ChallengesFacingSocialHousingOrganizationsintheU.S.:InsightsfromtheBostonandSanFranciscoRegions

November12,2016

RachelG.Bratt*ProfessorEmerita,TuftsUniversity,DepartmentofUrbanandEnvironmentalPolicyandPlanning,97TalbotAve.,Medford,MA,USA,andSeniorResearchFellow,JointCenterfor

HousingStudies,HarvardUniversity,Cambridge,MA,USArachel.bratt@tufts.edu

LarryA.Rosenthal

SeniorLecturer,UniversityofCalifornia,Berkeley,GoldmanSchoolofPublicPolicy,2607HearstAve.,Berkeley,CA,USA

lar@berkeley.edu

RobertJ.WienerContinuingLecturer,UniversityofCalifornia,Davis,DepartmentofHumanandCommunityDevelopment,andExecutiveDirector,CaliforniaCoalitionforRuralHousing,717KSt.,

Sacramento,CA,USArob@calruralhousing.org

PaperPresentedattheEuropeanNetworkforHousingResearchConference

Belfast,NorthernIreland,June2016ForbookbeingeditedbyGerardvanBortel

*Namesofauthorsarelistedalphabetically

Notforquotationorcitationwithoutauthors’permission 

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ChallengesFacingSocialHousingOrganizations’intheU.S.:InsightsfromtheBostonandSanFranciscoRegions

Abstract

NonprofithousingdevelopmentorganizationsintheU.S.haveplayedacentralroleinaffordablehousingprovisionfordecades,butarenowencounteringanumberofchallenges,someofwhicharearisingwithintheorganizations,whileothersstemfromchangesinthecontextinwhichtheycarryouttheirwork.OurworkinthisareaconstitutestheU.Scomponentofafour‐countrystudyofcurrentandanticipatedfuturechallengesandopportunitiesconfrontingthenonprofithousingsector.OurpreviousworkreportedonthefindingsfromasurveymodifiedfromonedeployedinEngland,theNetherlands,andAustralia.Thischaptersummarizesourfindingsfromin‐depthinterviewsthatwecarriedoutwithleadersfromthe12organizationsinourstudyintwomajormetropolitanareasoftheU.S.:theBostonand SanFranciscoRegions.

Keywords:SocialHousingOrganizations,Adaptations,Diversification

Introduction

TheU.S.hasarobustnonprofithousingsector.TheU.S.socialhousingstockincludeshousingownedbynonprofitsaswellaslocalhousingauthoritiesthroughthepublichousingprogram.Althoughthatstockhasnotbeenashistoricallydominantasthatofsomewesterncountries,nonprofitorganizationshavemadesignificantcontributionstowardalleviatingthecountry’shousingproblems.1Thischapterwasstimulatedbysurveyworkthathasbeenconductedinthreecountries:theUnitedKingdom,specifically,England,theNetherlands,andAustralia.Ourpreviousworkreportedonthefindingsfromasurveymodifiedfromonepreviouslydeployedintheselocales(Wiener,BrattandRosenthal,2015).

Thischapterdiscussesthefindingsfromaseriesofin‐depthinterviewscarriedoutinDecember2015–January2016withleadersof12high‐performingnonprofithousingdevelopmentorganizationsintheBostonareaandtheSanFranciscoBayArea.ThenonprofithousingsectorintheU.S.iscurrentlyencounteringanumberofchallenges,someofwhicharearisingwithintheorganizations,whileothersstemfromchangesinthecontextinwhichtheycarryouttheirwork.

ThechapterstartswithanintroductiontotheU.S.nonprofithousingsector,adiscussionofourmethods,andabriefoverviewoftheplanningframeworksandhousingmarketsthatarethecontextforthisinquiry.Thebodyofthechapterfocusesonorganizationalandinternalchallenges,theoperatingenvironmentsofnonprofithousingorganizations,andorganizationaladaptationsinresponsetointernalandexternalchallenges.Thefinalsectionpresentsourconclusionsandrecommendations.

1 According to data compiled by Pittini and Laino (2011), among the 27 European Union countries more than one-half (15) have a social housing sector that exceeds that of the U.S. As shown in Figure 1, the U.S. social housing stock of just over 5 million units equals about 3.8 percent of the toal U.S. housing stock of about 130,000,000 units. Pittini and Laino’s data (2011:24) also indicate that in one-third of the EU countries, the social housing sector comprises more than 10 percent of the housing stock, with The Netherlands having the highest proportion of such housing, at 32 percent.

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I. U.S.HousingNonprofits–ChallengesandRationalesNonprofithousingorganizationscontinuetobeacriticalpartofthepost‐publichousingeraintheU.S.AsshowninTable1,totalcumulativeproductionbyvarioustypesofnonprofithousingorganizationscomprisesthegreatmajorityofthetotalsocialhousingsector;publichousingcomprisesvirtuallyalltheremainingtotalofapproximately5,000,000socialhousingunits.Amongnonprofits,communitydevelopmentcorporations(CDCs)arethesinglelargestnonprofitproducer.2TheoriginofCDCsdatesbacktothe1960s,asacommunity‐basedresponsetourbanproblems.Grassrootsprotestandadvocacymovements,whichoftenformedaroundarson,redlining,displacementduetourbanrenewal,anddilapidatedhousing,transformedintoamorepositivesetofinitiativesaimedatproducingneworrehabilitatedaffordableunitsforlocalresidents.Duringthe1970sand1980s,thenonprofithousingmovementbegantotakeshape,withlargenumbersoforganizationsforming.Asoflate1990,therewereanestimated2,000CDCs;sevenyearslater,theestimatednumberoftheseorganizationsskyrocketedto3,600(NationalCongressforCommunityEconomicDevelopment,1991;1999).ThelastcensusofCDCs,whichisnowaboutadecadeold,placedthenumberofCDCsat4,600(NationalCongressforCommunityEconomicDevelopment,2005).Whilethenumberoforganizationshasgrownconsiderablyduringthepastfourdecades,wealsoknowthatmanyorganizationshavegoneoutofbusinessormergedwithothernonprofits.Theestimatesarenotabletocapturethekindofmorenuancedfluctuationsthathaveoccurred.Withintheruralsector,CDCshavealsoplayedaprofoundrolesincethe1960s(WienerandThompson,2011).A1998censuscommissionedbytheNationalCongressforCommunityEconomicDevelopment(NCCED)andconductedbytheUrbanInstituteestimatedthat1,700organizationswereworkingoncommunitydevelopmentissuesinruralareas,notincludingHabitatforHumanityprograms(Steinbach:1999).Anothercensusin2001byStandUpforRuralAmericaestimatedasmanyas3,800ruralcommunity‐baseddevelopmentorganizations,including1,400to1,500HabitatforHumanityprograms.Some81%ofthesegroupswereinvolvedinhousingdevelopmentandrelatedactivities(Muchnick:2002,1‐2).AnupdatebyStandUpforRuralAmericain2005identified3,168ruralcommunitydevelopers,withatleast87%(2,756)havingahousingcomponent(StandUpforRuralAmerica:2006,8,10).Theconclusionwasthatruralcommunitydevelopmentremainsa“newlyemergingindustry”(Muchnick:2002,1).MomentumforCDCgrowthwasfueledbythecreationofseveralnationalintermediaryorganizations,whichbegantoprovidetechnicalandfinancialresourcestononprofits(e.g.,NeighborWorksAmerica,formerlyNeighborhoodReinvestmentCorporation,1978;LocalInitiativesSupportCorporation,1979;andEnterpriseCommunityPartners,formerlyEnterpriseFoundation,1982).Thecurrentperiod,datingfromthe1990s,hasbeenmarkedbyincreasingprofessionalismofthesector,agreaterfocusontrainingprograms,andeffortstoworkcloselywithfor‐profitdevelopers,socialservicesproviders,andpublicofficialsincollaborativedevelopmentefforts.Thisgrowthalsocoincidedwiththecreationofnewfederalfinancingprograms,suchastheLow‐IncomeHousingTaxCredit(LIHTC)Programin1986andHOMEInvestmentPartnerships

2MostofSectionIwaswrittenbyRachelG.Bratt,andisexcerptedfromherunpublishedpaper(2015).ThedatapresentedinthetextandTable1hasbeenupdated,whereverpossible.

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Programin1990.ThevariousentitiesandsupportsforCDCshavebeencharacterizedasbeingpartofacommunitydevelopmentsystem(Bratt,1989;FrischandServon,2006;MayerandKeyes,2012).AlthoughCDCsarethesinglemostprevalenttypeofnonprofithousingorganization,thissectorencompassesseveraldifferentforms,asnotedinFigure1,eachofwhichhasvariousattributes,strengths,andweaknesses.(Fortwogoodcomparisonsofthevariousapproachestosocialhousing,seeDavis,1994andStone,2006).EvenwithintheCDCsector,therearemanydifferenttypesfromsmall‘momandpop’storefrontgroupshavingonlyafewemployeestolargeorganizationshavinghundredsofstaffmembers(Vidal,1992).SomehavedistinguishedbetweenHousingDevelopmentCorporations(HDCs)andCDCs(WienerandThompson,2011).HDCswereformedforthecorepurposeofproducingaffordablehousingandarestilloverwhelminglydevotedtoresidentialdevelopment.ThecategoryofCDCs,asusedinthischapter,includesHDCs,aswellasorganizationsthatmayhaveoriginatedasmulti‐purposedevelopersofcommercial,industrial,communityfacilities,and/orresidentialproperty.Inadditiontoincreasingthesupplyofdecentandaffordablehousing,theyinitiateandruncomprehensiveneighborhoodandcommunityimprovementactivities,suchasseedingorcreatingnewbusinessesandbuildingorupgradingcommunityfacilities,likechildcarecentersandhealthcareclinics.Affordablehousingprovisionmaybeamajororminorcomponentoftheirmission.“Affordablehousing”intheU.S.istypicallyconsideredhousingthatahouseholdwithanincomeofnomorethan80percentoftheareamedianincome(AMI)canafford,payingnomorethan30%ofhouseholdincome.Underthemajoraffordablerentalhousingproductionprogram,LIHTC,unitsaretargetedtohouseholdsearningnomorethan60percentofareamedianincome.InboththeBostonareaandtheSanFranciscoBayArea,annualhouseholdmedianincomesforafamilyoffourhoveraround$100,000,withBostonsomewhatlowerandSanFranciscosomewhathigher.Thismeansthatahouseholdearning80percentofAMIandeven50percentofAMImusthaveareasonablyrobustincome.Inorderforextremelylow‐incomehouseholds(thoseearning30percentorlessofAMI)tobeabletoaffordhousing,theymustrelyonlayeringanumberofsubsidies,findinghousinginthetraditionalpublichousingprogram,oraccessingaHousingChoicerentalvoucher(arentsubsidyprogramthatwasoriginallyknownastheSection8program).Also,foraunittobeconsideredaffordable,itmustbeprotectedthroughsometypeoflong‐termdeedrestriction,usuallylastingforatleast30years.Therefore,unitsontheprivatemarketthatmaybeaffordabletosuchlower‐incomehouseholdsarenotconsideredaspartoftheaffordablehousingstock,sincetheydonotincludelong‐termrentalpriceprotections.ResearchershaveexploredthevariouschallengesthatCDCsfaceandthekindsofcapacitiesneededforthemtobeproductivedevelopersandmanagersofaffordablehousing.Atthesametime,CDCsareattemptingtofulfillabroadmissionpertainingtoneighborhoodrevitalization,citizenengagement,andprovidingsocialsupportsandotherservicesaimedatpromotingeconomicsecurityandwell‐beingfortheirresidents.SomeofthemostcompellingchallengesfacingCDCsinclude:

theneedforstrongleadershipbothbytheboardandtheexecutivedirector; frustrationsoverhavingtoworkinanenvironmentofscarceresources,bothtosupport

organizationaloperationsandtofunddevelopmentdeals; thecomplexityofpackagingdealswithlayersoffundingallhavingdifferentrequirements;

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theneedtohaveonstaff,orhaveaccessto,ateamofhighlyskilleddevelopmentprofessionals,whoareabletocarryoutavariedsetoftasksthatincludelegalwork,financialanalysis,communityorganizing,anddeliveryofresidentservices;

theneedtocollaboratewitharangeofpublic,privateandnonprofitorganizationsinordertobringdealstofruitionandtoprovidethedesiredlevelandtypesofservices;

frustrationsbecauseanygivendevelopmentdealislikelytotakealongtime;and theevenlongertimeframesneededtoobserveanyappreciablechangeinthelocal

environment.(ForadditionaldetailsseeBratt,2006andGlickmanandServon,1998.)AnadditionalchallengeisthattheverystructureofCDCsmaybeproblematic.Bratthassummarizedthepotentialconflictasfollows:“TowhatextentcanCDCs,organizationswhosenamesincludetheword‘corporation,’andwhoareforcedtoworkcloselywithfinancialinstitutionsandcitygovernments,reallybeadvocatesforlow‐incomeinterests?”(2006,p.348).Thesechallenges,whichhavebeenwellunderstoodforanumberofyears,continuetobeconcernsfortheU.S.’shousingnonprofits.Ofcourse,theextenttowhichanyonegroupwillencounterspecificchallenges,aswellasaddressand,hopefully,overcomethem,islikelydependentontheirsize,assetbase,organizationalcapacity,andthelocalcontextwithinwhichtheywork.GiventhecomplexityofthechallengesfacingCDCsandotherhousingnonprofits,itisreasonabletoquestionwhetherthis,indeed,isaviablestrategy.Whatarethecompellingreasonsforsupportingnonprofithousingdevelopmentorganizationsasproducersandmanagersofaffordablehousing?Indeed,nonprofithousingdevelopersplayamuchsmalleroverallrolethantheirfor‐profitcounterparts,producingonlyabout22percentoftheLIHTCprojectsplacedinservicebetween1987and2014;for‐profitsproducedtheremaining78percent(Lew,2016).First,thebasicconceptsonwhichthenonprofitmovementisbasedarestillvalid.Nonprofitshaveaclearmissiontoproduceandmaintainaffordablehousingoverthelong‐term.Whileitisessentialthattheybeabletocovertheircosts,thedesiretomaximizereturnsandtogenerateprofitsisabsent.Thismeansthattheirworkisfocusedontheoutcomefortheresidentsofthehousing,ratherthanonreturnstotheorganization.Second,nonprofitsthatarecommunity‐basedalsoprovideopportunitiesforresidentstobecomedeeplyinvolvedwiththeeffort.This,inturn,notonlyincreasesthelikelihoodthatthehousingwillfitinwiththegeneralneighborhood,butitalsopromotesresidentinvolvementinday‐to‐daydecision‐makingand,insomecases,mayevenprovideultimatecontrolofthehousing.Third,sincethereisnofundingfornewpublichousingdevelopment,theonlywaytoincreasethesizeofthesocialhousingsectoristhroughthenonprofitsector.Ascompetitionforhousingcontinuestobeintenseinstrongmarketareas,socialhousingisakeyand,perhaps,thebestmechanismforprovidinglow‐incomeresidentswithsecurityagainstunwanteddisplacement.Unlesshousingisseparatedfromtheprivate,speculativemarket,low‐incometenantsarefacedwiththevirtualcertaintyofincreasingrentsandtheneedtomove.ThismakesthemissionofCDC’scriticallyimportantintermsofthesocialsafetynet.Businesspressurestheyfacethreatennotonlytheirbottomlinebut,ultimately,thewelfareofthosemostdependentonhousingassistance.InviewoftheoverridingneedfordecentaffordablehousingintheU.S.andtheimportantroleofnonprofithousingorganizations,itistimelytoexplorehoworganizationsaredealingwithandadaptingtoongoingchallenges—bothorganizationalaswellasthosethatareduetochangesinthecontextinwhichtheyoperate,includingpublicpolicies,marketconstraints,andopportunities.

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II. MethodsThischapterreportsonorganizationalbehavior,adaptationstochanges,andanticipatedfuturechangesamonghousingnonprofitsintwomajorU.S.metropolitanareas–theBostonareaandtheSanFranciscoBayArea.TheBostonareaislocatedinMassachusetts,ontheeastcoastoftheU.S.andtheSanFranciscoBayareainlocatedinNorthernCaliforniaonthewestcoastoftheU.S.Basedonresultsfrom12organizationsinourBostonareaandBayAreacohorts(N=6Boston;N=6BayArea),3itispossibletodrawsomeobservationsaboutthecurrentorientationsandfutureprospectsoftheseorganizations,includingthenatureandimportanceofchangesinoperationsandstrategiesandtheinternalandexternalfactorsthataredrivingthesechanges.TheAppendixliststhenamesoftheorganizationsincludedinourstudyandtheindividualsinterviewed.TwooftheBostonareaorganizationsarelocatedoutsidethecityoftheBostonandfouroftheBayAreaorganizationsarelocatedoutsidethecityofSanFrancisco.Asnotedabove,CDCsaccountforthegreatestnumberoforganizationsdevelopingaffordablehousingintheU.S.However,someoftheorganizationswestudiedservegeographicareaslargerthana‘community’‐‐forexample,largeregionsandmultiplestates.Therefore,weusethenomenclature‘NonprofitHousingDevelopmentOrganization’todescribeourstudypopulation.Withineachregion,organizationswereidentifiedthatmetthefollowingcriteria:1)primaryfocusonhousing;2)currentlyactiveinhousingdevelopmentand/orrehabilitation;3)atleast10yearsofexperience;and4)acumulativetotalofatleast200unitsproducedandintheircurrentportfolio.Thisincludedorganizationsthatfocusonproductionofhousingforrentand/orpurchase;mostlytargetthegeneralpopulation,butalsoservespecial‐needsgroups;offersupportiveservices;andperformworktypicalofotherorganizationsinthenonprofithousingsector.Fromourlistsofallorganizationsmeetingthesecriteria,sixorganizationswereselectedperregion,halfofthem‘regional’andhalf‘local’or‘neighborhood‐based.’Regionalorganizationshadproducedandwereoperatingover500unitsand,generally,workedinmultiplecities,counties,and,insomecases,states.Localorganizations,generally,workedwithinaspecificneighborhoodorneighborhoodsinasinglecityorinnearbycitiesandhadsmallerinventoriesandgeographicaltargetareas.TheoriginalsurveyemployedamodifiedDelphimethodology.TheDelphimethodaskssubject‐matterexpertstosharetheirperspectivesandexpertise.Therecanbemultipleroundsofdata‐gathering;inthiscaseweusedtwo.Thefirstroundwasthesurvey,whichusedprimarilyclosed‐endedquestionstoidentifythekeyissuesandinterestsofnonprofithousingorganizations.Thesecondroundusedthedatagatheredinthefirstroundtocollectmorein‐depthqualitativedataonareasofconsensusanddifferenceamongrespondents.Priortotheinterview,eachrespondentwassentareportthatcontainedhis/herownresponsesandasummaryofallresponsestoasub‐setofquestionsfromthesurveyinstrument(norespondentnamesororganizations’namesincluded).Thesewerethenusedtofacilitatetheone‐on‐oneinterview.   Apanelofkeyinformantswasselectedforeachregion,oneperorganization,typicallythemostseniorexecutive(e.g.,ExecutiveDirector,ChiefExecutiveOfficer,orPresident).Thesepanelistsalsowerechosenbecausetheyare‘reflectivepractitioners’knownforbeingactivistsandthought‐leadersinthefield.

