Report - 2022 Commercereports 2022 Csdhd Affordable Housing Cost Data Report And Let
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- 2022 Commercereports 2022 Csdhd Affordable Housing Cost Data Report And Let
Summary
A March 30, 2023 transmittal letter from the Washington State Department of Commerce to the Secretary of the Senate and the Chief Clerk of the House, followed by the Annual Affordable Housing Cost Data report to the Washington State Legislature dated December 2022. The letter cites Section 1029(4) of the 2019-21 capital budget and Section 1067(5) of the 2021-23 capital budget and is signed by the managing director of the Housing Finance Unit. The report, from the Washington State Housing Finance Commission and the Department of Commerce, covers projects reporting final cost data in state fiscal year 2022, cost containment, supply chain issues, inflation, interest rates and data definitions. It describes a $250 million Microsoft line of credit for bond recycling and closes with project tables, including Attachment B.
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STATE OF WASHINGTON
DEPARTMENT OF COMMERCE
1011 Plum Street SE PO Box 42525 Olympia, Washington 98504-2525 360-725-4000
www.commerce.wa.gov
March 30, 2023
Ms. Sarah Bannister, Secretary of the Senate
312 Legislative Bldg.
PO Box 40482
Olympia, WA 98504-0482
Mr. Bernard Dean, Chief Clerk of the House of Representatives
338B Legislative Bldg.
PO Box 40600
Olympia, WA 98504-0600
RE: 2022 Housing Trust Fund Affordable Housing Cost Data Report (Due Dec. 1, 2022)
Dear Ms. Bannister and Mr. Dean:
The Department of Commerce (Commerce) submits this letter to satisfy the reporting
requirements in Section 1029(4) of the 2019-21 capital budget and restated in Section 1067(5) of
the 2021-23 capital budget:
“(b) Beginning December 1, 2019, and continuing annually, the department must provide the
legislature with a report of its final cost data for each project under this section. Such cost
data must, at a minimum, include total development cost per unit for each project completed
within the past year, descriptive statistics such as average and median per-unit costs,
regional cost variation, and other costs that the department deems necessary to improve cost
controls and enhance understanding of development costs. The department must coordinate
with the housing finance commission to identify relevant development costs data and ensure
that the measures are consistent across relevant agencies.”
Commerce and the Washington State Housing Finance Commission (Commission) administer
the two major programs that provide resources to develop and preserve affordable housing in
Washington: Commerce’s State Housing Trust Fund (HTF) and the Commission’s Low Income
Tax Credit (LIHTC) program. The two entities collaborate on policies and coordinate
investments in affordable housing across the state. Twenty-eight percent of the Commission’s
projects reporting this year are also funded by the HTF. Read more here [INSERT LINK TO
WSHFC REPORT].
The low number of reports makes it impractical to provide analysis or conclusions on cost
containment at this time. However, the high number of projects expected to be completed in the
coming years will yield more robust future reports under this proviso.
Page 2
Please contact me by phone at 360-725-2973 or email at nathan.lichti@commerce.wa.gov if you
have any questions regarding this report or need additional information.
