its lowest allocation in four years due to the recent expiration of a temporary 12.5 percent allocation increase. Unfortunately, the impact of these combined problems is exacerbating the affordable housing crisis. In short, we need additional Housing Credit resources now more than ever.
Recently, the bipartisan Fiscal Year (FY) 2022 omnibus spending bill was signed into law, which includes $1.5 trillion in government funding and $13.6 billion in aid tied to Ukraine. The legislation provides $53.7 billion for the Department of Housing and Urban Development (HUD) – an increase of $4 billion, or 8 percent, above FY 2021. It also included funding for U.S. Department of Agriculture (USDA) rural housing programs and a reauthorization of the Violence Against Women Act (VAWA), among many other provisions. The Omnibus did not include any Housing Credit provisions, since the bill did not contain a tax title.
Moving forward, we expect Congress to focus its attention on other legislative issues, such as potentially a new iteration of budget reconciliation or other legislation that could have a tax component. However, the current crisis in Ukraine and the upcoming Supreme Court nomination confirmation process are also taking up considerable focus. We will continue to look for opportunities in any upcoming legislative vehicle to deliver more affordable housing resources, including restoring the recent 12.5 percent Housing Credit reduction.
Finally, Members of Congress often state they see great value in visiting affordable housing properties. It is especially important for them to directly hear personal stories from residents as we continue to advocate for additional affordable housing resources in Congress. When you are a few months out from construction completion, and begin thinking about showing off the finished product, please don’t hesitate to reach out to me. I would be happy to help coordinate a ribbon-cutting event with your Congressional delegation and their staff to further demonstrate how effective the Housing Credit is in providing affordable housing in their district and state.
We saw some exciting growth in 2021. MHDF expanded our loan portfolio to help even more people gain access to affordable, safe housing during this second year of the global pandemic. We closed over $22 million in loans assisting with the creation of 716 affordable, rental units in 8 states.
During 2021, MHDF made our first loan in South Dakota to Jefferson Village Apartments sponsored by YMCA of Sioux Falls and C.R. Lloyd Company. Jefferson Village will be newly built with a mix of 1-bedroom, 2-bedroom and 3-bedroom apartments in the same area of Sioux Falls as the new Thomas Jefferson High School.
MHDF received a $1.8 million CDFI Rapid Response Program grant for affordable housing loans from the U.S. Treasury as part of the federal COVID response package. We also received a $650,000 grant from the traditional CDFI Financial Assistance grant program for lending. These investments are being deployed across our footprint.