3Chicago,adifferenttypeofmarketarea,wasoriginallyincludedinourstudy.However,ithadtobedroppedforreasonsbeyondthecontroloftheauthors.

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Thesurveyquestionnaire,anddeploymentoftheDelphimethod,wereinformedbyresearchteamsinthreeotherlocations–England,theNetherlands,andAustralia–whohadfield‐testedthesurveysandsharedtheirfindingsconcerningthestatusofthenonprofithousingdevelopmentsectorswithintheirrespectivenationalsettings(Milligan,et.al.,2013).Totheextentpossible,wesoughttoconformthequestionnaireformatandthelanguageofourquestionstothatofourinternationalcolleaguesinordertofacilitatepossiblefuturetransnationalcomparisons.However,inpractice,thetermsofnonprofithousingpraxisandrelevanceofinfluenceswithindifferentnationalcontextsarenotalwaystransferable.Therefore,wechangedsometerminology,eliminatedsomequestionsthatwerenotpertinentintheU.S.context,andaddedotherquestionsthatweremoreimportanttotheU.S.nonprofithousingsector.Thequestionnairewasorganizedintofivesections:thevaluesoftheirorganization;strategicpositioningoftheirorganization;recentchangesthatmaybeaffectingtheirorganization;strategiesadoptedbytheirorganizationintherecentpastoranticipatedinthenearfuturetoadapttochangingcircumstances;andotherlonger‐rangedecisionsthattheirorganizationsarecontemplatingorengagedinatanearlystage.Apriorpaperreportedonthefindingsfromthewrittensurvey,whichconsistedofapproximately100questions(Wiener,Bratt,andRosenthal,2015).Thedatawerethenanalyzedandbargraphswereproducedforeachquestion.Thegraphswerefurtherrefinedtoshowwhereeachrespondent’sanswersfelloutofthegroupof12organizationssurveyed.Thischapterpresentsthefindingsfromfollow‐upinterviewswhichwerebasedon15broadquestionsthathadbeensynthesizedfromthequestionsposedintheoriginalquestionnaire.Beforepresentingourinterviewfindings,wefirstpresentanoverviewofthemarketconditionsandtheoverallcontextinwhichthese12organizationsoperatewithinourtwostudyregions.III.PlanningFrameworkandHousingMarketContextoftheBostonandSanFranciscoBayAreasTheBostonAreaBoththecityofBostonandthestateofMassachusettsarewellknownasinnovatorsinaffordablehousingdevelopmentandpreservation.Massachusettsisoneofonlyfourstatestohaveitsownstate‐fundedpublichousingprogramanditwasoneofthefirststatesintheU.S.tolaunchahousingfinanceagency,whichpromoteshomeownershipandrentalopportunitiesforlowerincomehouseholds.Inaddition,in1969,MassachusettscreatedtheComprehensivePermitprogram,usuallyreferredtoasChapter40B,whichisamodeleffortthataddresseslocalexclusionaryzoningpracticesthatsubstantiallylimitorcompletelybartheconstructionofhousingonsmalllotsandmultifamilyhousing.Instead,thisstatuteprovidesamechanismthatallowsthestatetooverridelocalordinancesinmunicipalitieswhereatleasttenpercentofthehousingstockisnotdesignatedasaffordable,therebyencouragingthedevelopmentofaffordablehousinginall351citiesandtownsinMassachusetts.Chapter40Brepresentsoneofthemostsuccessfulfair‐shareregulatoryregimesintheU.S.andhasbeenabulwarkagainstneighborhood‐levelresistancetohousingdevelopment(BrattandVladeck,2014).Thisaggressivestyleofdevelopmentgovernanceistheenvyofaffordablehousingprovidersnationwide,sinceitprovidesamechanismforthedevelopmentoflower‐incomeunitswherethey

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areinshortsupply.However,forourintervieweesoperatingwithinBostonitselfandsomeotherdiverse‐stockcitiesintheregion,the40Bsystemisunimportantsincesuchplacesareexemptfromthefair‐sharelaw(i.e.,morethan10percentoftheirhousingstockisaffordable).However,Chapter40BisindicativeofMassachusetts’generallyproactiveandcreativeapproachtoaffordablehousing.Sincethe1970s,thestatealsohassupportedavarietyofpublic‐privatefinancingandtechnicalassistanceinitiativestoproduceandpreserveaffordablehousingandithasnurturedthegrowthofmorethan60CDCs,manyofwhichareviewedasamongthemostsophisticatedandproductiveinthecountry(see,forexample,Bratt,1989).Inaddition,aninnovativestatelawenactedin2000,theCommunityPreservationAct,providesstatematchingfundstocitiesandtownsthatopttolevyasurchargeontheirlocalpropertytaxes.Atleasttenpercentofthefundsraisedthroughthisprogrammustbeallocatedforeachofthreeactivities–affordablehousing,historicpreservation,andopenspace/recreation.AsofMay2016,outofthestate’s351citiesandtowns,46percenthavepassedCPAprograms(CommunityPreservationCoalition,2016).Further,RepublicanGovernorCharlieBakerrecentlyannouncedtheavailabilityof$100millioninnewfundingforvariousaffordablehousingfinanceprograms(Mass.Gov.2016).AsdiscussedinSectionVI,in2012,thestatealsocreatedanewtaxcreditprogramspecificallytosupportCDCs.

Intermsofitsapproachtoplanning,unlikeCalifornia,Massachusettsisamongtheone‐halfofthestatesintheU.S.withaweakplanningframework.Specifically,Massachusettsdoesnot:mandateregionalplanning(andcountygovernanceisnon‐existent);enforcetherequirementforlocalcomprehensiveplanning(withahousingelement);mandatethatmunicipalitiesadoptgrowthmanagementplans;mandatethatacertainamountoflandineachjurisdictionbezonedformultifamilyhousing/high‐densitysingle‐family;andrequirethatlocalplansandzoningbeconsistent.Therehasbeenlittle(butgrowing)recognitionoftheimportanceofsuchconsistency.ThevariouslimitationsandproblemswithMassachusetts’approachtoplanningandlandusehavebeenwidelyacknowledgedandvariousinitiativesarebeingdebatedasawaytomodernizeMassachusetts’zoningandplanningframework.4Inaddition,municipalitiesinMassachusettshaveHomeRule(adoptedin1966),whichgivestheresidentsofeverycityandtowntherightofself‐governmentinlocalmatters.Thereare,however,limitstothesepowersassetforthinstatelaws.Chapter40Bisanexampleofthestatesettingastandardofperformanceinanareaofpublicconcernthatover‐shadowslocalcontrol.

Theprofessionalhousingcommunityishighlyregardedforthedepthofitsunderstandingoffederalhousingissuesandforitsproficiencyinbothadvocacyandproduction.Foroveradecade,thecityofBostonanditssurroundingareashavebeenoneofthe“hottest”housingmarketsintheU.S.–withescalatinghomeandrentalpricesandlowvacancyrates.Thisenvironmentmakestheproductionandpreservationofaffordablehousingacompellingandcomplexissueandcreatessignificantchallengesforthenonprofitsector.Butthestateandlocalgovernmentsaregenerallyseenasimportantpartners.SanFranciscoBayAreaOurotherstudyregionsharesanumberoffeatureswithBoston.TheSanFranciscometropolitanregionandCalifornia,ingeneral,havebeennationalleadersincreatingaffordablehousingfinanceprogramsandlocallanduseandplanningtools.Thisisdue,inpart,totheintensityofthedemandforhousing:coastalCalifornia,inparticular,isknowntobeahigh‐demand,high‐pricedrealestate4ThissectionisexcerptedfromBratt,2012a.

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environment.Whilebeingscenicandculturallyrich,theBayAreaisalsoseismicallyactiveand,asismostofthestate,pronetoextrememeteorologicalcycles,oftenleadingtoprolongeddroughts.Becauseofitstemperateclimate,anditsgloballeadershipininformationtechnologyandenergy,aswellastourismandrelatedservicesectors,theBayAreafeaturesveryhighmedianincomesandaccompanyingincomedisparities.Therefore,theareafeaturesamongthenation’smosturgentneedsforaffordable,low‐incomehousing.Californiaalsohasbeenaninnovatorinstate‐levelenvironmentalprotection.TheCaliforniaEnvironmentalQualityAct,orCEQA,hasfornearlyfiftyyearsprovidedprivatecitizenstherighttochallengeanynewresidentialdevelopmentprojectonenvironmentalgrounds.ThepotentialbasesforCEQAadministrativeclaimsandensuinglitigationareextraordinarilybroad;projectscanbestalledforyears,orupendedentirely,overclaimsrelatingtotraffic,parking,greenhousegases,lightandtrees,soils,endangeredspecies,andevenculturalpreservation.TheconsequentcostsanddelaysonlyaddtothechallengingconditionsfacingBayAreanonprofithousingdevelopmentandconstructioningeneral.CaliforniahasamuchmoreproactiveoverallframeworktoplanningthanMassachusetts.Californiaisageneral‐planningstateand,assuch,allland‐useauthoritiesmustsubmitthehousingelementoftheirgeneralplanforstate‐levelreview.Thissystemrequiresplanninganalysisofdevelopmentopportunitiesandregulatorybarriers,andcitieswhichdonotplanadequatelyforacalculatedfair‐shareofconstructioninvariousincomecategoriescanbedeterminedbythestate’sDepartmentofHousingandCommunityDevelopmenttobeoutofcompliancewiththehousing‐elementlaw.AlthoughMassachusettsrecommendsthatmunicipalitiessubmitaHousingProductionPlan,andstatecertificationofthisplancanprovideaprotectionagainstunwanted40Bdevelopments,therearenoexplicitrequirementsthatthisplanbesubmitted.However,unlikethe40BsysteminMassachusetts,Californialacksastrongregulatorymechanismtoencouragethedevelopmentofaffordablehousingintheplaceswhereitismostneeded.Administrativeand/orjudicialinterventionoverpermitdenialsisexceedinglyrare,andeventhencourtstypicallydefertolocalprerogativeoverwhatgetsbuiltwhenandwhere.Intheabsenceofstrongerstatemandates,however,over140citiesandcounties,aboutaquarterofalllocalgovernments,haveadoptedinclusionaryhousingpoliciesrequiringthatmarket‐ratedevelopersincludeaffordableunitsintheirnewdevelopmentsordedicatelandorpayfeesinlieuofdevelopment(Wiener,2013).CalifornialeadstheU.S.inthenumberofinclusionaryprograms.LiketheBostonarea,theSanFranciscoBayAreaishometosophisticatednonprofithousingdevelopmentorganizations,intermediaryservices,andsupportnetworkspursuingresidentialdevelopment,despitetheaforementionedchallenges.SomeoftheseorganizationsaretraditionalCDCs;thelargestproducers,however,fallmorecomfortablyintoourHDCcategory.LiketheBostonarea,thesectorcameofageaftertheenactmentoftheLIHTCprograminthemid‐1980sandthesubsequentevolutionofstateandfederalaid.TheBayArea’sfirmsandnetworkscomprisehighlyskilledleadershipandtechnicalstaff,navigatingthecomplexitiesoftheentitlementandfinancingenvironmentstheyface.Thesegroupsarepoliticallyorganizedaswell,pressuringregionalandstateauthoritiesforpublicfundingcommitmentsandtheeasingofregulatoryconstraints.Aswediscussbelow,affordable‐housingneedisaprominentissueonCalifornia’slegislativeagenda.Thishasyieldedaseriesofmultibillion‐dollarvoter‐approvedbondinitiativesoverthelasttwodecades.Inaddition,legislationenactedin2014requiresthatso‐called“capandtrade”funds,whicharecollectedbythestatefrompollutingindustries’paymentsintopermitauctions,beusedforaffordablehousing

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projects,especiallythosewhichreducegreenhousegasemissions.Inaddition,legislationenactedin2016createdanew$2billionprogramtoprovidehousingforthementally‐illhomeless.Atthesametime,Californiarecentlywitnessedtheguttingofacrucialsourceoflocalproject‐finance,namely,taxincrementfinancingoverseenbyCalifornia’snowdefunctredevelopmentagencies.IV:OrganizationalFocusandInternalChallengesAllofthegroupsinoursamplehaveastrongandlongstandingcommitmenttoprovidinghighqualityaffordablehousing.Ourinterviewsmadeclearthatorganizationsareconstantlyassessingtheirmissioninthecontextoftheinternalandexternalpressuresandchallengestheyface.Althoughalltheissuesdiscussedinthischapterareinterconnected,thissectionfocusesonhowtheorganizationsgoabouttheiroperationsandthetypesofinternalchallengestheyareencountering.Thenextsectionfocusesontheexternalissuesthatarepresentinganumberofcontextualchallenges.Thefourpartsofthissectioncoverthefollowing:

Theextenttowhichorganizationsseetheirworkasincorporatingalargercommunitydevelopmentagendabeyondhousing;

Howorganizationsarebalancingtheirsocialmissionwithbusinessimperatives; Thewaysinwhichresidentservicesarebeingprovidedandchangesinhowthis

issueisbeingapproached;and Howresidents’viewsandeffortsarebeingincorporatedintomanagement

decisions.CommunityDevelopmentvs.HousingFocusThesurveyresultsrevealedasplitinhowgroupsviewedtheirhousingworkwithinthecontextofalargercommunitydevelopmentagenda.Justoveronehalfofthegroupsindicatedthattheirworkwasprimarilyabouthousing.Yet,therealsowasaclearandstrongmessagethatnearlyallthegroupsareworkingonmorethan“justhousing.”Inadditiontothecomplexitiesofdeveloping,owning,andmanagingaffordablehousing,thenonprofitswestudiedare,forthemostpart,focusingonatleastsomecomponentsofacomprehensivecommunitydevelopmentagenda.Theseactivitiestypicallyinvolvearangeofsocialservices,communityorganizing,andplace‐basedinitiatives,includingprovidingcommunitymeetingspaceswithintheirdevelopments.Severalofthenonprofitsinoursamplehavedeeprootsintheirneighborhoods.OnegroupintheBostonareaembarkedonahighlyvisibleandambitiouscommunitydevelopmentnon‐housingproject‐‐thepurchaseandrenovationofasocialclubanddancehallservingthelocalIrishcommunityduringthefirsthalfofthetwentiethcentury.Beforetheorganization’spurchaseofthebuildingin2000,ithadsatunoccupiedfordecades.Thefacilitywasfullyrestoredtoitsoriginalgrandeurandreopenedin2005,usingfundingfromavarietyofpublicandprivatesources.Severalorganizations,despitebeingnon‐neighborhood‐based,nevertheless,seetheirroleasrealestatedevelopersinthecontextofcommunitydevelopmenteffortsthat,forthemostpart,arecarriedoutbyothers.Whenneeded,theyarepreparedtoworkwithgroupsthatdoorganizingandarecommittedtomakingotherstreet‐levelimprovements.Buthousingistheircentralfocus.Othergroupsofferavarietyofservicesandprogramsthemselves,asdiscussedinthenextsection.Developingneighborhood‐focusedretailoutlets,whichareoftenlocatedonthegroundfloorofabuilding,hasbecomepartofsomemixed‐incomeoraffordablehousingdevelopments.Oneorganizationcompletedaredevelopmentprojectwhichincludedsuchretailspace,inthehopethat

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itwouldcontributetoamorevibrantlocal‐marketeconomyandgenerallyhelptostimulatedevelopmentinthearea.Mostgroupsnotedtheimportanceofhavingananti‐displacementagenda–assuringthatlongtimeresidentsarenotdisplacedasrevitalizationisoccurring.Oneofthepreferredstrategiesinvolvesthedevelopmentofmixed‐incomehousing,whichguaranteesthatlower‐incomepeoplewillhaveaplaceinthatarea,regardlessofmarketpressures.Withgentrificationbeingviewedasahugeissueinbothareasstudied,thereisadesiretoacquireexistingpropertieswithdeedrestrictionsthatrequirelong‐termaffordability.Asoneintervieweecommented:“Iftherearebetterormoreeffectiveways,Iwouldlovetoknowaboutthat."BalancingSocialMissionwithBusinessImperativesThenonprofithousingorganizationsinourstudygrouparecommittedtoachievingatleastadoublebottomline5:ensuringfinancialsoundnessoftheirhousingdevelopments,whileservingtheneedsoflow‐andmoderate‐incomeresidents.Somepridethemselvesonachievingtruebalance,buteventheseorganizationsrealizethatassistingthosewithhighlevelsofneedcanpresentaseriousfinancialstrain.Organizationswithdeeperassetbasesandcashflowsappeartoenjoygreaterleewaytopursuetheirsocialhousingmission.Theycaninnovateandcollaboratefromapositionofstrengthandleveragetheirfinancialpositioninthepublicinterest.Otherorganizationsmayoperatewithintightermarginsand,therefore,likelyfacethesetradeoffsmoreoftenandinmoreconcreteways.Allmustbecognizantofwhatonerespondentlabeledthe“mission‐money”matrix.Clearly,anunstablebalancesheetdoesneitherthenonprofithousingorganizationnoritsresidentsandneighborhoodsmuchgood.Althoughthepossiblecontradictionsofthedoublebottom‐lineareeasytoarticulate,inthegive‐and‐takeofbusinessmanagement,eachdecisionmustbeweighedonitsownmerits.Oneplacewherethemission‐businesstradeoffismostmanifestisinrent‐setting.Manyoftheorganizationsinourstudygroupoperateavarietyofbuildingtypesandunits,therebyservingdifferentincomelevels,withvaryingoperationalcosts.Thosemostactivelybalancingsocialmissionandbusinessdemandsmaydraw“excess”revenuefromonebuildinginordertoeaserentconditionsinanother.Otherintervieweesemphasizedtheneedfordirectingrevenuesintonon‐residentialservices,suchaschildcare,health,nutrition,andotherprograms.Forsomeorganizations,therevenueneededfortheseexpendituresmaybegeneratedfromcommercialspacesandfacilitiestheyoperatealongwiththeirresidentialproperties.Inothercircumstances,suchaswhenthefederalHousingChoiceVoucherProgramisusedto“markuptomarket”U.S.DepartmentofHousingandUrbanDevelopment(HUD)‐insuredpropertieswithcontractrentsthatareunrealisticallylow,theincreasedincomeislikelytoprovidethenonprofitswithamoresubstantialfinancialcushion.Refinancingcanalsoprovidethesameopportunity.Withsuchaddedfinancialsecuritycomesthechancetoreinvestanyexcessincometomeettheneedsofthelower‐incomeresidents.Thiskindofbudgetaryadjustment,totheextentitisfeasiblegivenanorganization’sbusinessandregulatoryconstraints,makesthemission‐businessbalancingactmoremanageable.