Sincerely,
Nate Lichti
Managing Director
Housing Finance Unit
Housing Division
Copy: JLARC
ANNUAL AFFORDABLE
HOUSING COST DATA
Report to the Washington State Legislature
December 2022
Submitted by the Washington State Housing Finance Commission
and Washington State Department of Commerce
CONTENTS
INTRODUCTION ............................................................................................................................................. 1
The Low-Income Housing Tax Credit Program.......................................................................................... 1
Reporting Requirements ........................................................................................................................... 2
COST DATA AND COST CONTAINMENT ........................................................................................................ 2
CPA Cost Certified Data............................................................................................................................. 2
Cost Containment Policy ........................................................................................................................... 3
Current Conditions: Supply Chain Issues, Inflation and Increased Interest Rates .................................... 3
New Financing Tools to Stretch Federal Resources .................................................................................. 4
DATA DEFINITIONS & METHODOLOGY ......................................................................................................... 5
Definitions ................................................................................................................................................. 5
Methodology ............................................................................................................................................. 7
2022 REPORT ON LOW-INCOME HOUSING TAX CREDIT PROJECTS .............................................................. 8
Source of Project Costs ............................................................................................................................. 9
State Housing Trust Fund Involvement ..................................................................................................... 9
Funding Sources in 2021-22 LIHTC Projects ............................................................................................ 10
INTRODUCTION
The Low-Income Housing Tax Credit Program
The Washington State Housing Finance Commission (Commission) administers the Low-Income Housing
Tax Credit (LIHTC) program which finances the construction and preservation of affordable multifamily
housing units through federal tax incentives. Housing credit in the 9% program is awarded through an
annual competitive process in which projects are evaluated and scored according to the Commission’s
established criteria. The 4% housing tax credit combines tax credit equity with tax-exempt bonds and
the tax-exempt bonds are allocated through a competitive process. These programs are governed by
the Internal Revenue Service (IRS) and annual state allocations are determined by a per capita formula.
The Department of Commerce (Commerce) administers the Housing Trust Fund, a state program that
makes grants and low-interest loans for low-income housing. Commerce and the Commission
collaborate on policies and partner on making investments in affordable housing across the state. In any
given year, 30-50% of our projects “overlap,” meaning that they receive both a Housing Trust Fund
award and a LIHTC allocation of federal housing tax credits.
1
Reporting Requirements
In 2017, the Legislature directed the Joint Legislative Audit and Review Committee (JLARC) to analyze
the costs of developing low-income housing (i.e., affordable to households making less than 80 percent
of the area median income). In their final report, published in January 2019, JLARC made
recommendations to Commerce and the Commission to improve cost efficiency, controls, and
monitoring, including the following recommendation:
Commerce and the Commission should report development cost data to the Legislature
annually. Data should include the total development cost per unit for each project, descriptive
statistics (such as average and median per unit costs), regional cost variation, and other cost
data that agencies deem necessary to improve cost controls and enhance the Legislature's
understanding of development costs. Commerce and the Commission should coordinate to
identify relevant development cost data and ensure that measures are consistent across the
agencies. The costs should be published in a format that allows the Legislature and the agencies
to track development costs over time.
In 2019, pursuant to the JLARC report, the Legislature included JLARC’s recommendation in the 2019-21
Capital Budget appropriation for the HTF (Section 1029), as follows:
(b) Beginning December 1, 2019, and continuing annually, the department must provide the
legislature with a report of its final cost data for each project under this section. Such cost data
must, at a minimum, include total development cost per unit for each project completed within
the past year, descriptive statistics such as average and median per unit costs, regional cost
variation, and other costs that the department deems necessary to improve cost controls and
enhance understanding of development costs. The department must coordinate with the housing
finance commission to identify relevant development costs data and ensure that the measures
are consistent across relevant agencies.
This report responds to the recommendation made by JLARC to provide relevant development cost data
and analysis for LIHTC affordable housing projects to the Legislature. The data in this report includes
projects that have submitted to the Commission their final development cost data during state fiscal
year 2022 (July 1, 2021, to June 30, 2022). The numbers provided are derived from the Certified Public
Accountant-prepared cost certifications and the analysis relies on benchmarks established in previous
reports including a series of assumptions and definitions that allow for consistent measures and data
characteristics across the two programs and state agencies.
COST DATA AND COST CONTAINMENT
CPA Cost Certified Data
Since the inception of the federal Low-Income Housing Tax Credit (LIHTC) program in 1987, the
Commission has collected and tracked cost data. Developers cannot obtain approval from the IRS for the
housing tax credits until their costs are certified. They must submit a CPA-generated report of the total
2
sources and uses of the project’s funding to obtain Form 8609 from the IRS, which enables their
investors to claim the housing tax credits and thus provide equity for the project.
