Timothy Sullivan
Over the past two years, Massachusetts has preserved more affordable housing units than ever before.
A significant number of those affordable units – more than 9,800 – have been preserved with MassHousing financing. Our agency has succeeded in partnering with private property owners to protect so many tenants because we have identified and delivered preservation solutions for housing communities well ahead of their affordability restrictions expiring. We have set preservation records by being proactive about offering innovative refinancing options that are attractive to property owners, while delivering meaningful preservation solutions to low-income tenants.
MassHousing does not receive taxpayer funds, and the primary “public” tool the agency uses to achieve our mission is the authority to issue tax-exempt bonds. In most markets, this allows us to offer below-market interest rates, which we use to secure housing affordability restrictions. But interest rates have now been so low for so long that tax-exempt financing is not always delivering the kind of value to borrowers it once did. With not much of a gap between the interest rates on tax-exempt and taxable financing, MassHousing could have found itself in a difficult position to deliver the type of mission-driven financing in which the agency specializes.
We faced a worst-case scenario in which properties in our affordable housing portfolio would refinance with private taxable debt that carried no affordability restrictions, with the commonwealth losing units to market-rate conversion.
Instead, MassHousing used this challenging environment as an opportunity to diversify our suite of lending products and create new tools for achieving affordable, sustainable housing in Massachusetts.
We began allowing property owners to prepay their existing MassHousing loans before those loans matured, and we helped borrowers to refinance out of higher-interest loans and into low-interest, taxable debt that carries long-term affordability restrictions. This approach uses the current interest rate environment as an opportunity to work with property owners, and create lasting value for tenants.
Top 10 In The Nation
Instead of waiting for a crisis moment at the end of a mortgage with affordability restrictions, we are locking in long-term preservation outcomes now.
Refinancing properties with competitive taxable debt relieves the pressure on scarce public resources, like low-income housing tax credits and tax-exempt bonds, which are capped annually by federal law. This strategy also allows MassHousing to reach more tenants than we would otherwise be able to. The result has been record-setting lending volume and preservation figures.
In fiscal year 2017, which ended June 30, MassHousing provided $729 million in affordable rental financing and preserved 5,106 affordable housing units. Over the past two fiscal years, the agency has provided $1.5 billion in rental lending – a figure that represents 15 percent of MassHousing’s total rental lending since 1970 – with 9,800 affordable units preserved.
The use of taxable financing has played a significant role in our recent preservation efforts. MassHousing has provided $789 million in taxable rental finance to preserve 5,843 affordable units over the past two fiscal years. Along the way, MassHousing has become one of the 10 largest FHA multifamily lenders in the country, despite only lending in Massachusetts. No other Housing Finance Agency in America comes close to MassHousing’s FHA production. That is a data point MassHousing is proud of: It means we are delivering value for our customers and the commonwealth’s low-income residents in a major way.
Tim Sullivan is the executive director of MassHousing, an independent, quasi-public agency charged with providing financing for affordable housing in Massachusetts. MassHousing funds homeownership opportunities for low- and moderate-income residents and finances the production and preservation of affordable and mixed-income rental housing.