5IthasalsobeensuggestedthatmanynonprofitsarecommittedtomeetingaQuadrupleBottomLine,whichalsoincludes“sensitivitytothewaythehousingfitsintothelargerfabricoftheneighborhoodandcontributestoneighborhoodviability”andacommitmenttomakingthehousing“asenvironmentallysensitiveandsustainableaspossible,whichinvolvesminimizingtheuseofnonrenewableenergyresourcesandstrivingtoreducetransportationneeds”(Bratt,2015;seealsoBratt,2012b).

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Anumberofrespondentsspokeoftheaggressiveapproachesneededtomanagebusinesssituationsasnotbeingseparablefromtheskillsneededtomeetpublic‐interesthousingneeds.Onerespondentnotedthat,whileday‐to‐dayeffortsmaytilttowardsthebusinessside,themission‐businesstensionreallyrepresents“afalsedichotomy.”Anothercharacterizedthebalancingstrategicallyasa“both‐and”proposition.Whileorganizationsmayoscillatefromday‐to‐dayormonth‐to‐monthbetweensocialandeconomicimperatives,thetwopolesare,infact,mutuallyreinforcing.Fewleadersofnonprofithousingorganizationsthinkofthemselvessolelyasrealestateexecutives.Yet,allofourrespondentsrecognizedthatrealestateprowessisanecessaryingredientformission‐orientedsuccess.Allthissaid,itisimportanttorecognizethatafeworganizationsinoursampletendtoemphasizebusinesssustainabilityfirstandforemost.Buildingandmaintainingaffordablehousinginourtworegions,andthroughouttheU.S.,isdemandingwork.Developingnewbuildings,preservingtheiraffordability,andinsuringcompliancewithcomplexregulatoryrequirementsareextraordinarilylabor‐intensiveenterprises.Particularlyfordevelopersdedicatedtooperatingtheunitstheybuild,theywanderlittlefromthecorepurposeofsustainingthebuildings’financialviability.Thistakesanadequateworkforceandtheabilitytopaycompetitivesalariesandrecruitandretaintalentedpersonnel.Inthewakeoftheglobaldownturnandrecession,itisnotsurprisingthatsomefirmsunapologeticallyplacebusinessfirst.Intheirview,theyfulfilltheirmissionsprimarilyasrealestateprofessionalscommittedtoprovidingaffordablehousing.Inasmuchasthestrongestfinancialbottomlinetranslatesintothegreatestcapacitytotakeonnewdebt,expandingthesupplyoflower‐incomehousingmaybedependentonthispriority.Nonprofithousingorganizationsdonothavetheluxury,asonerespondentacknowledged,ofrunninga“deficitbudget.”ResidentServicesResidentservicesareveryimportanttoallthegroupsinourstudyandthereappearstobeagrowingdesiretoexpandandintensifyservicesprovidedon‐site.Alloftheorganizationsarecommittedtousingtheirhousingasaplatformforresidentempowermentviathedeliveryofwrap‐aroundservicestocreategreaterfinancialsecurityandsocialmobility.Theseservicesinclude,forexample,schoolandcommunity‐basedprogramsforelementaryschool‐agedkids,adultdayhealthcenters,andprimarycareclinics.Anumberoforganizationsarecommittedtoinvestinganysurpluscashflowintotheirvarioussocialandcommunity‐orientedactivities.Afrequentlymadepointwasthatthenonprofitsviewtheircommitmenttosupportingresidentsasadistinguishingfeaturebetweenthenonprofitandfor‐profitaffordablehousingdevelopmentworlds,wherethelattertypicallytakeexcesscashasprofit.Someorganizationsfocusedprimarilyonhousingareexpectingtoexpandintonon‐development,housing‐relatedactivitieswithintheirtargetgeographicareas.Intheirview,residentservicesprogramsarelessaboutdirectprovisionandmoreaboutcommunity‐buildingandcommunityengagement.Bybeingcloselyconnectedtothetenantpopulation,theorganizationsfeeltheyareinastrongpositiontoexpandintothewidercommunity.Theidea,asoneintervieweeputit,isto“thinkbeyondthebuildings”andtoachieve“collectiveimpacts”througha“place‐makingapproach.”Specificprogramsmayincludehomeownershipcounselingandmakingloansforrehabilitationforfirst‐timehomeacquisition,whileothersarefocusedonhealth,financialsecurity,publicsafety,foodsecurity,andafter‐schoolprogramming.AtleastonegroupisinterestedinformingaCommunityDevelopmentFinancialInstitution(CDFI)tofinancecommunity‐based

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developmentvialow‐interestpre‐developmentandseedmoneyloansfornotonlyhousing,butcommercialdevelopment,includingsmallbusinesseslikegrocerystoresinretailcorridorsandtransitinfrastructure.Ontheotherhand,severalothergroupswereadamantabouttheimportanceofpreservingtheircoreproductsandservices.Whiletheywereamenabletoofferingnewhousingproductstonewpopulations,aswellasprovidingservicestotheirproperties,theydidnotanticipatemovingbeyondabasicrentalhousingmodel.Totheextentthatservicedeliveryisapriority,groupstypicallygrapplewiththequestionoftheextenttowhichservicescanorshouldbeprovidedthroughtheorganizationdirectly,orbydevelopingpartnershipswithlocalserviceproviders,asdiscussedinSectionVI.Forthemostpart,thereisafocusoncollaboratingwithlocalsocialservicesproviderstolinktheservicestotheirresidents,viapartnershiparrangements.Butwhenagroupisinterestedinbringingservicesdirectlyintothebuildingsitoperates,orthereisadesiretohirearesidentservicescoordinator,theproblemofwheretofindthefundingloomslarge.Wherepossible,organizationscoverresidentservicescostsoutofthebuilding’scashflow.Severalorganizations,forexample,aredevelopingtheirresidentservicesprogramsthroughtheirday‐to‐daymanagementoperations.Oneoftheregionalnonprofitsinoursampleisself‐consciouslyworkingonblurringtheboundarybetweenpropertymanagement,ontheonehand,andresidents’services,ontheother.Thisorganizationisattemptingtoredefinethemeaningofmanagementtoencompassfarmorethanrentcollectionandprovidingbasicoperationalservices,toallowstafftobecomemoreinvolvedinmeetingarangeofresidents’needs.Also,theyarereformingtheirproject‐planningapproachesbyinvolvingbuildingmanagersinfinancialanalysesoffutureoperations.Forexample,inevaluatingapotentialredevelopmentprojectinvolvingpublichousing,theorganizationquestionedhowmuchtheywouldbeabletoaffordoutoftheoperatingbudgetforresidentservices.Atleastoneothernonprofitleaderweinterviewedhasmadeaconcertedefforttochangetheorganization’soverallapproachtoresidentservicesbyprovidingfewerservicesmoreintensely.Anotherindicatedthat,whereastheyhadnottraditionallyofferedresidentservicesprograms,theorganizationhascometounderstandthatawholearrayofprogramswasneeded.Asitturnedout,manyoftheserviceswereavailablethroughthehostcity,buttheserviceshadnotbeenwelladvertised.Bypartneringwiththecity,theorganizationisnowabletobringpeopletotheavailableservices.Also,bypartneringwiththelocalpolicedepartment,thecity’scommunitypolicingprogramisenhanced,whileyoungadultsfromtheorganization’sdevelopmentsareabletogetsummerjobsinthepolicedepartment. Somegroupsfocusonservicesforspecificsub‐populations,suchaspreviouslyhomelesshouseholds,theelderly,veterans,andpeoplewithHIV/AIDS.And,finally,severalgroupsinboththeBostonareaandtheBayAreaareworkinghardtogetthehealthcareindustrytobringmorehealthservicesintotheirbuildingsandaretryingtofigureouthowtheycanqualifyforMedicare,Medicaid,orprivatemedicalinsurancepayments.EmpoweringResidentsMostoftheorganizationsinourstudyincorporatestrategiesforinvolvingresidentsinthemanagementoftheirdevelopments.Empoweringresidentsthroughmanagementwasalsonotedasimportantinthesurveyphaseofourstudy.However,ourinterviewsrevealedamorenuanced

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picture.Aconceptthatwaspopularseveraldecadesagowhichinvolved“residentcontrol”ofdevelopments,orextensiveinvolvementinmanagementdecisions,has,forthemostpart,beenreplacedwithvariousstrategiesforpromotingresidentinput,engagement,and“empowerment”throughnon‐management/ownershipactivities.If,forexample,anorganizationprovidescomputerandjobtrainingprograms,aswellasotherwaysthatpromotekidsgoingtocollege,stafffeelthattheyareinvolvedinempoweringresidents,butnotthroughtheirmanagementfunctionsandtheactualoperationofthehousing.Incontrast,atleastoneoftheorganizationsadherestotheearlierviewthatresidentsshouldhaveacentralroleinmanagementdecisionsandisconvincedthatthissupportresultsinbetteroutcomes.Indeed,about40percentofthisgroup’sportfolioisownedincollaborationwithanorganizedresidentgroup,whichservesasthegeneralpartner.Forexample,ifrentsneedtoberaisedduetoescalatingcosts,thesenseisthatifresidentleadersunderstandthedilemmatheorganizationfaces,theywill,perhaps,beabletoexplainthesituationtotheirneighbors.Andthis,initself,canbeempowering.Othergroupsacknowledgedthat,forthem,theissueisfarfromsettled,withsomestaffandboardmembersviewingresidentinvolvementinmanagementastime‐consuming,inefficient,andnotthebestuseoforganizationaltimeintheirroleasproducers,providers,andmanagersofhousing.Formalresidentcouncils,whichmeetregularlywithmanagementstaff,havebeenacommonstrategyforengagingresidents.But,atleastonegroupvoicedskepticismabouttheutilityofthesecouncils,notingthatitisoftenthesamethreepeoplethatmanagementmeetswitheverymonth.Indeed,“insteadofparticipatingonresidentcouncils,don’tmostresidents–whethermarket‐rate,moderate‐orlow‐income–justwanttoliveintheirhomes?Aretheyreallyinterestedinpropertymanagementissuesifeverythingisgoingalongwell?”Asonegroupputit:“Wewouldratherhavepeopleengagedintheircommunity,thantiethemintotheissuesinvolvedwithmanagingthedevelopment.”And,further,severalofourinterviewssuggestedthatachievinganeffective,formalresidentinvolvementmodeliscomplicated,particularlyinbuildingswithonehundredunitsormore.Nevertheless,theU.S.DepartmentofHousingandUrbanDevelopment(HUD)isstillinsistingonamodelofformalresidentinvolvementin,forexample,therecentlycreated“RentalAssistanceDemonstration”(RAD)program.

Shortofformalresidentcouncils,somegroupshavedevelopedacommitteestructuretoengageresidents,withafocusontransportationissues,andorganizingvarioustypesofcelebrations..Somedevelopmentsofferresidentsavarietyofwaystomakecomplaintsaboutmanagementissuesand,atthesametime,theyaimtoprotectresidents’anonymityandshieldthemfromfearofretaliation.Onenewideainvolvesfosteringcommunitylifethroughlessformal,moreorganicactivitiesthatarenotdirectlyrelatedtomanagementdecisionsbut,instead,aregearedtothespecificneedsoftheresidents.Forexample,onenonprofitintroducedsomethingtheycall“Qmixers.”Withfoodprovided,residentsareaffordedtheopportunitytodiscussideasaboutthequalityoflifeinthedevelopments.Thesegatheringshaveresultedintheformationofgrandparentgroupswalkingstudentstoschool,andevenaquiltingcircle.

Somegroupsmakesurethat,asLIHTCbuildingsapproachthetimethattherentrestrictionsontheirbuildingexpireinyear156,withrefinancingoptionslooming,theyholddiscussionswithresidentsabouttheneedsintheirbuildingandideasgoingforward.Inaddition,whenthereisa6Althoughrestrictionsofficiallyendinyear15,thereisastrongexpectationthatthedevelopmentswillremainaffordabletohouseholdsbelow50percentor60percentofAMIforatleastanadditional15years.

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difficultsubjecttodiscuss,suchasinstitutingano‐smokingpolicy,theysolicitresidentinvolvement.OneorganizationexpressedagreatdealofexcitementaboutitsinvolvementintheNeighborWorks’residentservicesinitiative,knownastheCommunityLeadershipInstitute.Eachyear,theorganizationbringsuptosevenresidentstosessions;theresidentscanthenapplytoNeighborWorksforagranttoworkonanissue.7Inarecentyear,thefocuswasonyouthwithhalfofthoseonthetripunder18.Thiswasthefirsttimetheyoungpeoplehadbeenonanairplaneandtravelingoutofstate.NeighborWorkspaid80percentofthecost,withthenonprofitpayingtherest.“Theyoungpeoplecamebackwithsomuchenergyandideas.”

***Insummary,ourfindingsconcerningtheorganizationalfocusandinternalchallengesfacingthenonprofitsinourstudyareasfollows:

Althoughjustoverhalfofthegroupsindicatedtheirworkwasprimarilyabouthousing,nearlyallthegroupsareworkingonmorethan“justhousing.”Thenonprofitswestudiedare,forthemostpart,focusingonatleastsomecomponentsofacomprehensivecommunitydevelopmentagenda.

Thenonprofithousingorganizationsinourstudygrouparecommittedtoachievingatleastadoublebottomline:ensuringfinancialsoundnessoftheirhousingdevelopments,whileservingtheneedsoflow‐andmoderate‐incomeresidents.Regardless,afeworganizationsinoursampletendtoemphasizefinancialsustainability,sinceexpandingandsustainingthesupplyoflower‐incomehousingdependsonstayinginbusiness.

Residentservicesareveryimportanttoallthegroupsinourstudyandthereisagrowing

desiretoexpandandintensifyservicesprovidedon‐site.Alloftheorganizationsarecommittedtousingtheirhousingasaplatformforresidentempowermentviatheprovisionofwrap‐aroundservicestocreategreaterfinancialsecurityandsocialmobility.Groupstypicallygrapplewiththequestionoftheextenttowhichservicescanorshouldbeprovidedthroughtheorganizationdirectly,orbydevelopingpartnershipswithlocalserviceproviders.

Mostoftheorganizationsinourstudyincorporatestrategiesforinvolvingresidentsinthe

managementoftheirdevelopments.However,thisdoesnotgenerallymeanagoalofpromoting“residentcontrol”ofdevelopments,orextensiveinvolvementinmanagementdecisions.Instead,mostgroupsarecommittedtopromotingresidentinput,engagement,and“empowerment”throughnon‐management/ownershipactivities,therebypromotingresidents’skillsandself‐confidence.

Complementingourlookattheinternalperspectiverelativetostrategyandoperations,weturntothesegroups’operatingenvironments,whichinvolvebothmarketandpolicyconditions.

7 More information about NeighborWorks and its leadership institute is available at http://www.neighborworks.org/Training-Services/Training-Professional-Development/Specialized-Training/Community-Leadership-Institute (accessed October 24, 2016). .

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V.TheOperatingEnvironmentsofNonprofitHousingOrganizationsThecomplexitiesandresourcelimitsgroupsfacepresstheircapacitiesandplaceanextraordinarilyhighpremiumonvisionandleadership.Atthesametime,thecontextinwhichorganizationsoperatecanmakeiteasierormoredifficultforthemtodotheirwork.Thissectiondiscussestheoperatingenvironmentsinwhichthesefirmsstrivetomeettheirbusinessandsocialmissions.Fivekeyissuesareexploredwithreferencetohoweachimpactsorganizationaloperations:

market characteristics; local policy context; state policy context; federal policy context; and smart growth, environmental protection, and energy conservation strategies.