Cost Containment Policy
In addition to the cost-certification process, the Commission has a robust cost-containment strategy
which is essential to the future success and continued credibility of the Housing Tax Credit program. Given
the finite resource of the Housing Tax Credit, the primary objective of these cost-containment policies is
to balance cost containment with promoting quality development. As referenced in the JLARC report, the
Commission follows key national best practices for monitoring and controlling costs.
To this end, in 2012, the Commission developed and established total development cost (TDC) limits to
benchmark and analyze costs against metrics. These limits vary according to region to better measure
and acknowledge the different cost drivers throughout the state. The Commission reviews these limits
annually (and resets them if necessary) using third-party data from Engineering News-Record (ENR). The
TDC limits are documented in the Development Cost Limit Schedule as part of the LIHTC application
process.
As part of the competitive application process, points are awarded based on a percentage of the amount
under the TDC limit and based on the comparative cost of projects in the geographic pool. Projects are
subject to the Development Cost Limit Schedule in place at the time of application. As part of the
application, projects must provide a detailed breakdown of all anticipated project costs.
Based on our ongoing analysis and work with the Housing Development Consortium of Seattle/King
County Cost Analysis workgroup, we adjusted our cost limits for projects applying for resources in 2022
to reflect more granular nuances of costs found between Seattle and Balance of King County.
Numbers are now being presented to reflect that change below.
Commerce’s application recognizes the less costly projects with higher prioritization in funding but does
not apply a strict cost limit like the Commission. There are wide-ranging variations of project types,
including single family construction/renovation, congregate shelters, acquisition rehabs and new
construction in all types of communities. Therefore, Commerce finds the scoring to be a fairer method
of recognizing and containing costs.
Current Conditions: Supply Chain Issues, Inflation and Increased Interest Rates
As was stated in last year’s report, significant issues evolving out of the pandemic continue to have a
large impact on real estate and construction projects. Disruption in the supply chain of many materials
and products, inflation, and a volatile subcontractor market have increased project costs. For example,
the cement strike in the Puget sound region delayed many of the projects that were in construction
which then had a ripple effect on projects waiting to break ground. In addition, interest rates have been
increasing, affecting projects in development as well as projects just trying to close on their financing.
The Commission and the Department of Commerce worked collaboratively to ensure projects could still
move forward with full financing in place.
3
New Financing Tools to Stretch Federal Resources
As described in the introduction to this report, a significant part of the Low-Income Housing Tax Credit
program (the “bond/credit” or “4%” program) relies on federal tax-exempt bonds that then combine
with federal tax-credit equity. These bonds are capped for each state based on population. Washington
is a nationwide leader in the use of this program to build and preserve affordable housing. In recent
years, dramatically increased demand in this program has far exceeded the annual bond cap available.
The Commission has responded with several innovative financing programs to stretch our limited bond
cap with the help of corporate and other private capital. These tools are most useful for “workforce
housing” projects, rather than housing that serves the lowest incomes and most vulnerable (such as for
the homeless). They include:
• Bond recycling partnership with Microsoft:
In this national award-winning partnership, Microsoft provides the Commission with a $250
million line of credit to facilitate the recycling of housing bonds. Through bond recycling, as
short-term affordable housing bonds are paid off, a certain amount of the repaid principle can
be reissued to finance new affordable housing projects. Microsoft’s line of credit not only lowers
the cost of each transaction, making individual projects pencil for developers, it also gives the
Commission a structure and mechanism for recycling bonds on a much larger scale than we
were able to do before. In 2021-22, we issued $102.4 million in recycled bonds that helped bring
9 projects with 1,297 units to fruition.
• Evergreen Impact Housing Fund:
A collaboration between the nonprofit Seattle Foundation and the Commission, the Evergreen
Fund brings in private capital from socially motivated investors – including large corporate
donors – to supplement and extend the LIHTC bond program. Microsoft, and a coalition of
credit unions have contributed to the EIHF, which fills the gaps currently unfilled by bonds and
housing credits to make 4% LIHTC projects feasible again in high-growth urban areas of King
County. Since implementation in 2020, the fund has invested $34.9 million, financing four LIHTC
projects with a total of 745 units. Meanwhile, equity investors and philanthropists can
contribute to the fund and earn a return.
4
DATA DEFINITIONS & METHODOLOGY
The data included in this report is based on Total Residential Project Cost (TRPC), which
includes the total cost of the residential portion of a project, including land, capitalized reserves,
and offsite infrastructure improvements.
Total Residential Development Cost (TRDC) is the Total Residential Project Cost minus the cost
of land, reserves, and infrastructure. The Commission uses TRDC for purposes of analyzing
projects against limits and determining competitive points because TRDC better reflects the
costs over which the developer has control. Some developers, for example, may be building on
donated land, while others may have paid market price.
Definitions
The following table shows the key data and criteria that have been agreed upon by both the Commission
and Commerce for reporting cost data.
Field Description
General Project Data
Sponsor Project Sponsor (the primary developing organization)
Project Name Project Name
Program Type 4% or 9% Low-Income Housing Tax Credit program
Project Address Project Address
Project City Project City
Project County Project County
Zip Project Zip
New Construction OR New Construction vs. Acquisition/Rehabilitation of an existing building
Acquisition/Rehab
Total Units Includes all physical units in the property:
• Low-Income Housing Units (income- and rent-restricted units);
• Common Area Units (which include manager-occupied units and
sometimes community areas); and
• Market Rate Units (units renting at market rate without income or
rent restrictions).
Total Residential Includes all residential areas including common areas and parking; does
Square Feet not include commercial square footage
Project Cost Data
Total Residential All costs including land, capitalized reserves, and infrastructure costs
Project Cost associated with the residential budget. All subtotals below are for
residential costs.
5
Land/Acquisition Cost for acquiring land, buildings and any closing costs
Subtotal
Construction Subtotal Materials, labor, and associated costs of residential construction; any site
or infrastructure work; and contingency
Professional Fees Engineering, architecture, appraisals, market studies, Geotech,
Subtotal topography, environmental reports, legal fees, development consultant,
developer fees
Financing Costs Loan fees, interest expenses and insurance
Subtotal
Capitalized Reserves Operating and/or replacement reserves
Subtotal
Other Development Real estate tax, insurance, relocation, bidding costs,
Costs Subtotal permits/fees/hookups, impact mitigation fees, development period
utilities, nonprofit donation, accounting audit, marketing leasing expenses,
and any carrying costs at rent up reserve
Sources of Financing
State Housing Trust True = The project includes an investment from the Washington State
Fund? Housing Trust Fund; may also include State HOME funds, National Housing
Trust Funds.
State Housing Trust Amount awarded from the Washington State Housing Trust Fund (through
Fund Amount Dept of Commerce); may also include State HOME funds and National
Housing Trust Funds allocated through the Dept of Commerce.
Private Equity from Private equity generated from federal Low-Income Housing Tax Credits
LIHTC
Other State Source Capital appropriations
Federal Source HUD Choice Neighborhoods, may also include other federal resources, if
Summary available direct from the Federal level
Local Source Housing Authority capital funds, local HOME funds (HUD), local housing
Summary levies, other city or county investments
Private Source Tax exempt private activity bond cap (issued by either Commission or
Summary Housing Authority), permanent loans, other federal tax credits,
subordinate loans, etc.
Sponsor Source Deferred developer fee, sponsor loan, sponsor contribution, Net Operating
Summary Income (NOI) during lease-up, seller note
“Cost Per” Data
Cost Per Unit Total Residential Project Cost divided by Total Units
Cost Per Total Total Residential Project Cost divided by Total Residential Square Feet
Residential Square
Footage
6
Methodology
The analysis provided in this report is focused on describing or summarizing total residential
development cost data and uses common descriptive statistics such as measures of central tendency.