MarketCharacteristicsSincetheorganizationsincludedinourstudyoperateintwoofthehighest‐costandmostcompetitivehousingmarketsinthecountry,itisnotsurprisingthattherewasagreatdealofuniformityintheresponses:allgroupsfeltthathousingmarketpressureswereanimportantissue.Mostgroupsvoicedseriousconcernsaboutthehighcostoflandandbuildingsintheirarea.Asaresult,accesstolandandbuildingsarehotlypursuedamidststiffcompetition,anddevelopmentdealsaredifficulttoputtogetherandcostly.Nonprofitdevelopersandoperatorsnotonlycompetewithoneanother,butwithfor‐profitfirmsaswell.Beinginastrongenoughmarketpositiontodictateone’sowntermsisrelativelyunusual.Onlyoneorganizationstudiedfeltthatcompetitionwithfor‐profitdeveloperswasnotanissue,stating:“We’restillinaplacewherewearethesought‐afterpartner.Ifthereisabigproject,afor‐profitwillprobablytalktous.”Thatorganizationandothersinoursampleoperatewithaportfolioofexistingprojectsandothersinthedevelopmentqueueorpipeline.Withalargeenoughpipelineandsufficientnumberofunitsundermanagement,atleastsomeorganizationsfeeltheywillbequitebusyfortheforeseeablefuture.Severalorganizationsobservedthatmarketconditionsresultedinlostopportunities.Onenonprofitleadergavethisexample:

Wewerelookingatabuildingin[ourarea],butithadhugestructuralproblems.Theownerswereasking$300,000perunit.Wetoldthemthatiftheycouldgetthat,theyshouldsignthePurchaseandSaleagreementimmediately.Sureenough,thebuildingsoldtoaprivatedeveloperforthatamount.

ABoston‐basedorganizationexpressedconcernsaboutprivateinvestorscompetingforpropertiesinwhichtheyhaveaninterest.Apparently,theyhadlostoutonanumberofdealswherepurchaserswithinternationalmoneyofferedtopurchaseaparcelincash,withoutanyconcernaboutduediligence,suchasenvironmentalcontingencies.Inoneparticularlynoteworthyexampletheyreportedthat:

InFebruary2015,wesubmittedanofferof$4.7millionfora4.6acresiteinEverett[acityaboutfourmilesfromBostonandnottraditionallyconsideredpartofthecity’shotrealestatemarket].Weincludeda90‐dayduediligenceperiod.Ourofferwasnotaccepted.Weweretoldbyourbuyer'sbrokerthatthesellershadacceptedanofferover$1millionbelowours.[Thosetermswere:]cash,thirtydaystoclose,withnoduediligence.Weheardthroughlocalnetworksthataforeigninvestorfrom

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theMiddleEastwasacquiringtheproperty.TheRegistryofDeedsshowsthepropertywasconveyedonMarch31st,2015for$2.5million.So,aslongasthereweren’totherelementsofthetransactionomittedfromthedeed,thegapbetweenourofferandthesalespriceappearstohavebeen$2.2M.

Clearly,though,theappealingtermsofthedealwereattractivetothesellerandeliminateduncertaintyanddelay.Thissamenonprofitalsonotedthatthelargevolumeofnewhomedevelopmentbyfor‐profitsiscreatingabacklash,presentingnewchallenges.“Peoplearetiredofdevelopment.They’retiredofdisruptionsoftheireverydaylifeasconstructiongoesonandon.Thefeelingonthepartofalotofpeopleistojustsay‘no’toalldevelopment,ratherthanofferingamoreinteresting,thoughtfulresponse.”OneorganizationintheBayAreaacknowledgedthatgoingafterdealsclosetoOaklandandSanFranciscoisimpossible,duetothehighcosts.Instead,theytrytobuypropertiesinlocationsthat,astheyputit,are“infrontofthewave–beforeanyoneelsewantstobuythere.Ifweareabletodevelopnicehomes,thenotherswillwanttolivethere.Crimeperceptionschangeandpeoplewillwanttomovein.”And,bygoingtoas‐yetundiscoveredareas,theyfeeltheyaren’tcontributingtogentrification.ConcerningpropertiesinthecityofOakland,marketpressuresareresultinginalossofrentalsinsingle‐familyhomes,which,inturn,isputtingalotofpressureontheremainingstockofmultifamilyhousing.Withonly450buildingsof40+unitsinallofOakland,thatorganizationfeelsthat“themorewebuyup,themorewecanstabilizetheseneighborhoods.”Alongwiththegeneralmarketpressures,in“hotmarket”areasliketheBostonareaandtheBayArea,taxtitleproperties(acquiredingovernmentauctionsfollowingnonpaymentoftaxes),haveprovidedlotsofopportunitiesfornonprofits.However,despitetheongoingrecoveryfromtheGreatRecession,mostoftheseopportunitiesaregone.Inaddition,theintensityofinterestinaffordablehousingdevelopmentisresultinginalongqueue,forbothfor‐profitsandnonprofits,forLIHTCfunding.Moreover,theaggregateamountofmoneyavailableisshrinking,whilethedemandisincreasing.Organizationsaremakingvariouskindsofadjustments.OneBayAreaorganizationspecializinginsuburbanprojectshaschangeditsacquisitionprogram,seekingtobuyandbankmorelandmorequickly.Inaddition,thisgrouphasobservedthat:“alotofcommunitiesarenowveryaggressiveaboutdensity,whichmayinvolvecreatingamixed‐usesetting,combiningofficeswithresidentialdevelopment.”FiguringouthowtoincreasedensityisalsoapriorityforatleastoneBoston‐areagroup,whichholdstheviewthatitistheonlywaytogetthehousingbuilt.TheExecutiveDirectorofferedtheexampleoftheCityofCambridge,Massachusetts,which,theyreport,isquiteinterestedincreatingzoningoverlaydistricts.Ifitcanincreasedensitiesinthatfashion,groupsoperatingtherewillbeabletoachievereducedlandcostsperunit,eveniftheyneedtobuypropertiesatmarketprices.This,theyfeel,wouldhelptoevenoutandneutralizeadvantagesenjoyedbyprivatedevelopers.Theintensedevelopmentclimateisproducinganumberofotheroutcomes,includingimpactsonpersonalrelationshipsamongorganizations.AsoneregionaldeveloperintheBayAreanoted,“Thereiswidetensioninthefieldbecauseofthepriceofhousingandland.”And,accordingto

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another,“thereiscompetitionwithfor‐profitsandcut‐throatrelationshipswith[nonprofit]colleaguesbecauseresourcesjustdon’texist.”8LocalPolicyContextTheintensemarketpressuresonhousingarelikelyresponsible,atleastinpart,forthestrongadvocacyclimatethathasbeguntotakehold.AsaBayAreaorganizationsnoted:“thepressureonlocalitiestoenactpoliciesonrisingrentsanddisplacementisalmostuniversal;theaffordabilityissueissodifficultintheEastBay.Largecrowdstypicallyshowupatcouncilmeetings,whichwillmovepolicyforwardmorequickly.”Thehousingpressuresandthecommunity’sresponseintheBayAreaandtheBostonareahavereceivedsignificantmediaattention.Thelackofhousingaffordabilityforworkingpoorandmiddle‐classfamilieshas,atleastonthesurface,changedperceptionsregardingtheimportanceofspurringlow‐andmoderate‐incomeconstruction.Theshiftispalpable,particularlyintheBayArea.Indeed,oneCaliforniaintervieweeseesthisas“theGoldenEraforaffordablehousing.”Voters,businesses,nonprofitgroups,andneighborhoodorganizationshaveunitedinnewways.Themostpoliticallyactiveamongthemdemandactionfromlocalcitycouncilsandotherbodiestoaddressaffordability,gentrification,displacement,andhousingdevelopmentsufficienttoaccommodatejobgrowth.Politicalleaders,eventhoseidentifyingasconservative,seemmorewillingthanevertopartnerwiththenonprofithousingsector.Whilelocalsubsidiesforlow‐incomeconstructionremainscarce,nonprofithousingorganizationsandtheiralliesareworkinghardtochangethat,sometimeswithpositiveresults.Despitethegrowingconsensusonthecrisis‐levelhousingconditionsofunaffordability,andachangedpoliticalclimateforhousingasaresult,oppositiontonewconstructionstillsoccursandnonprofithousingorganizationscontinuetostruggleagainsttraditionalNIMBY(Not‐In‐My‐Back‐Yard)arguments.Whileassertionsofregionalhousingneedtypicallystimulatelittleopposition,actualprojectsinspecificplacesfacecustomaryobstacles.Inaddition,onepractitionernotedthatvarioustypesofaffordablehousingprojects,includingthoseaimedatvarioussub‐populations(e.g.,thehomeless,theformerlyincarcerated,orthoseinsubstance‐dependencerecovery)arefacingstiffresistancewithinminority‐dominatedneighborhoods,whereresidentsoftenfeeltheyhavealreadyhostedtheirfairshareofnewconstructionfavoringthepoor.Allthismakescoalition‐buildingthorny.Bycontrast,housingprogramsportrayedasbenefitingveteranshaveincreasingappeal,andseniorhousingremainseasiertoplacethannewresidencesforyoungfamilies.Intermsofstrategy,nonprofithousingorganizationsaretryingtoridethewaveofattentionabouttheneedformoreaffordablehousing,whilebracingthemselvesfortheboisterousdisruptionsoftencausedbyaffordablehousingproposals.Practitionersinbothourstudy‐regionscautionthatevendenseurbanneighborhoodscanbesusceptibletooppositiontoaffordablehousingwiththeclassicconcernsoverdensity,traffic,andpublic‐serviceburdensstillregularlyechoed.Neighborhoodactivistsseeminclinedtoopposeall

8Perhapsnotsurprisingly,largernonprofitorganizationsconsidercompetitiontobelessofaconcernthanthesmallernonprofitsinourstudy.Onlyone‐quarteroftherespondentsinarecentnationalsurveyofsuchlargefirmsindicatedthattheyexpectedfairlybigchangesinthecompetitiveenvironmentinthefollowingthreeyears.“Mostorganizationsexpectmoderatechangestothecompetitiveenvironmentwithboththeirpeerorganizationsandfor‐profitsinthefuture,similartowhatoccurredinthepriorthreeyears”(WalshandDavidson‐Sawyer,2014).

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construction,regardlessoftheaffordabilitybuiltintonewprojects.Ratherthansupportingproposedconstruction,progressivesappeartodemandthatincome‐eligibilitybeloweredbeyondwhatmightbefinanciallyfeasible.Withconcernsoverdisplacementbeinginthepoliticalvanguard,theyalsodemandthatnewunitsfirstbenefitthosemostatriskoflosingtheirhomes.Giventhelongtimelinesofdevelopmentandconstruction,however,nottomentionpotentiallegalimpediments,guaranteeingnewhousingfordisplacedhouseholdsisdifficultfornonprofithousingorganizationsandhostcitiestoachieve.Inbothregions,nonprofitsstrivetoensurethatthegentrifyingeffectsofurbanneighborhoodimprovementsaremitigated.Thegoalisforlower‐incomehouseholdstoavoiddisplacementorbeabletomoveintoareasundergoingregeneration.Thenecessity,asalways,isforhousingproviderstobuildandsustainstrongcoalitionsfavoringnewconstruction,neighborhoodimprovement,andaffordablehousingdevelopment.Resistanceofvariousstripesremainsafactoflifeforhousingleaders.Whileoptimisticconcerningthatchallenge,ourrespondentsemphasizedthenovelanduniquelocalpoliticscurrentlyprevailinginthelocationswheretheywishtobuild.Andthetypicalresistanceoflocalresidents,whofearchangeandprizeincreasinghomevaluessecuredbyslowresidentialgrowth,maypersistdespitethesensethataffordabilityisofparamountimportanceonthemunicipalagenda.Whatismore,oft‐citedstudiesshowingthatneighboringpropertyvaluesarelittleaffectedbyaffordabledevelopmentfailtosignificantlyovercomelocalresistance.Regardlessofthedevelopmentstrategy,savvypoliticsstillmakesforsuccess,andstrongleadershipatCityHallremainsinstrumentalinhammeringoutneededcompromisesamongcompetingfactions.Forthisreason,asonehousingpractitionerweinterviewednoted,itmatterswhoisinCityHall.Organizationsinbothareaswereacutelysensitivetotheimperativesofwinninglocalelectionsandmaintainingpro‐housingalliancesonlocalcouncilsandboards.Amongthelocalpoliciesthatseempromisingarespecialdevelopmentfeespayablebymarket‐ratedevelopersofbothresidentialandcommercialproperty.Over140jurisdictionsinCalifornia,representingaboutone‐quarterofallcitiesandcountiesintheState,haveadoptedinclusionaryzoningprogramsthatrequiremarket‐ratehomebuilderstoincludeaffordableunitsasaspecifiedpercentageoftotalunitsbuilt.Mostlocalprogramsallowcompliancealternativestoonsiteconstructionoftheunits,includingdedicationoflandtoanonprofithousingdeveloperorpaymentoffeesperunit“inlieu”ofconstruction.Thein‐lieufeesaretypicallydepositedintoalocalhousingtrustfundandthencanprovideaversatilesourceoffundingforavarietyofhousingactivities,newconstructionbeingjustone.Increasingly,withthedemiseoflocalredevelopmentagenciesandthelossoflocalpropertytaxincrementsforaffordablehousinginredevelopmentareas,localitiesaremodifyingtheirinclusionaryprogramstoprioritizethecollectionofthesepayments.Undersucha“fee‐first”strategy,thefeeisrequiredandon‐sitedevelopmentofunitsbecomesthein‐lieuoption.Bywayofexample,thecityofBerkeleycurrentlyimposesa$34,000perunitfeeinitsinclusionaryprogram.Afifty‐unitmarket‐ratebuildingwould,therefore,requirethatitsdevelopercontribute$1.7milliontothecity’saffordablehousingtrustfundunlessthedeveloperproposedtobuildtheaffordableunitsitself.TheCaliforniaSupremeCourtrecentlyruledthatlocalgovernmentscanimposeinclusionaryrequirementsthatincludeafeeoptionundertheirnormallanduseandzoningpowers,withoutanexusjustificationshowingthatnewmarket‐ratedevelopmentwillcauseadeleteriousfinancialimpactonaffordablehousing.Somelocalitiesthatimposefeesabsentaninclusionaryprogramhaveelectedtoperformanexusstudytoderivethefee.Suchastudyaimstosetandjustifythefee‐

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levelgenerallyapplicabletoallnewmarket‐rateresidentialdevelopmentandthencalculateadditionalamountsonthegapnecessarytoproduceaffordableunits,akintoaninclusionaryrequirement,maynotbenecessary.However,followingarecentdecisionbytheSupremeCourtofCalifornia,anexusstudymaynolongerbelegallynecessary,althoughsomejurisdictionsmaywishtopursuethemforindependentreasons.InthemidstoftheBostonareainterviews,inDecember2015,BostonMayorMartinWalshannouncedchangestoitslongstandinginclusionaryzoningpolicy,whichhadbeeninplacefor15years.Thepolicyhadrequiredmostlargedevelopmentstosetaside13percentoftheirunitsatbelow‐marketrentsorcontribute$200,000perunitintoacityhousingfund.Thepolicychangenowrequiresdevelopersbuildingluxuryhousinginhigh‐costareastoeithercontribute$360,000perunitforaffordablehousingtobebuiltelsewhere,ortosetaside13percentoftheon‐siteunitsforlower‐incomehouseholds.Market‐ratedevelopmentinotherpartsofthecitywillberequiredtomaketheoldlevelofcontributionsforoff‐siteaffordablehousing($200,000/unit).AsintheBayArea,theBostonareaiscomposedofmanyautonomouscitiesandtowns,eachwithitsownregulations(orlackthereof)concerninginclusionaryhousing.TheCityofCambridge,forexample,has,since1998requiredthat15percentofallhousingdevelopmentbesetasideforon‐siteaffordablehousing.Otherlocalcommunities,suchasChelsea,whichhastraditionallynotbeenpartoftheover‐heatedhousingmarket,donotcurrentlyhaveaninclusionaryzoningordinance,althoughoneisbeingconsideredinChelseaasthatmarket,too,hasbecomemoreattractivetodevelopers.StatePolicyContextAtthestatelevel,CaliforniaandMassachusetts,thetwostatesinwhichourstudyareasarelocated,differsubstantially.However,oneofthewaysinwhichtheseareasaresimilarisintheadversepublicitythatwouldbelikelytooccurifthecostsofaffordablehousingdevelopmentwerewidelyknown.Organizationsinbothofourregionsareacutelyawareofthispotentialland‐mine:insomecases,thecostis$500,000ormoreperunit.Someindicatethattheirsuccesseshavebeenunevenbecauseofthelackofsubsidytooffsetthehighcostsofinnovationandstillproducehomesaffordabletolower‐incomehouseholds.Oneorganizationspokeaboutmakingstrategicinnovationsintheenergy‐conservationarea.Theycharacterizedas“low‐hangingfruit”somebuildingupgradeswhererealsavingscouldbecapturedrelativelyeasilyinashortpaybackperiod.