This method of analysis was chosen with the goal of providing a simple but meaningful presentation of
the data. It is important to note that this method of analysis deals with quantitative data only and
should not be used to generalize or make unsupported conclusions about the cost of affordable
multifamily housing projects not included in this data set.
7
2022 REPORT ON LOW-INCOME HOUSING TAX CREDIT
PROJECTS
The charts and points below highlight data found in the list of projects placed in service from July
1, 2021, through June 30, 2022, provided as Attachment A.
Note: Median costs, instead of average costs, are used below to capture the central location of
the dataset’s distribution when outliers are present in the data.
Total Projects, Units and Median Costs – 2019-2022
Median units Median cost Median cost
Fiscal Year Total Projects
per project per unit per square foot
July 2021 - June 2022 32 99 $316,097 $392
July 2020 - June 2021 33 95 $262,331 $284
July 2019 - June 2020 43 108 $259,105 $280
July 2018 - June 2019 51 114 $207,496 $239
Costs by County and Construction Type – 2021-22
New Construction: Acquisition/Rehab:
Median Cost Median Cost
Median Cost Per Median Cost Per
County County
Per Unit Residential Per Unit Residential
Square Foot Square Foot
Clark $262,696 $405 Benton $282,759 $296
King $329,339 $383 Clark $295,508 $400
Balance King* $318,710 $335 King $317,128 $528
Seattle* $337,544 $537 Balance King* $310,225 $441
Kittitas $255,084 $237 Seattle* $324,030 $542
Pierce $351,338 $414 Walla Walla $227,279 $214
Snohomish $307,990 $277
Thurston $224,962 $243
Whatcom $358,974 $367
Yakima $294,459 $441
Med of All Med Of All
$301,224 $375 $289,134 $348
New Const: Acq/Rehab:
*The City of Seattle-King County and the “balance” of King County are listed here separately in addition to King
County.
8
Source of Project Costs
Construction costs, including labor and materials, are the major cost drivers of these projects. Project
cost categories are defined above in the Data Definitions Table.
Other Development
Financing Costs
Costs
1%
Capitalized 8%
Reserves
2%
Professional
Fees
14% Construction
Costs
(including
material and
Land/Acquisition
labor)
Costs
57%
19%
State Housing Trust Fund Involvement
How many 2021-22 projects include funding from the Washington State Housing Trust Fund?
Includes
Housing Trust
Fund
28%
No Housing
Trust Fund
72%
9
Funding Sources in 2021-22 LIHTC Projects
Note: Private debt includes tax-exempt bonds issued by the Commission or by the local housing
authority. The State Funds category is solely made up of State Housing Trust Fund.
Federal Local Funds
$600,275 $74,407,274
6%
LIHTC Private
Equity
$460,656,868
37% Private Debt
$484,807,268
39%
Sponsor Funds
State Funds $203,829,232
$21,550,339 16%
2%
Attachment A: Full List of 2021-22 LIHTC Projects in this Dataset
Attachment B: Additional Non-LIHTC Projects Funded only by the Housing Trust Fund (Not
Included in Charts Above)
10
ATTACHMENT A: Full List of 2021-22 LIHTC Projects
Cost per Total
Housing Trust New Construction OR
Project Name City County Total Units Cost per Unit Project Residential Population Served
Fund? Acquisition/Rehab
Square Foot
1800 Hillside Terrace Yes Tacoma Pierce New Construction 64 $ 342,072 $ 428 Disabled/Homeless
Arlington Drive Youth Campus Yes Tacoma Pierce New Construction 58 $ 376,623 $ 497 Homeless
Belmont 1 No Seattle King New Construction 90 $ 353,788 $ 1,236 Disabled