CaliforniaNopolicychangeinCaliforniahashadamoresuddenanddamagingimpactonnonprofithousingdevelopmentthanthe2012dissolutionofmorethanfourhundredlocalredevelopmentagenciesbyGovernorJerryBrown(seeLefcoeandSwenson,2014;StephensandFulton,2012).Sincethe1940s,thestatehadempoweredlocalitiestocreateredevelopmentagencies(RDAs)torevitalizedisadvantagedneighborhoods.Thevehicledrivingthisinvestmentwas“taxincrementfinance”(TIF),whichusesexpectedgrowthinpropertytaxrevenuestounderwritebondindebtednessneededtofinancetheproject.Sincethe1970s,theredevelopmentlawalsohadrequiredthatatleast20percentofTIFrevenuesbesetasidespecificallytosupportaffordablehousing–fromproductionofnewhomesforrentorpurchasetooperatingsubsidiesforexistinghousing.Thelossoftheserevenueshasbeennothingshortofseismic.AconsequenceofthedemiseofredevelopmentisthatsomeBayArealocalitieshavesincereceivedone‐timelump‐sumdistributions,so‐called“boomerang”fundsfromformerredevelopment

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accounts.Inaddition,thesuccessofredevelopmentinsomeareashasproducedhigherpropertytaxrevenues.Localpolicymakershavemadepost‐redevelopmentreliefarealpriorityandhavededicatedboomerangresourcestowardnewhousinggrantandloanprograms.Althoughboomerangmoneydoesnotrepresentasustainable,substitutesourceofhousingprojectfunding,nonprofitleadersnotedthatthesefundshavehelpedeasethepainandbridgethetransitiontoapost‐redevelopmentworldinCalifornia.Statelegislationenactedin2016allowscitiesandcountiestobondagainsttheirboomerangfundstoraiseadditionalcapitalforaffordablehousingproduction.Onamoreoptimisticnote,severalCaliforniaintervieweespraisedthecreationofthestate’s“AffordableHousingandSustainableCommunities”program(AHSC),thelargestnewsourceoffundsinitiatedsincetheeliminationofredevelopment.TheAHSCinitiativeisfundedbyauctionrevenuesgeneratedinthestate’s“capandtrade”regimeforreducinggreenhousegasemissions(discussedfurtherinthenextsection).InFiscalYear2015‐16,thisprogrammade$320millionavailablefordevelopingdenseaffordablehousingnearhigh‐qualitytransit,therebypromotingenergy‐efficiencyandchangesfromvehicleusetowalking,biking,andpublictransport.Another$600millioningeneralobligationbondsforveterans’rentalhousingwasapprovedbyvotersin2014and,asmentionedpreviously,in2016theStateLegislaturecreatedanewprogram,whichcouldprovideupto$2billioningeneralobligationbondstohousethementally‐illhomeless. MassachusettsAsdiscussedinSectionIII,Massachusettshasbeenaninnovatorinaffordablehousingprogramdevelopment.ArecentpolicyinnovationinMassachusetts,mentionedbyanumberofthehousingleadersinterviewed,istheCommunityInvestmentTaxCredit(CITC)program.Createdin2012,CITCprovidestaxincentivesspurringphilanthropicinvestmentincertifiedcommunitydevelopmentcorporations(CDCs).Toparticipate,CDCssubmitmulti‐yearstrategydocumentstothestateforreviewandapproval.Thoseplansmustevidencetheinvolvementoflocalbusinessesandresidentsandmustshowgreatpromiseinproducingsubstantialneighborhoodimpacts.QualifyingCDCplansmayencompassexpendituresonimprovementsotherthanhousing,butakeyfocusoftheCITCprogramhasbeentoaddressdisturbancescausedbytheforeclosurecrisis.TheMassachusettsCDCsinoursampledetailedhowCITChasnotonlyfuelednewdonationsbuthasalsoattractedavarietyofadditionalresources,boostingtheirdiversityoffunding.Thetaxcreditsmotivatingprivatedonationsareexpectedtoraiseupto$66millionbeforetheprogram’ssunsetdatein2019.HousingorganizationsinBostonalsodescribedotherinitiativesaimedataddressingtheshortageoffamily‐sizedunitsintheaffordableproductionpipeline.Projectsthatreceivestatehousingfundsmustnowincludeatleasttenpercentoftheirunitswiththreebedroomsormore.Thereisalsoincreasingstateconcernaboutrisingconstructioncosts,whereprevailingwagerequirementsandspecializedtradesaremakingtaxcreditsandothersourceslessproductiveintermsofoverallunits.AlsounderconsiderationatMassHousing(formerlyknownastheMassachusettsHousingFinanceAgency),accordingtooneinterviewee,isareplacementprogramforthesuccessfulformerPriorityDevelopmentFund,whichsupportedcommunity‐wideplanningprocessesandfacilitatedmixed‐incomeprojects.

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FederalPolicyContextNonprofithousingprovidersintheUnitedStateshavewatchedpublicresourcesatthefederalleveldwindlefordecades.OurinterviewsfocusedontheLIHTCprogram,grantfunds,publichousingfinanceandmanagement,budget“sequestration,”andalandmarkdecisioninfair‐housinglaw.Whileitsstructureinthetaxcodeisrelativelystable,utilizationoftheLIHTCprogramvariesbystateandtendstoexpandandcontractwiththeeconomy.Whenthereislessgrowth,taxcreditsbecomelessattractivetoinvestorssincethosecreditsoffsetincome‐taxliability,whichdecreaseduringeconomicdownturns.Inthecurrentgrowthenvironment,LIHTCsareabletoprovidemajorfinancingfornewconstruction.However,asdiscussedbelow,LIHTCstypicallyneedtobesupplementedbyothersubsidiesinordertomakeaffordablehousingdealswork.ProgramslikeHOMEandtheCommunityDevelopmentBlockGrant(CDBG)areconstantlythreatenedandarenotkeepingpacewithinflation.HOMEandothersourcesareoftendrawnupontofurnish“gapfinancing”coveringwhatcannotbefundedviaLIHTCandstate‐fundedtax‐creditprograms.Project‐basedvouchers(viatheHousingChoiceVoucher/Section8program)haveprovenrelativelydurableandflexible,buttheyareneverfundedtotheextentnecessarytomeethousingneeds,particularlyforthelowest‐incomeresidents.Theorganizationsinoursamplearebothdiversifyingsourcesoffundingaswellasspecializingintheutilizationofthosetheyfeelaremostreliable.SomerespondentsemphasizedthattheirexperiencewithpriorfederalprogramsputtheminagoodpositiontotakeadvantageoftheHOPEVIprogramforrehabilitationofpublichousingand,morerecently,thevoucher‐basedRentalAssistanceDemonstration(RAD).TheflexibilityoftheNewMarketsTaxCredit(NMTC)programmayalsobebeneficial,butitsfundinglevelsfluctuateyeartoyear.9AndagrowingnationalcommitmenttoendchronichomelessnessamongveteransofthearmedforceshasincreasedfundingforVeteransAffairsSupportiveHousing(VASH)vouchers.Nonprofithousingorganizations,whichareagileandabletospecialize,tendtoseekthemostaccessiblefederalsources,onaproject‐by‐projectbasis.But,overall,fundingforfederalhousingandrelatedcommunityrevitalizationprogramsintheU.S.hasundergonesubstantialretrenchmentsincethe1980s.Oneofourrespondentsnotedwistfully,uponconsideringtheorganization’sexistingportfolio,thatmanyofthoseprojectssimplycouldnotbebuilttoday.Anothercharitablycharacterizedthefederalsceneinhousingleadershipasoneof“lowenthusiasm.”

9TheHOPEVIprogramoperatedfrom1992to2010torevitalizeseriouslydeterioratedpublichousingdevelopments.Typically,unitsaffordabletoverylow‐incomehouseholdswerereplacedbyamixofunitsaffordabletoarangeofincomelevels;thenewdevelopmentswereoftenownedbyprivatefor‐profitdevelopers.TheRADprogramwasauthorizedinFY12andallowsHUDtoapprovetheconversionpublichousingunitsintoeitherproject‐basedSection8rentalassistancecontractsorproject‐basedvouchers.TheNMTCprogramwascreatedin2001andprovidesataxcredittoencourageinvestorstoprovidefundsforcapital‐starvedlow‐incomecommunitiesforsmallbusinessdevelopment,jobretentionprograms,andotherrevitalizationefforts.

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Anenvironmentofconstantlyshrinkingresourceshasledsomeoftheseorganizationstofeartheworst.Nomatterhowunlikely,thespecterthattheLIHTCandtheHOMEprogramsmightsimplybe“zeroedout”isanightmarescenariofornonprofithousingorganizations.Thesituationsapsmanagementresourcesandreducesstability.Someofthelesspessimisticvoicesinourstudyventuredthataffordable‐projectfinanceviataxcreditvehicles–withmarket‐basedlenders,financialanalysts,contractors,architects,andothers–hastoosturdyafootinginthepoliticaleconomytoeverbeeliminatedentirely.Asnotedearlier,morethanthree‐quartersoftheLIHTCprojectsplacedinservicebetween1987and2014wereproducedbyfor‐profitdevelopers.OneintervieweenotedthattransactioncostsperunitwithintheLIHTCprogramaretoohigh(sometimesexceeding15percentoftotalprojectcost).Morestraightforwardgrantsfromthefederalgovernmentmadedirectlytononprofitsponsors(e.g.,throughtheSection202“SupportiveHousingfortheElderly”program)strikesomeprovidersasfarpreferable.Butsuchdirect‐grantresourceshavenearlyvanished.StudentsofU.S.nonprofithousingpracticequicklylearnthatLIHTCfinanceremains“thenameofthegame.”AparticularlyworrisomesituationaggravatingU.S.nonprofithousingleadershipinrecentyearshasbeenthehyper‐politicizationofthefederalbudget.Thephenomenonledtothe“sequestration”offederalprogramsandacross‐the‐boardcutstohousingprogramsbytheU.S.Congressin2013.Thedeleteriouslimitsonresourcesweremoderatedonlysomewhatduringthe2014and2015fiscalyears,duetoapartialresumptionofbipartisannegotiationsonCapitolHill.Butthecontinuingeffectandpossibleresumptionoffull‐scalebudgetsequestrationmarkanewstatusquothathousingproducershavetonavigate.ForFY16andbeyond,newsequestrationthreatscouldimperiltheNationalHousingTrustFund,10drasticallycuttheHOMEprogram,canceltherenewalofnumerousHousingChoiceVouchers,andreducecapitalandoperatingfundsforpublichousingauthorities.Likeotherstrategicfactorswehavediscussed,sequestrationnegativelyimpactsgroupsworkinginhigh‐costareaslikeBostonandtheBayAreainsignificantways.Thisstudy’sinterviewstookplaceinthewakeofamajorjudicialdevelopmentinfederalpolicy.Theeventwasashistoricasitwasunlikely.AcasedecidedbytheU.S.SupremeCourtin2015,TexasDepartmentofHousingandCommunityAffairsv.TheInclusiveCommunitiesProject,Inc.,preservedandbroadenedtheapplicationoffederalanti‐discriminationprovisionsundertheFairHousingActof1968.Manywelcomedthedecisionforreaffirmingtheadmissibilityofso‐called“disparateimpact”evidencetoprovediscrimination.SuchevidencecanbeparticularlyusefultothevictimsofdiscriminationundertheFederalHousingAdministration(FHA),adivisionwithinHUD,sincedirectproofofdiscriminatoryintentinhousingtransactionsisrarelyavailable.Inotherwords,theintentofagivenhousingpolicymaynotbetoexacerbatesegregation,butifitisfoundtoproducethatoutcomeviadisparateimpact,theSupremeCourtrulingprovidesabasisforviewingitasdiscriminatoryandthusinviolationoftheFairHousingAct.

10TheNationalHousingTrustFund(NHTF)wascreatedin2008toincreaseandpreservethesupplyofrentalandhomeownershipopportunitiesforlow‐incomehouseholds.TheNHTFisfundedwithdedicatedsourcesofrevenue,particularlyfromthefederallysupportedsecondarymortgagemarketentities,FreddieMacandFannieMae.Duetothefinancialcrisisfacingtheseagenciesstartingin2008,nofundingwasprovidedtotheNHTFuntil2016.

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Forourrespondents,thehighcourt’slandmarkdecisionwaswelcomed,byandlarge,butoptimismremainsguarded.WeretheCourttohavedisallowedalldisparate‐impactevidence,theFHA’sprotectionsagainstdiscriminationwouldhavebeenmarkedlyweakened.Indeed,manyobserversofthehighcourtthoughtthisresultlikely,sotheeventualdecisionmaybeviewedasanarrowlyaverteddisaster.Atthesametime,nonprofithousingorganizationsproducingunitsintraditionallyunderservedinnercityneighborhoodsareconcernedthattheirworkwillbeviewedasexacerbatingracialandeconomicsegregation.JustafewweeksaftertheSupremeCourtdecisioninmid‐2015,HUDissuedtheAffirmativelyFurtheringFairHousing(AFFH)rule,whichisaimedatassistingcommunitiesthatreceiveHUDfundingwiththedataandtoolsneededtohelpthemtomeettheirfairhousingobligations. Currently,theimpactsoftheselegaldevelopmentsareuncertain,butpolicymakersseemtobedirectingaffordablehousinggrowthawayfromdenselypopulatedcityneighborhoods,towardhigher‐opportunitysuburbanlocations.Basedonourinterviews,itappearsthatsomenonprofitdeveloperswouldbemorepreparedthanotherstomaketheadjustmentofworkingoutsidetheirusualareas.Thosealreadyoperatingataregionalscalemightevenbenefitfromtheshift,withsomevoicinginterestinfar‐reachingdevelopmentopportunities. SmartGrowth,EnvironmentalProtectionandEnergyConservation:OpportunitiesandConstraintsAnimportantaspectoftheenvironmentinwhichnonprofithousingdevelopmentorganizationsoperateistheincreasingpolicyorientationtowardinnovative,smartgrowthhousingpractices.Theseapproachesdiffermarkedlyfrompriorstrategiesinvolvingthepursuitofdevelopmentopportunitieswhereverlandandbuildingswereavailable.Fornearlyallorganizations,pursuingsmartgrowthprojectsisnowahighpriority.Oneorganizationalleaderwhomweinterviewedwasespeciallyproudofcreatingafull‐timesustainabilitymanagerposition,focusingonsmartgrowthandotherenvironmentalissues.Smart‐growthhousingpracticesmeettwoimportantcriteria.First,communitiesgenerally,andespeciallylow‐incomeresidents,needproximitytogood‐qualitysupportiveandremedialservices,on‐andoff‐site,anddurable,energy‐efficienthomestoreducehouseholdcosts.Second,governmentagenciesincreasinglydemandthataffordablehousingdevelopmentsbeproximatetoschools,childcare,healthcare,full‐servicegrocerystores,andothershopping,aswellasparksandpublictransit.Smartgrowthpracticestakemanyforms.Someorganizationsareexploringalternativehousingprototypes,suchasmanufacturedhousing,modularcomponents,and“tiny”houses,toreducethecostsoftraditionalstick‐built,site‐builthousing.OneBostonorganizationinoursamplehasexploredhowtoproducemoreflexibleunitswherefloorplansandotherfeaturescanbealteredasfamilycompositionchanges.Allofourintervieweesseektoincorporategreenelementsintotheirnewprojects:solar‐paneledroofs;lowwater‐flowfixtures;smoke‐free,cleanairtechnologies;fixedthermostats;naturalsunlightandbuildingorientation;andrecyclable,low‐impactconstructionmaterials.Inexistingproperties,theyaremakingsolarandwaterconservationretrofits.Somepropertiesaregeneratingsomuchenergythattheycanmeettheirresidents’needsandselltheexcesstotheenergygridtogenerateadditionaloperatingincomeandserveotherbuildingsintheneighborhood–utilizing“solarfarming,”asonerespondentcalledit.Othergreenelementsincludeopenspaces,lowwater‐

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usevegetation,waterrecapture,pedestrianwalkways,bikestorage,andlinkagestoexistingbikepaths.Transit‐orienteddevelopment(TOD)hasbecomeamajorfocusformanyoftheorganizations.Thisisinresponsetothecurrentpublicpolicyemphasesupondecreasingtrafficcongestion,longcommutestoworkandservices,carbonemissions,andairpollution,whileincreasingtransitridershipandresidentialdensityinurbanplaceswithshrinkingsuppliesofdevelopableland.OrganizationsarebuildingTODprojectswithreducedornoparkingstalls,concomitantlyincreasingthenumberofunitsandobviatingtheneedforexpensiveundergroundparkingfacilities.Forlow‐incomehouseholdswholackcars,orwhoownundependable,high‐maintenancecars,TODshavetheadditionaladvantageofsignificantlyreducinghouseholdexpendituresontransportation.Organizationsfocusedonneighborhood‐wideimprovementsnotethattheyarenotonlycommittedtoTOD‐typehousingprojects,butarealsohelpingtomakeneighborhoodsgreenerthroughbetterneighborhooddesignandbydevelopingpedestrianwalkwaysandbikewaysandothertransit‐friendlyfeaturesthatincreaseconnectivityfromtheprojecttosurroundingneighborhoods.Insuburbancommunitieswithlessgoodpublictransit,organizationsnotethegreaterdifficultyoffindingTODsitesforaffordablehousingthatmeettherequirementsofgovernmentprograms.TheurbansitesbestsuitedforTODswithexistingamenitiesareoftenveryexpensiveand,insomecases,prohibitivelyso.SeveralintervieweessuggestedthattherecentrulingbytheU.S.SupremeCourt(discussedearlierinthissection)wouldcompeldeveloperstolaunchmoreprojectsinexpensive,high‐opportunityareas.Suchadevelopmentpatterncouldhavetheunintendedconsequenceofexacerbatingsprawlbychannelingdevelopmentawayfromdistressedinner‐cityneighborhoodstowardnewerandwealthiersuburbswithouttherequisitetransitinfrastructure.Thenewcap‐and‐tradepolicyinCaliforniaisagoodexampleofhowsmartgrowthinitiativescanbefunded.Thestatehasdesignedasystemunderwhichgreenhouse‐gas(GHG)producingindustriesmustpurchasepermitsatauctionsauthorizingtheirGHGoutputlevels.TheaggregatelevelofallowableGHGpollutionis“capped”andthesepermitscanbetradedamongfirms.Thesaleofthepermitsgeneratedsubstantialnewrevenueintheinitialyearsoftheprogram,althoughlesssoin2016,duetolegaluncertaintyabouttheprogram’sfuture.In2014,theCaliforniaLegislaturerequiredthat20percentofallcap‐and‐tradeproceedsbeearmarkedforanewprogram,theAffordableHousingandSustainableCommunities(AHSC)Program.AHSCfundsaffordablehousingthatreducesdependenceonfossilfuelsandemissionsofgreenhousegasses,typicallybyfundinghigher‐densitydevelopmentsthatarenearhigh‐qualitytransitnodesandcorridors,thereby,reducingvehiclemilestravelled.AHSCprioritizesurbaninfillprojectsandgrantsruralanddisadvantagedcommunitiesspecialconsiderationintheireffortstopromotehousingandemploymentaccessibilityvialower‐carbontransitmodes.(Ironically,thisprioritymayconflictwiththe2015U.S.SupremeCourtTexasDepartmentofHousingdecisioncompellingaffordablehousinginvestmentinhigher‐opportunityareas.)AHSCalsostronglyencourageswalkability,bikeability,andenergyefficiency(see,forexample,NewmarkandHaas,2015).The2015‐2016AHSCfundingroundawardedsome$280millioninhousingfundingviagrantsandloans.Althoughthislevelfallswellshortoftheapproximately$1billionredevelopmentagencieshadcontributedtowardCaliforniahousingdevelopmentannually,someobserversareoptimisticthatthecap‐and‐tradeset‐asideswillgrowincrementally,oncependinglegalquestionsareresolvedandaslongastheeconomycontinuestogrow.

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California’sadministrationofLIHTCalsoassignspreferencesforamenity‐richprojectsinurbanizedlocationswithcloseaccesstopublicandcommunityservices.GivenintensecompetitionforscarceLIHTCfunding,developershavenochoicebuttomeetstrenuoussmartgrowththresholdsandrelatedpolicypreferencesiftheywanttodevelopaffordablehousingandstayfinanciallyviable.

***Insummary,ourfindingsconcerningtheoperatingenvironmentsinwhichnonprofithousingorganizationsinourtwostudyareasoperate,areasfollows:

Allgroupsfeltthathousingmarketpressureswereanimportantissue,withmostgroupsvoicingseriousconcernsaboutthehighcostoflandandbuildingsintheirarea.Nonprofitdevelopersandoperatorsnotonlycompetewithoneanother,butwithforprofitfirmsaswell.

Theintensemarketpressuresonhousingarelikelyresponsible,atleastinpart,forthestrongadvocacyclimatethathasbeguntotakehold.Thelackofhousingaffordabilityforworkingpoorandmiddle‐classfamilieshascontributedtochangedperceptionsregardingtheimportanceofspurringlow‐andmoderate‐incomeconstruction.Despitethegrowingpoliticalconsensusoncrisis‐levelconditionsofunaffordability,oppositiontonewconstructionstillsoccurs,withaffordablehousingproponentsoftenstrugglingtoovercometraditionalNIMBYarguments.

TheBostonareaandtheBayAreadiffersubstantiallyintermsofthestatepolicycontextin

whichthelocalnonprofitsoperate.NopolicychangeinCaliforniahashadamoresuddenanddamagingimpactonnonprofithousingdevelopmentthanthe2012dissolutionofmorethanfourhundredlocalredevelopmentagencies.Whileso‐called“boomerang”fundshaveprovidedresourcesfornewhousinggrantandloanprograms,theydonotrepresentasustainable,substitutesourceofhousingprojectfunding.SeveralCaliforniaintervieweespraisedthecreationofthestate’s“AffordableHousingandSustainableCommunities”program(AHSC),thelargestnewsourceoffundsinitiatedsincetheeliminationofredevelopment.

Massachusettshasbeenaninnovatorinaffordablehousingprogramdevelopment.Arecent

policyinnovationinMassachusetts,mentionedbyanumberofthehousingleadersinterviewed,istheCommunityInvestmentTaxCredit(CITC)program,whichprovidestaxincentivesspurringphilanthropicinvestmentinCDCs.

FundingforfederalhousingprogramsintheU.S.hasundergoneasubstantialprocessof

retrenchmentsincethe1980s.Inthecurrentgrowthenvironment,LIHTCsareabletoprovidemajorfinancingfornewconstruction.However,LIHTCstypicallyneedtobesupplementedbyothersubsidiesinordertomakeaffordablehousingdealswork.Inaddition,programslikeHOMEandCDBGareconstantlythreatenedandarenotkeepingpacewithinflation.Anenvironmentofcontinuallyshrinkingresourcessapsmanagementresourcesandreducesstability.

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A2015U.S.SupremeCourtdecisionontheU.S.FairHousingActhascreatedaconcern,amongnonprofithousingorganizationsproducingunitsintraditionallyunderservedinnercityneighborhoods,thattheirworkwillbeviewedasexacerbatingracialandeconomicsegregation.Attheblockortractlevel,newconstructionmayappeartoconcentrateratherthandisperseaffordabilityforlower‐incomepopulations.

NonprofithousingdevelopmentorganizationsinboththeBostonareaandtheSan

FranciscoBayAreasarestronglyfocusedoninnovative,smartgrowthhousingpractices,ratherthanpursuingdevelopmentopportunitieswhereverlandandbuildingsareavailable.AlltheintervieweesalsonotedthattheyseektoincorporategreenelementsintotheirnewprojectsandthatTODhasbecomeamajorfocusofmanyoftheorganizations.

VI.OrganizationalAdaptationsinResponsetoInternalandExternalChallengesOrganizationsmustbenimble.Theymustnotonlyembracenewexternalopportunitiesandmeetnewexternalchallengesbutalsobeabletorealigntheirinternalorganizationalstructureandredeploystaffandresources.NearlyalloftheorganizationsinthestudygrouphadmadeimportantinternalchangestoabsorbtheshocksoftheGreatRecessionandwerestrivingtoachievebetterstrategicpositioningtosurviveandthriveinthecurrentenvironmentandincomingyears.Doingnothingwasnotanoption.Thissectiondiscussestheseveralwaysthatorganizationsarerespondingtotheinternalandexternalchallengestheyarefacing:

Carryingoutstrategicplanningeffortsandhiringnewstaff; Shiftingtheirtargetingtohigher‐incomepopulations; Changingthegeographictargetareaoforganization; Deliveringnewproductsandservices; Increasingemphasisontheimportanceofassetmanagementandrecapitalization;

and Formingpartnerships,collaborations,andcoalitions.

StrategicPlanningandHiringNewStaffRespondentscitedavarietyofwaysinwhichtheyareworkingonstrengtheningtheirorganizations.Evaluationsofthecurrentandlikelyfuturechallengesandplanningforchangewerecriticalfirststeps,typicallyinvolvingboardandstaffretreats,hiringoutsideorganizationalconsultants,andworkingonstrategicplans.Intermsofstaffing,oftenmentionedwasthecreationofneworexpandedhumanresourcescapacity,suchasaddingachieftalentofficer,inordertoupdatesalariesandbenefitsandtoattractandretainthebestemployeesinacompetitivelabormarket.Inaddition,variousorganizationswereaddingstaffinbudgetanalysis,accounting,mediacommunications,andinformationtechnology.Organizationsalsoareupgradingoldbudgetanddatasystemsorinstallingnewsystemsusingthelatestsoftwaretobettermanageinvestmentsandproperties.Technologyimprovementstotracktenantutilityusageandtomonitortheeffectivenessofwaterandenergyconservationmeasuresareseenasakeywaytoreduceoperatingcosts,particularlygiventheinelasticityoftenantrentsandthelackofoperatingsubsidiesforrentaldevelopments.AsdiscussedinSectionV,leadersofnonprofitdevelopmentorganizationsareacutelyawarethatfederal,state,andlocalfinancingresourcesaredwindlingandundependable,whilethenumberof

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competitors,bothnonprofitandfor‐profit,hasremainedthesameorincreased.Inotherwords,theconventionalbusinessmodelthattiesorganizationalfinancialviabilitytoasteadyrevenuestreamfromthefeesdevelopersearnfromnewunitproductionisnolongersustainable.Moreover,asonerespondentputit,andechoingobservationspresentedinSectionIV,organizationscannolongeraffordtobedrivenonlyby“mission,mission,mission,”butmustnowcarefullyscreenprojectsforfinancialviabilityandmakecalculateddecisionsaboutwhatisbestfortheiroveralleconomichealthandwell‐being.Therealizationthatorganizationsmayhavetobelessreliantonnewproductioninthefutureisprovokingsignificantinternalstructuralchanges.Organizationsaredeployingmoreoftheirexistingstaff,aswellashiringnewstaff,tofocusonrecapitalizationandmodernizationoftheirolderinventories.Assetmanagementofexistingprojectportfolioslikelywillbecomealargercomponentoforganizationaloperations.Morestaffandstafftimearealsobeingdevotedtoacquisitionandrehabilitationofexistingpropertieswithintheirgeographicserviceareas,includingsmallermarket‐rateprojectsandaffordablehousingatriskofconversiontomarket‐ratedevelopments.Anumberoforganizationsarecreatingnewdivisionsordepartmentssolelycommittedtorecapitalizationoracquisitionandrehabilitation.Lessrelianceonpublicfundingalsomeansagreaterrelianceonbuildingtheorganizations’owncapitalbasesfromprojectincome,privateinvestors,andothersources,aswellasafocusonformingnewpartnerships.Someorganizationsarerethinkingtheirfocusonlower‐incomepopulationsand,instead,areconsideringtheneedtoservehigher‐incomehouseholdsrequiringfewersubsidies.Inaddition,someorganizationsarecreatingotherprofitcentersfromnon‐housinglinesofbusiness,includingchild‐careandothersupportservices,andevensponsoringretailoperations.Manyorganizationsdescribedmakinginternaladaptationstotakeadvantageofnewfundingopportunities.ThepushtorepositionoldpublichousingthroughtheChoiceNeighborhoodsProgram11isofferingopportunitiestodeploystafftoacquireandrehabilitatetheseunits,aswellasproducenewreplacementunitsonandoffpublichousingsites.InCalifornia,tocapitalizeonthestrongemphasisoncommunitysustainabilityandholisminhousingandcommunitydevelopmentfinanceprograms,oneorganizationcreateda“healthyneighborhoods”implementationgroupwithinitsexecutiveteam.Everysectionoftheorganizationmustcoordinatewiththisgroupindeveloping,improving,andmanagingprojects.Toachievegreaterscale,organizationsmayneedtoincreasepartnershipswithlarge,for‐profit,market‐rateresidentialdevelopers.Inlocalitieswillingtousetheirzoningandapprovalpowerstosweetenbenefitsforprofit‐motivateddeveloperswhileleveragingaffordableunitsinexchange,somenonprofitdevelopersareplanningtobuildandoperatetheaffordablehousingportionon‐siteorondedicatedland.Communitybenefitsagreementswillbeanotheropportunitytoleverageaffordablehousingfromlargecommercialprojects.Finally,manyorganizationshavecontemplatedmergerswithotherorganizationsasawaytoadapttonewrealities,butonlyonewasactiveinthemergerspace.Recently,ithadabsorbedthe

11TheChoiceNeighborhoodsProgramfollowedtheHOPEVIprogramastheneweststrategyforredevelopingseverelydistressedpublichousingandotherHUD‐assistedhousingdevelopments.Here,too,thefocusisonreplacingdevelopmentstargetedonlytoverylow‐incomehouseholds,withresidentshavingarangeofincomes.Createdin2011,ChoiceNeighborhoodsiscommittedtoprovidingsocialservicesandcoordinatingcloselywithlocalschools.

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inventoriesoftwononprofitdevelopersthatfailedduringtheGreatRecession.Afterdoublingitsstaffinfiveyears,theorganizationisevaluatingwhetherithasthecorrectmixofstaffindevelopment,assetmanagement,technology,andcommunicationsandisfocusingonwaystomakeinvestmentsinitsexpandedportfolio.TargetingHigher‐IncomePopulationsChallengingbusinessconditionsandexpensivemarketscanpreventnonprofithousingorganizationsfromservingasmanyindividualsandfamiliesastheywouldlike.And,difficultchoicesloomconcerningthedepthofsubsidyneededandthebreadthofthepopulationtobeserved.Manyorganizationsallowthetermsofbuildingfinanceandsubsidytodictatethemaximumlevelofaffordabilitytheycanoffer.Othershaveutilized“mixedincome”arrangements,offeringassistedunitsatvariousincome‐eligibilitylevelsalongwithmarket‐rateunits.Theseapproacheshavetheirownchallenges,anditisunclearhowwelltheyworkinpractice.Residentsinmixed‐incomedevelopmentsmaystillseparatethemselvessociallyandspatially(see,forexample,Hyra,2013)andotherpurportedbenefitsofmixed‐incomedevelopmentshavenotmaterialized(Brophy and Smith, 1997; Joseph, Chaskin and Webber, 2007; DeFilippis and Fraser, 2010; Levy, McDade, and Bertumen, 2013; Moore and Glassman, 2007; Schwartz and Tajbakhsh, 1997).But,foranumberofreasons,affordabilityprogramsthatincludeortargetmoderate‐incomehouseholdsareagrowingfixtureinthefield.Indeed,inmostlocalinclusionaryzoningschemes,affordableunitsarepeggedathouseholdsearning80percentofAMIlevelsfarabovethosethathaveverylowincomes.And,asoneintervieweeplainlystated,“Wedon’thavesufficientresourcestonotlookatmixed‐incomepopulations.”Giventhehighhousingcostsinthetworegionsinourstudy,themajorityoforganizationsweinvestigatedalreadyhadexploredstrategiesthatincludedservingdiverseincomelevels.Mostplanonmaintainingthatdirection,ifnotexpandingit.Ratherthanthereasonsforthisapproachbeingstrictlybusiness‐related,theneedtoexpandincome‐eligibilitytowardbetter‐offhouseholdsseems,inpart,tobepoliticallydriven.ApleaoftenechoedinAmericancitiesinvolvestheneedforworkforce12housingfor“essential”employees,suchasteachers,publicsafetyworkers,ornurses.Thispreferenceisdemonstratedinanumberofrecentstateandlocalfundinginitiativesspecificallysupportingmixed‐incomeprojectswithhigheraverageincome‐eligibilityguidelines.Ingeneral,communitiesappearlessresistanttoworkforcehousing;oppositionisoftenstrongestwhenprojectstargetonlytheneediesthouseholds.Moreover,thehigherallowableincomestranslateintolowerfinancialburdensfortheorganization,sincethereisadecreasedneedforsubsidiestoproduceandoperatethenewunits.Thatfactoralonemakesthisapproachmorefinanciallyfeasible.Theincreasingcommitmenttomeetthehousingneedsofhigher‐incomehouseholdsisbeingachievedinanumberofways.Productionofmultifamilyrentalhousingistheproducttypenonprofitdevelopersinthetworegionsaremostfamiliarwith,buthelpingsomefamiliesbecomehomeownersisanotheroption.

12Often,theterm“workforce”housingisusedtodescribehousingforpoliticallymore“desirable”higher‐incomepopulations,althoughlower‐incomehouseholdsarealsointheworkforce.Itraiseslongstandingquestionsinthesocialpolicyliteratureabouttheextenttowhichresourcesshouldbetargetedtothe“deserving”poor(i.e.,low‐wageworkers)ortothe“undeserving”poor(i.e.,thoseonwelfare).

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Takentogether,thesecircumstancesaretendingtomakeitlesspracticableforourrespondents’organizationstoserveresidentsatorbelowfiftypercentofAMIlevels.Thosewithfewerassets,unsteadyemployment,andseriousillnessordisabilityfaceenormoushousingchallengesorevenariskofhomelessnessinplacesliketheBostonandBayAreas.Allthissaid,theorganizationsstudiedherestillremaincommitted,inprincipleandinpractice,totheircoremissionsofmaximizingassistanceandtargetinghouseholdswiththegreatestneed.Theyregularlyanalyzeopportunitiesandfashionstrategiestotacklethesechallenges.Onestrategymentionedbyafeworganizationsasawaytocontinuetoservelower‐incomepopulationsinvolvesmovingtowardlarger‐scaleprojects.Themoreunitsinanewdevelopment,thegreatertheopportunitytospreadcosts,layerincome‐eligibilitylevels,andtakeadvantageofcross‐subsidyeconomies.Theimpedimentstosuccessinsuchefforts,however,remainformidable.Forone,simplyfindinglarger‐scalebuildablesitesindenseurbanneighborhoodsisanenormoushurdle.Anotherstrategyistospreadcoststhroughoutmultipleprojects.Generally,organizationswiththegreatestoperatingmarginsduetostrongassetbasesarebetterabletomaintaindeeperaffordability.Giventheextremelyhighcostsofnewconstructionintheareasinourstudy,anumberofourorganizationsarelookingforopportunitiestoacquireandstabilizeexistingbuildingsasawaytocontinueservinglower‐incomeresidentsandpreserveaffordablehousingthatisunderthreat.Ashousingmarketsinthesetworegionsstrengthen–reachingpricelevelscomparabletoorexceedingthoseseenintherealestate“bubble”andtherun‐uptothemortgagemeltdown–theconversionofaffordablehousingtomarket‐rateunits,neighborhoodgentrification,anddisplacementofthepoorarereachingastateofcrisis.Atthesametime,respondentsrecognizethatmaintaininghousingopportunitiesingentrifyingareascanexacerbatethesocialdivideswithinthoseneighborhoods.Oneorganizationinourstudyhousesanumberoflower‐income,racial‐minorityresidentsinarapidlygentrifyingBoston‐areaneighborhood.Althoughtheseresidentshavenotbeendisplaced,lifehaschangedintheirlocalarea,withmanyofthenewerbusinessesspringingupbeingonestheycannotaffordtopatronize,whilethelongstandingbusinessesintheareahavebeensqueezedout.IntheU.S.systemoftime‐limited,rent‐restrictedcontracts,anentiremovementdedicatedtowardspreservationofaffordabilityhaslongbeenunderway(see,forexample,Fields2015). Inthisstruggle,weseehowincome‐targetingplaysoutamidchallengesstrainingtheseorganizations’capacities.Newproductionisanexpensiveenterprise;butsoistheprocessofrecapitalizingandrehabilitatingolderbuildings.Mixinginmoderate‐incomeeligibilityinreconfiguredbuildingsmayhelpfacilitatetheinfusionofnewresourcesnecessarytomaketheeffortfeasible,butitalsoraisesquestionsabouthowtofindreplacementhousingintheeventthatdeeplyaffordableunitsarelostintheprocess.ChangesinGeographicTargetAreaofOrganizationsWhilesomeofthelongstandingneighborhood‐basedgroupsarestillfocusedexclusivelyontheirlocalareas,anumberoforganizationsfeelthatworkinginaspecificgeographicareaislessimportantthanseizingdevelopment/rehabopportunitieswherevertheyemerge.Infact,the