Bonanza Yes Seattle King Acquisition/Rehab 87 $ 497,350 $ 700 General
Chuck Austin Place Yes Yakima Yakima New Construction 41 $ 294,459 $ 441 Homeless
Columbia Park No Richland Benton Acquisition/Rehab 139 $ 282,759 $ 296 Large Household
Coronado Springs Cottages No Seattle King Acquisition/Rehab 148 $ 298,247 $ 538 General
DESC 22nd Avenue PSH Yes Seattle King New Construction 85 $ 325,422 $ 537 Homeless
Encore Apartments No Seattle King New Construction 60 $ 383,974 $ 782 Disabled
Kent Permanent Supportive Housing Yes Kent King New Construction 80 $ 308,082 $ 511 Homeless
La Madera Apartments No Federal Way King Acquisition/Rehab 76 $ 190,716 $ 270 Disabled/Large Household
Opportunity Place Apartments No Seattle King Acquisition/Rehab 145 $ 324,030 $ 542 Disabled
Othello Park Apartments No Seattle King New Construction 106 $ 337,544 $ 383 Disabled/Large Household
Panorama Apartments No Snoqualmie King New Construction 191 $ 329,339 $ 238 Disabled/Large Household
Renton Crest No Renton King Acquisition/Rehab 274 $ 310,225 $ 441 Elderly/Large Household
Reserve at Lacey No Lacey Thurston New Construction 241 $ 224,962 $ 243 Elderly
Riverview Apartments No Everett Snohomish New Construction 203 $ 352,687 $ 292 Disabled/Large Household
Samish Way Redevelopment Yes Bellingham Whatcom New Construction 69 $ 358,974 $ 367 Disabled/Homeless
Sea Mar Vancouver Family Housing No Vancouver Clark New Construction 70 $ 304,653 $ 286 Large Household
South Wilbur Manor Apartments No Walla Walla Walla Walla Acquisition/Rehab 38 $ 227,279 $ 214 Large Household
Spurling Court Apartments Yes Ellensburg Kittitas New Construction 49 $ 255,084 $ 237 Homeless
Station House No Seattle King New Construction 110 $ 321,968 $ 374 General
The Confluence No Tukwila King New Construction 103 $ 383,883 $ 359 Large Household
The Elwood No Vancouver Clark New Construction 46 $ 220,740 $ 524 Homeless
The View by Vintage No Bonney Lake Pierce New Construction 408 $ 210,783 $ 235 Large Household
Traditions at Federal Way No Federal Way King New Construction 200 $ 246,285 $ 312 Disabled/Elderly
Van Vista Assisted Living No Vancouver Clark Acquisition/Rehab 95 $ 295,508 $ 400 Elderly
Villas at Arlington No Arlington Snohomish New Construction 312 $ 263,293 $ 263 Large Household
Vintage at Seatac Apartments No Seatac King New Construction 170 $ 268,640 $ 437 Disabled
Watermark No Auburn King New Construction 221 $ 380,593 $ 288 Disabled/Large Household
Woodland North No Lake Forest Park King Acquisition/Rehab 105 $ 412,688 $ 517 General
YWCA Pierce County Affordable Family Housing Yes Tacoma Pierce New Construction 55 $ 360,605 $ 401 Homeless
ATTACHMENT B: Additional Non-LIHTC Projects Funded By Housing Trust Fund (No LIHTC – Not
Included in Charts Above)
New Construction OR Total Cost per Total Project
Project Name Site Name City County Total Units Cost per Unit Population Served
Acquisition/Rehab Bedrooms Residential Square Foot
FFC Homes XII A/R Kitsap County/Bremerton Bremerton Kitsap Acquisition/Rehab 3 3 $ 193,000 $ 341 Dev Disabled
FFC Homes XII A/R Pierce County/Puyallup Tacoma Pierce Acquisition/Rehab 3 3 $ 244,333 $ 431 Dev Disabled
FFC Homes XII A/R Longview Longview Cowlitz Acquisition/Rehab 3 3 $ 193,667 $ 342 Dev Disabled
Hearthstone Apartments Hearthstone Apartments Medical Lake Spokane Acquisition only 48 n/a $ 32,205 $ 36 General
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