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surveyrevealedanalmostevensplit,withfivegroupsbeingcommittedtoacommunity‐basedagenda,whilesevenareworkinginaregionalormulti‐statecontext.13Severalyearsago,oneBoston‐areagroupmadeaconsciousdecisiontoexpanditsgeographicfocustoincludeseveralneighboringtownsinordertohaveagreatersetofdevelopmentopportunitiesandoptions.Infact,theorganizationchangeditsname,whichhadincludedthenameofonlyasinglecityclosetoBoston.Itscurrentnon‐location‐specificnamereflectsitsmulti‐cityfocus.Similarly,althoughoneBayAreaorganizationweinterviewedstartedoutwithafocusonasingleneighborhoodinSanFrancisco,itpresentlyseesitselfasacitywideagency,althoughitisstillanchoredinagrittyurbanneighborhoodclosetodowntown.Withitshousingnowlocatedinsixadditionalneighborhoods,itsaysitisagnosticaboutlocationandwilldevelopanysitethatisfeasible,solongasitisinSanFrancisco. AnotherorganizationinoursamplehasbeendeeplyembeddedinOakland,thelargestEastBaycityintheSanFranciscoBayArea,foryears.ButitnowhastwoprojectsinneighboringContraCostaCountyandisconsideringwhethertospreadfurtherawayfromtheirtraditionaltargetarea.Partofthemotivationtodevelophousinginlower‐povertyareasisdue,inpart,totroublingresearchfindingsonsocialdeterminantsofhealth.TheAlamedaCountyDepartmentofPublicHealthhaspointedoutthatthereisa14‐yeardifferenceinlifeexpectancyforresidentslivingintheleastadvantagedneighborhoods,comparedtothoselivinginmoreaffluentareas.WhileOaklandcontinuestohaveahighincidenceofpoverty,thisorganizationisconcernedaboutthelong‐termhealthimplicationsofcontinuingtodevelopunitsinOakland.Asmaller,neighboringEastBaygroupinoursamplehadexploredthepossibilityoflaunchingout‐of‐stateprojects,butitdidnotgoforwardwiththoseplans.WhiletheintervieweereportedacloseconnectiontotheEastBay,thegroupislookingatotherpossibledevelopmentoptionsintheBayArea,whethertothesouth,north,oreastofOakland.Similarly,onelargerregionalgrouphasconsideredworkingmulti‐state,butitisstillfocusedonCalifornia,withanewlyexpandedgeographicareareachingtoSouthernCalifornia,aswellastoothernorthernCalifornialocales,suchasthecitiesofSacramentoandSantaClara,andtoAlameda,ContraCostaandSonomaCounties.TwootherCalifornianonprofitswithinourstudygrouphavebeenworkinginseveralpartsofCaliforniaforalongtime.Althoughsome50percentoftheirpipelineisinthecityofSanFrancisco,theyarealsoworkinginothersectionsoftheBayArea,aswellasmuchfartheraway‐‐LosAngelesCounty,OrangeCounty,andtheCentralValley.Oneofthesegroupsalreadyhasprojectsinsome12countiesacrossCaliforniaandisinterestedinexpandingitsportfoliointheselocales.AmongourBoston‐areacohort,therealsoissomegeographicspreadamongthenon‐neighborhood‐basedorganizations.Oneorganization,whichhasbeenworkinginanumberofstatesforyears,islookingtoincreaseitshousingstockintheexisting70neighborhoods(in30cities)whereitalreadyhasapresence.By2018,theplanistoexpandtoanadditional20neighborhoods.

13The2014surveyoflargenonprofitscarriedoutbytheHousingPartnershipNetworkrevealedthat,overthefollowingthreeyears,morethantwiceasmanygroupswereplanningonexpandingtheirgeographicfocuscomparedwiththosethatwereanticipatingfocusingonaspecificlocality(WalshandDavidson‐Sawyer,2014)

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AlthoughanothersmallergroupintheBostonareahashadacitywidefocussinceitsinception,itisnowinterestedinexpandingbeyonditslocalservicearea.Thisispartlyinresponsetoastateprogram,knownas40T,whichgivestheStatetheright‐of‐first‐refusalontheredevelopmentofexpiringuseproperties.14Althoughthefirstthree40TpropertiesthisorganizationhasbeensuccessfulingettingStatepermissiontoredevelopareallinitstargetarea,itwouldbehappytogetstateapprovalforanysuchprojects,regardlessofwheretheyarelocated.Moregenerally,theorganizationisonlistsforreceivingrequestsforproposalsfortheredevelopmentofpropertiesinotherlocales,butsofarasiteoutsidethetargetareahasnotbeensecured.And,finally,anorganizationinourstudygroupwhichisdevotedtohousingfortheelderly,andthathadstartedwithdevelopmentsinthecityofBoston,hasexpandeditsworktosomeoftheinnersuburbsofBoston,aswellastoatownsome20mileswestofBoston.Whileitdoesn’thaveaninterestinworkingbeyondMassachusetts,itwouldnotruleoutdevelopingapropertyinotherlocationsacrossthestate.DeliveryofNewProductsandServicesForalltheorganizationsinourstudygroup,thewatchwordsareopportunismandentrepreneurship.Tobetterserveclients,toincreasecompetitiveness,andtosurviveinchangingtimes,amajorityofourgroupsarerepositioningandreinventingthemselvesbycreatingnew,orimprovingupon,existingbusinesslines.Thisisespeciallythecasefororganizationsthataremulti‐purposeCDCs,withhousingbeingonlyonecomponentofalargercommunitydevelopmentmission.Formostgroups,“newproductsandservices”hasanumberofmeanings.Forsome,itmeansproducinghomestoservenewtargetpopulations,liketeachersandtechnologyworkers,andsupportivehousingforspecial‐needspopulations,suchastheindependentorfrailelderly,veterans,formerlyhomeless,recentlyincarcerated,peoplewithautismandotherdevelopmentaldisabilities.Some,aspreviouslymentioned,arenowdevelopinghomesforhigher‐incomepopulations,suchasthosewithincomesfrom60to120percentofAMI(includingsomemarket‐ratehomes),eitherexclusivelyorinmixed‐incomeprojects.Insomecases,whatisnewistheorganization’sproductionmethod,suchasmovingfromdevelopingnewrentalhousingtowardacquisitionandrehabilitationofexistinghousing,orthehousingtenuretype,suchasacquiringscattered‐site,single‐familyhomesforlease‐purchase.And,foralltheorganizationswestudied,expansionandintensificationofresidentservicesismoreimportantthanever.Asonenonprofitleaderobserved,product‐andservice‐typeflexibilityanddiversitygivesthemmore“arrowsinthedevelopmentquiver.”Inadditiontohousingproductionandproperty‐basedsocialservicesprovision,asnotedinSectionIV,someorganizationsanticipateexpansionintonon‐development,housing‐relatedserviceswithintheirtargetgeographicareas,tobringhousingsupportservicestoneighborhoodorcommunityresidentswheretheylive.

14Allthepublic‐privatepartnershipprograms(incontrasttotheU.S.’spublichousingprogram)includeaprovisionfortheoriginalprivatefor‐profitownertooptoutoftheircontractualobligationswithHUDwhichcommitsthemtoprovidingaffordabilityfortheunitsforacertainnumberofyears.Afterthecontractperiod,theregulatoryagreementsexpire,therebyprovidingopportunitiesforotherbuyers,suchasnonprofits,toassumeownership,therebyprovidingonemechanismforretaininglonger‐termaffordabiltyoftheunits.Allunitsbuiltundertheoriginalprogramsareatriskofbeinglostfromtheassistedhousingstockunlessadditionalsubsidiescanbeprovidedtopreservelong‐termaffordability.

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SomeCDCsareexpandingintonewnon‐housingventures.OneofthemajorwaystheyaredoingthisisbycreatingCDFIstofinancecommunity‐baseddevelopmentvialow‐interestpre‐developmentandseedloans,notonlyforhousingbutalsoforcommercialdevelopmentandinfrastructureimprovements.Oneofourrespondents,whichisoperatingregionallyinmanyU.S.states,hasitselfcreatedaCDFI;however,itsCDFIoperatesprimarilytosupportthatorganization’scorebusiness,newhousingdevelopment.Bycontrast,otherCDCs,viatheirCDFIs,arefinancingsmallbusinesseslikechild‐carecentersandgrocerystoresinretailcorridorsandtransitinfrastructureinitiatives.Whileallorganizationswereamenabletotheintroductionofnewproductsandservices,severalwerecommittedtowhattheydobest–theircoremissionandcompetenciesasrentalhousingdevelopersandoperators.IncreasingImportanceofAssetManagementandRecapitalizationPrudence,aswellastheprioritiesandrequirementsoffunders,dictatethatnonprofithousingdevelopmentorganizationssetasidesufficientproceedsfromtheirdevelopmentbudgetsandprojectoperatingincomeforday‐to‐daymaintenanceandlonger‐termreplacementreserves.Recapitalizationoffersanotherrevenuesourceforlong‐termpropertypreservationthroughre‐syndicationandrefinancingofexistingportfolioprojectsinordertomodernizethem,increasecashflowfromprojectoperations,andpayforstaffandotherorganizationalcosts.Asorganizations’inventoriesage,LIHTCinvestorsphaseoutafter10years,andresourcesfornewconstructionbecomeincreasinglyscarce,thepressuretorecapitalizewillcontinuetogrow.Thechallenge,ofcourse,ishowtodothatwhilepreservingprojectaffordabilityforcurrentandfuturetenants.Respondentsuniversallyrecognizethecriticalimportanceofregularbuildingmaintenanceandsavingforreplacement.Notallhaveolderprojects,andnotallolderprojectsareamenabletorefinancing,buttheyfullysubscribetotheoldadagethat“anounceofpreventionisworthapoundofcure.”Oneorganizationinparticular,wasemphaticabouttheriskofnotspendingwhatisneededintheshort‐runwhenitcomestorentalhousingconstruction,rehabilitation,andmanagement.Clearly,moneysavedinthepresentcanendupcostingalotmoreinthefuture.Tryastheymay,however,thepressuresofkeepingrentslowmakethesedecisionsverydifficult.Inmanycases,organizationsreporttheywillhaveinsufficientreservestomakemajorrepairsandupdateunitsthatwerebuilt15,20,ormoreyearsagoandtheyareawarethatrelyinguponlocalgovernmentagenciestofundrenovationsisunrealistic.Consequently,recapitalizationwillinevitablybecomeasignificantactivity;oneorganizationiscurrentlymodernizingitsentireportfolio.Somegroupsanticipatethatamajorityoftheirstaffwillbedevotedtoassetmanagementinthenot‐too‐distantfuture,althoughaddingnewinventorywillcontinuetobeamajorgoal.Recapitalizationalsooffersanhistoricopportunityforproject‐basedlearning.Olderprojectsbuiltduringthe1980sand1990swerepioneeringintermsofpursuinganewmodelofplace‐based,socialservices‐enrichedhousingtomeetthefullneedsofresidents.However,developmentbudgetshadverythinmarginsbecausedeveloperswereunderpressurebyjurisdictionsandfunderstocontrolcosts.Newerprojectsareunderwrittenwithmuchhigherreservesthanthosethatwerepossibleinthepast.Withgreaterfinancialsophisticationandknowledgeoftheproperties,financialrestructuringshouldenableorganizationstodobetterdeals,placingthemonastronger,moresustainablefinancialfootingforthefuture.

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ForrentalpropertiesfinancedwithLIHTCs,nonprofitgeneralpartnerscanbuyouttheoriginaltaxcreditinvestorsafterthe15‐yearcomplianceperiodandrecapitalizeabuilding.Thisstrategyinvolvesrefinancingand/orresyndicatingthedevelopmentwithnewLIHTCs.Theproceedsmaybeusedtorepairormodernizeabuilding,suchasincorporatingnewwaterandenergyconversationtechnologiesdevelopedafterthepropertywasoriginallyplacedintoservice.Proceedsfromtherecapitalizationmayalsobeusedtosupportassetandpropertymanagementstaffandreinvestintheorganization.Inaddition,existingdebtcanberestructuredorpaidoff,allowingpropertiestocontinueoperationswithmoreaffordablerentsandgreaterviabilityforthefuture.Thiskindoffinancialrenewalinvolvesnotonlypreservation,butalsoextendingandimprovingthebuilding’sdeliveryofhousingservicesfordecadesbeyonditsoriginalsubsidyperiod.Intermsofstaffandresourceallocation,thenonprofithousingdevelopmentorganizationswestudieddonotseeatensionbetweenpreservingexistingportfoliosandgrowingtheirportfolios.Bothareessential.Wherethedynamictensionexistsisbetweenhowmuchofanorganization’sfinancialandhumancapitalshouldbedevotednowandinthefuturetogrowthvianewconstructionversusgrowthviaacquisitionandrehabilitationofexistingunits.Inotherwords,thecentralquestionishow,exactly,togrow.Severalgroupspredictthatthemajority,ifnotall,oftheiractivityincomingyearswillbedevotedtoacquisition‐rehabilitation,ratherthannewconstruction.Alackoffinancingandheavycost‐containmentpressurespointinthatdirection.Howcana$500,000perunitcostfornewconstructionbejustifiedwhenacquisition‐rehabilitationofexistingunitsislikelytocosthalfasmuch?Moreover,thereistheaddedadvantagethatexistingmultifamilysitesdonothavetoberezonedandNIMBYargumentsareunlikelytoarisewhenrenovationsarebeingplanned.Finally,asnotedearlier(seefootnote#13)developmentsbuiltthroughvariouspublic‐privatepartnershipprogramsareatriskofbeingconvertedtomarketrentsinthenearfuture,unlesssubstantialfederal,state,andlocalfinancingisprovidedandnonprofitsstepintoacquirethem.Respondentsarecommittedtopreservingat‐riskproperties,buttheyreportthattheyareoftenbeingout‐bidbyfor‐profitbuyers.Furthermore,theexistingfor‐profitownersofthesepropertieshave,inmanycases,drainedtheprojectreservesand“runthemintotheground”(asstatedbyoneinterviewee),deferringmaintenanceneedsandprovidinglittletonothingforsuccessorownerstouseinrepairingtheunits.Partnerships,Collaborations,andCoalitionsThesupport,development,andoperationofaffordablehousingis,bynatureandnecessity,ahighlysynergisticenterprise.Fromthecreationoftheprogramandtheresourcesthatareaffordablehousing’slifeblood,toprojectconceptionandcompletion,andthroughaproject’susefullifetime,nonprofitdevelopersmustrelyonapanoplyofpartnerships,collaborations,andcoalitionstobesuccessful.Alloftheorganizationalleadersinthestudyemphasizedtheunprecedentedlevelsofcollectiveaction,interdependence,andholisticapproachestohousingprovision.Asleadersandthinkersinthefield,andsophisticatedpoliticaloperatives,respondentswereacutelyawarethatfunding,landuse,andplanningdecisionsaffectingaffordablehousingareinnatelypolitical,informedbydivergentideologicalperspectivesandcompetitionwithotherorganizationsandinterests.Whiletheycompeteforfinancingwithothernonprofitdevelopers,aswellasfor‐profits,organizationsinbothregionsemphasizethenecessityofjoiningnational,statewide,andregionaltradeassociationsandadvocacyorganizationstomakethecasefor

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affordablehousingandbuildpoliticalsupportforneededfinancing,landuse,andplanninglawsandregulations.Towardthisend,oneorganizationhasdoubleditsadvocacybudgetwithinthelastfiveyears.Withshrinkingresourcesandcompetingdemandsforfundingbymanydifferentsectors,suchashealth,education,transportation,andenvironment,policyandprogramadvocacyismorecriticalthanever.Affiliatingwithotheraffordablehousingdevelopersnotonlyhaspoliticaladvantages,butmanyreportthattheyconferregularlywiththeirlocalnonprofitpeers.EspeciallyinthesmallerBostonmarket,aneffortisapparentlybeingmadetominimizecompetitionforsites,sharepeerlearning,andsupporteachother.WeweretoldthatBoston‐areaorganizationsalmostnevercontestthesamesites,communicatingwitheachotherasawaytoavoidconflicts.Somehavesubmittedjointfundingproposalstofoundationsandsomearejoining“buyers’clubs”toreducecoststhroughbulkpurchases.Atthesametime,anationalintermediaryorganization,theLocalInitiativesSupportCorporation,isencouragingcollaborationsinBostoninordertoshareinformationonbestpractices.Aspreviouslynoted,organizationsinbothregionshavecontemplatedmergerswithothernonprofitdevelopers,butmosthaveconcludeditwasprematureastheyarestillhigh‐performingandeconomicallyviable;onlyoneorganizationhadactuallybeeninvolvedwithamerger,sinceitsawconsolidationasinevitableand,infact,anecessityfororganizationalandsectoralsurvival.Byandlarge,however,consolidationoftheindustryhasnotoccurredonthescalemanypredictedandorganizationsdonotanticipatenear‐termmergers.Anotherareaofintensecooperationisinthedevelopmentprocess.Organizationsworkcloselywithfederal,state,andlocalgovernmentagencies,aswellaswithconventionalbanks,CDFIs,andequityinvestorsthatfinancepredevelopment,construction,andpermanenttake‐outfinancing.Theyalsoworkwithlocalgovernmentstogaindevelopmentrightsandapprovalsandconferwithneighborhoodandcitizensgroupstobuildsupport.Whilepreferringtoretaincontrol,organizationshaveundertakenorarecontemplatingjointventureswithavarietyofpartnersasco‐developersandco‐ownersofrentalhousingassets.Thesepartnersincludesocialservicesproviders,faith‐basedorganizations,high‐techcompanies,andfor‐profitdevelopers.OneorganizationhaspartneredwiththreeAfricanMethodistEpiscopalchurcheswithexcesslandandcommunitycredibility.ASiliconValleyorganizationhasbeencourtinghigh‐techcompaniesthatmaywishtocollaboratetohousetheirworkers.Inbothregions,organizationsworkingincommunitieswithinclusionaryzoningmandatesonmarket‐ratedevelopmentsarelookingtoleveragetheirexpertiseandlocalreputationtoproduceaffordableunitswithfinancialandothersupportsfromfor‐profitcompanies.

***

Insummary,ourfindingsconcerningadaptationsorganizationshavemadeinresponsetointernalandexternalchallenges,andwilllikelypursueinthefuture,areasfollows:

Respondentscitedavarietyofwaystheyareworkingonstrengtheningtheirorganizations,includingholdingboardandstaffretreats,hiringoutsideorganizationalconsultants,workingonstrategicplans,formingpartnerships,consideringmergers,andhiringnewstafftoaddresspersonnel,financialmanagementsystems,mediacommunications,andinformationtechnologyissues.

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Withdecreasedfederal,state,andlocalfinancingresourcesavailable,theconventionalbusinessmodelthattiesorganizationalfinancialviabilitytoasteadyrevenuestreamfromnew‐unitproductionisnolongersustainable.Missionmustbeevaluatedinthecontextofwhatisbestfortheorganization’soveralleconomichealthandwell‐being.Organizationsalsoaredeployingmoreoftheirexistingstaff,aswellashiringnewstaff,tofocusonrecapitalizationandmodernizationoftheirolderinventories.

Someorganizationsarerethinkingtheirtraditionalfocusonlower‐incomepopulations,

consideringopportunitiestoservehigher‐incomehouseholdsthatrequirefewersubsidies,andassessingnon‐housinglinesofbusiness.

Manyorganizationsallowthetermsofbuildingfinanceandsubsidytodictatethemaximum

levelofaffordabilitytheycanoffer.Othershavedeveloped“mixed‐income”housing,incorporatingassistedunitsatvariousincome‐eligibilitylevelsaswellasmarket‐rateunits.

Theneedtoexpandincome‐eligibilitytowardbetter‐offhouseholdsseemstobeboth

business‐relatedandpoliticallydriven.Workforcehousingtypicallyencounterslesslocalopposition,andsomelocalgovernmentsareappealingtothenonprofithousingsectortoproducemoderate‐tomiddle‐incomehomesinhigh‐costareas.Atthesametime,thehigherallowableincomestranslateintolowerfinancialburdensinvolvedinproducingandoperatingnewunitssincelesssubsidyisrequired.Thatfactor,alone,alsomakesthisapproachtoaffordablehousingnotonlymorepoliticallypalatable,butalsomorefinanciallyfeasible.

Theoveralldevelopmentenvironmentismakingitlesspracticableforourrespondents’

organizationstoserveresidentsatorbelowfiftypercentofAMIlevels,althoughanumberoforganizationsarelookingforopportunitiestoacquireandstabilizeexistingbuildingsasawaytocontinueservinglower‐incomeresidentsandpreserveaffordablehousingthatmaybeatriskoflosingitsaffordabilityrestrictions.

Whilesomeofthelongstandingneighborhood‐basedgroupsarestillfocusedexclusivelyon

theirlocalareas,anumberoforganizationsfeelthatworkinginaspecificgeographicareaislessimportantthanseizingdevelopment/rehabilitationopportunitieswherevertheyemergeand,atthesametime,tryingtoserveawidergeographicarea.Thisapproachmayhelpdiversifytheirportfoliosaswell.

Tobetterserveclients,toincreasecompetitiveness,andtosurviveinchangingtimes,the

groupsinourstudyarerepositioningandreinventingthemselvesbycreatingnew,orimprovinguponexisting,businesslines.Nevertheless,severalwereadamantthattheywouldsticktotheircoremissionandstaycommittedtotheirmajorroleasrentalhousingdevelopersandoperators.

Prudence,aswellastheprioritiesandrequirementsoffunders,dictatethatnonprofit

housingdevelopmentorganizationssetasidesufficientproceedsfromtheirdevelopmentbudgetsandprojectoperatingincomeforday‐to‐daymaintenanceandlonger‐termreplacementreserves.Recapitalizationoffersanotherrevenuesourceforlong‐termpropertypreservationthroughre‐syndicationandrefinancingofexistingportfolioprojectsinordertomodernizethem,increasecashflowfromprojectoperations,andpayforstaffandotherorganizationalcosts.

37

Thereisadynamictensionbetweenhowmuchofanorganization’sfinancialandhuman

capitalshouldbedevotednowandinthefuturetogrowthvianewconstructionversusgrowthviaacquisitionandrehabilitation.Thecentralquestionishow,exactly,togrow.

Alloftheorganizationalleadersinterviewedforthestudyemphasizedtheunprecedented

levelsofcollectiveaction,interdependence,andholisticapproachestohousingprovision.Thisincludes:joiningnational,statewide,andregionaltradeassociationsandadvocacyorganizationstomakethecaseforaffordablehousingandbuildpoliticalsupport;affiliatingwithothernonprofitdevelopers;workingcloselywithfederal,state,andlocalgovernmentagencies,aswellaswithconventionalbanks,CDFIsandequityinvestorstolocatefundingopportunities;andembarkingonjointventureswithavarietyofnonprofitandfor‐profitpartners.

VII.ConclusionsInasense,theexperiencesofthenonprofithousingorganizationswehavestudiedmirrorthoseoftheirresidents.Theystrivetosucceedincomplicatedpolitical,social,andeconomicenvironments.Theytypicallyfacesevereresourceconstraints,whileworkinghardtodowellforthemselvesaswellasfortheircommunities.Ourstudyshowsthattheseeffortsareasdemandingastheyarerewarding.NonprofithousingdevelopmentinU.S.metropolitanareaslikeBostonandSanFranciscoisnotacareerforthefaintofheart.Difficultchoicesfrequentlypresentthemselves,andtherealitiesofbusinesssurvivalmay,understandably,takepriorityoverthesocialmissionsofthesegroups.Agilityandstrategyareatapremium;leadersinthesectorareforcedtobecomedeftforecastersofbusinessconditionsandpolicychanges.Theyarepragmatic,butalsodevotedtosocialimprovement.Theseorganizations,theirexecutiveteams,andtheirstaffmembersrepresentararebreed.Theindividualsinterviewedaspartofourstudyaresageobserversoftheir“industry.”Manyhavedeepexperienceacrossarangeoffirmsandbusinessperspectives.Whetherworkinginsmallercommunity‐orientedormoreregionally‐focusedorganizations,theyshareacommitmenttoimprovingthelivesofworkingfamiliesandthepoor.Oftenoperatinginorneargentrifyingneighborhoods,theyseetheinterconnectionsbetweentheirregions’growingeconomiesandwideningincomedisparities.Andtheyareevermindfuloftheneedtobalancehousingdevelopmentwithcommunitydevelopment,whileassuringthesurvivaloftheirorganizations.Nonprofitleadersrevealbothacommitmenttotraditionalvaluesandasavvyquestioningoforganizationalpracticesandbusinessmodels.Atthesametime,theywishtoempowerresidents,butnotnecessarilyinwaysthatcomplicatespecificpropertymanagementtasks.Andtheystrivetooperatewithanonprofitmindset,whileconfrontinghighlycompetitivebusinessandsubsidyenvironments.Theyalsoquestiontheadditionofnewfunctionsandcapacitiesin‐housewhenpartnershipswithoutsideprovidersmaybepreferable.And,theyaremakingthemostofhousing’sincreasingprominenceonstateandlocalpolicyagendas.Thereisagenuinetradeoffbetweenthetwinpressuresofpursuingnewconstructionwhilemaintainingandrecapitalizingtheorganization’sexistingportfolio.ThestructureofsubsidyintheU.S.placestimelimitsontheaffordabilityrequiredoffederally‐assisteddevelopments(typically,15yearsforLIHTCprojectswithstrongintentionsthatprojectsstayaffordableforconsiderablylonger,orpermanently).Themoreanorganization’scapacityisstretchedinordertoextendand

38

preserveexistingunitsfacingexpiringaffordabilityrestrictions,thelessthatorganizationisabletofocusonexpandingitsportfolio.ThissituationisparticularlyworrisomeforthesocialhousingsectorintheU.S.,generally,astheflowofsubsidycontinuestofallshortofwhatisneededtomeetthedemandforrentalassistance.However,thevisionsandstrategiesoftheorganizationsinourstudyunderscoretheirdesiretocreateopportunitiesfortheirtargetpopulation,inthefaceoffinancialtradeoffsandrisks.Basedonoursurveyandourinterviews,weremainconfidentthatnonprofithousingorganizationswilldowhattheycantosurviveandtocontinuetoprovideahighlevelofhousing‐andnon‐housing‐relatedservices.However,iffinancialsurvivalmeansdiversifyingassets,expandingservices,creatingnewpartnerships,andmakingincome‐targetingmoreflexible,traditionalcommitmentstoofferhousingassistancetopeopleinthegreatestneedinthecommunitiestheycallhomecouldsufferasaresult.

39

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Wiener,RobertJ.,Bratt,RachelG.,andRosenthal,LarryA.2015.“HousingOrganizations’AdaptationstoChangeintheU.S:PreliminaryFindingsfromtheSanFranciscoBayAreaandBoston.”PresentedattheEuropeanNetworkofHousingResearchConference,Lisbon,Portugal(unpublishedmanuscript).

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Figure1:ComponentsandApproximateSizeoftheU.S.SocialHousingSectori Numberofunits %percent

oftotalsocialhousingunits

%ofpublichousing

Publichousing

Federal(familyandelderly)(localPHAsN=3,095)ii

1,156,839ii 22.9% 76.3%

DepartmentofDefense(formilitaryhouseholds) 300,000iii 5.9% 19.8%Otherprograms(stateandlocal) 59,629iv

1.2% 3.9%

Sub‐totalpublichousing 1,516,468 30.0% 100%

%ofnonprofithousing(adjustedtotal)

Nonprofithousing

Communitydevelopmentcorporations(includingHousingDevelopmentOrganizations)(N=4,600)v

1,252,000v 24.8% 35.5%

HousingPartnershipNetworkmembers(N=97)vi 219,300vi 4.3% 6.2%Communitylandtrusts(N=220)vii 59,813vii 1.2% 1.7%Limitedequitycooperatives

425,000viii 8.4% 12.1%

Federallysubsidizedhousingfortheelderly 400,000ix

7.9% 11.3%

HabitatforHumanity(N=1,400)x 130,523xi

2.6% 3.7%

Mutualhousingandothernonprofitorganizations

240,000viii 4.8% 6.8%

Sub‐totalnonprofithousing 2,726,636 54.0% Estimatedadditionalproductionsincedatacollectedonwhichabovefiguresarebased

800,000xii 16.0% 22.7%

Adjustedsub‐totalnonprofithousing 3,526,636 100%TOTALALLSOCIALHOUSINGUNITS ~5,043,104

100%

Sources:i.TableupdatedfromBratt(2012,p.442)andfromBratt(2015).ThisversionappearsinBratt(forthcoming).Thevariousnotes,below,describesomevariationsfromthatpriorpresentation.Attemptingtocompilethistypeofdataisverydifficultandsubjecttoerrors.ii.CitedinSchwartz(2015,p.164).

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iii.http://www.acq.osd.mil/housing/ct97_congress.htm(accessedFebruary14,2016)iv.Stone(2006)hadestimated700,000otherstateandlocalpublichousingunitsandthiswasthenumberpresentedpreviously(Bratt,2012,p.442).However,mysubsequenteffortstoconfirmthisnumberhaveprovenunsuccessful.BasedontheinformationIhavebeenabletofind,Ibelievethatamoreaccuratenumberof“otherstateandlocalpublichousing”is59,629units.AccordingtoLindaCouch,SeniorVicePresidentforPolicy,NationalLowIncomeHousingCoalition,thereareonlyfourstateswithstate‐basedpublichousingprograms,Connecticut,Hawaii,MassachusettsandNewYork(emailcommunication,February26,2015).Connecticut=11,500units(MichaelC.Santoro,CDSpecialist,OfficeofPolicy,ResearchandHousingSupport,ConnecticutDepartmentofHousing,Privateemailcommunication,March3,2016).Hawaii=864units.Areportstatesthatthereis“nosubsidy”associatedwiththeseunits(HawaiiPublicHousingAuthority,2015,p.10).However,inafollow‐upphonecalltotheagencyastaffmember,MariCar,clarifiedthatthismeansthatthereisnofederalsubsidy(March4,2016).Massachusetts=45,484units.(NumberprovidedbyMargotLeClair,MassachusettsDepartmentofHousingandCommunityDevelopment,March1,2016(telephonecall).AsofJune30,1997,therewere50,285state‐aidedpublichousingunits(Citizens’HousingandPlanningAssociation,1999),meaningthat90%ofthisportfoliohasremainedunderstatecontrol.NewYork=1,781.Inall,New York State financed the construction of some 66,123 public housing units (New York State, Homes and Community Renewal, 2016). Thus, nearly all of New York State’s state-funded public housing units have been “federalized” – transferred to the federal public housing stock. v.ThisnumbercomesfromthelastnationalcensusofCDCs(NationalCongressforCommunityEconomicDevelopment,2005).However,accordingtotheNationalAllianceofCommunityEconomicDevelopmentAssociations(2010)theproductionbycommunitydevelopmentcorporations(CDCs),largenonprofithousingproducersandothertypesofnonprofitstotaled1,614,000units.Inthischart,aneffortismadetobreakoutthedifferenttypesofnonprofits.However,theremaybesomedoublecountinginthenumberofunitslistedforCDCs,HousingPartnershipNetworkmembers,andothertypesofnonprofits.Thisisonereasonwhythefiguresinthechartshouldbeviewedasapproximations.vi.Housing Partnership Network, Membership Profile (2014 data)vii.ThetotalnumberofCLTsisanestimateofferedbyEmilyThaden(privateemailcommunication,February16,2016).However,theproductiondataisbasedonlyonthenumberofmembersintheCLTNetwork,N=136.However,since24oftheseorganizationsdidnothaveanyrentalunitsintheirportfolioasofDecember31,2014,theproductionnumberinthechartisbasedonlyon112CLTs.“Ofmemberswithresidentialunits(n=112),onememberstewarded32,000cooperativeunits,whichaccountedfor53.5percentofallmemberunits”(ThadenandWebb,2015,p.9).Theproductionfigureof59,813wascalculatedfromthisinformation.viii.Thenumbersfor“limitedequitycooperatives”and“mutualhousingandothernonprofitorganizations”arefromStone(2006).ix.SeetheNationalLowIncomeHousingCoalition(2015,p.4‐31).Schwartz(2015)citesaslightlylowernumber,360,000andalsonotesthatsomesourcesindicatethatthenumbercouldbeaslowas270,000.x.http://www.habitat.org/where‐we‐build/united‐states(accessedFebruary14,2016).xi.PrivateemailcommunicationfromAngieKuhlmann,HabitatforHumanity,March10,2015.xii.Severalofthefiguresinthechartareoutdated,particularlyproductionbyCDCs.CDCsproducedsome602,000unitsinthesevenyearsbetween1998and2005,foranannualaverageof86,000/year.InviewofthecontinuingsophisticationofCDCsashousingproducers,oneestimatecouldbethataboutthisnumberofunitshasbeenproducedbyCDCsineachofthetenyearssincethe2005CDCcensus(NationalCongressforCommunityEconomicDevelopment,2005).Additionalnonprofitproduction,bygroupsotherthanCDCsisalsonotcapturedintheabove.Inparticular,asnotedabove,thedatafor“limitedequitycooperatives”and“mutualhousingandothernonprofit

45

organizations”aremorethantenyearsold.Ontheotherhand,nonprofitproductionwaslikelyreducedsignificantlyduringtheworstyearsoftherecession,soitisreasonabletoassumethatannualnonprofitproductionwasreducedforseveralyears.Onbalance,Iamestimatingthatthenonprofitsectorhasaddedatleast800,000units,sincethedatacitedforthischartwerecollected.Assumingthattherehavebeenatleast4,000CDCsproducinghousing,acrossthecountry,overthepasttenyears,thiswouldcometoanaverageannualproductionofsome20units/year.Thetotalsizeofthesocialhousingsectorisroughlythesameaspresentedpreviously(Bratt,2012),butsomeoftheproduction,byprogramororganizationaltype,hasshifted.   

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Appendix–OrganizationsIncludedinStudyBostonAreaHomeowner’sRehab,Inc.,Cambridge‐PeterDaly,ExecutiveDirectorJewishCommunityfortheElderly,Boston(Brighton)‐AmySchectman,PresidentandCEOMadisonParkDevelopmentCorporation,Boston‐JeannePinado,CEOTheCommunityBuilders,Inc.,Boston–BartMitchell,PresidentandCEOTheNeighborhoodDevelopers,Chelsea–AnnHouston,ExecutiveDirectorUrbanEdgeHousingCorporation,Boston(Roxbury)‐ChrystalKornegay,CEOatthetimethestudy

waslaunched;laternamedUndersecretaryofHousingfortheCommonwealthofMassachusetts

 SanFranciscoBayAreaEastBayAsianLocalDevelopmentCorporation,Oakland–JoshuaSimon,ExecutiveDirectorEdenHousing,Inc.,Hayward–LindaMandolini,ExecutiveDirectorMercyHousingCalifornia,SanFrancisco–DougShoemaker,PresidentMidPenHousingCorporation,FosterCity–MatthewO.Franklin,PresidentResourcesforCommunityDevelopment,Berkeley–DanSawislak,ExecutiveDirectorTenderloinNeighborhoodDevelopmentCorporation,SanFrancisco–DonaldFalk,ExecutiveDirector