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Neighborhood Redevelopment at Scale Data Driven

HPI Beyond 9 th Initiative Acquisition and Rehabilitation of 201 Vacant and Abandoned Single Family Homes. Neighborhood Redevelopment at Scale Data Driven Strategic Resource Alignment: Acquisition/Development Lease Purchase/Credit Reporting/Credit Counseling Homebuyer Mortgages with DPA.

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Neighborhood Redevelopment at Scale Data Driven

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  1. HPI Beyond 9th InitiativeAcquisition and Rehabilitation of 201 Vacant and Abandoned Single Family Homes Neighborhood Redevelopment at Scale Data Driven Strategic Resource Alignment: Acquisition/Development Lease Purchase/Credit Reporting/Credit Counseling Homebuyer Mortgages with DPA Andrew Hawes President/CEO The Housing Partnership, Inc. 1512 Crums Lane, Suite 401 Louisville KY 40216 ahawes@WeAreHPI.org 502-814-2727

  2. Neighborhood Homeownership Rates Portland – Less than 24% Russell – Less than 24% California – Less than 24% PORTLAND 76% + of the single family homes are rental! RUSSELL Essentially no homeowner sales to homebuyers. Real estate transfers are from investor to investor. CALIFORNIA

  3. Representation of the dispersion of Section 8 TBRA

  4. Evaluating homeownership rates at the census block level for each neighborhood shows that there are pockets of stability.

  5. Overlaying HPI owned and acquired homes to the map shows that many of our homes are in areas of stability based on the census block homeownership rates. HPI will be able to strategically target which homes to sell to contribute to measurable increases in homeownership rates at the census block level.

  6. It gets even better! Homeownership rates are strong in a good percentage of census blocks. 41-80% homeownership rates looks less scary.

  7. HPI’s future acquisitions in 2019 are shown on this map. Clearly, these properties are well suited for conversion to homeownership with the high concentration in stable homeownership census blocks.

  8. Overlaying all vacant land parcels, LMG vacant buildings and vacant lots we able to see the opportunity for strategic redevelopment and infill new construction. Focusing on areas that contribute to increasing census block level homeownership rates. Individual plans can be created for each census block that contains HPI assets, vacant lots and vacant homes.

  9. HPI will use the data to drive our redevelopment efforts at scale. We will be able to strategically increase homeownership rates on a census block level through a combination of new construction infill, acquisition and rehabilitation of vacant properties and selling HPI owned homes to residents.

  10. HPI Scale: Existing Single Family Home Inventory – approximately 400 homes New Market Tax Credit Program HPI Opportunity Zone Fund - $4.5M HPI is evaluating if it can create an opportunity zone business, with the purpose of the business being single family development. ($3,600,000 OZ Investor - $900,000 HPI) 70% of the OZ funds have to meet the substantial rehab test. 30% of the OZ funds do not have to meet the substantial rehab test. HPI has the portfolio to meet the 10 year flow of housing to the OZ business. HPI has formed a collaborative coalition of local nonprofits to support an at scale neighborhood revitalization implementation. GAP funding will be needed to set up the fund at scale! Sources of GAP NMTC program Other local or federal resources • 62 homes in one year • Can be used for Rehab, or Infill new construction • Sourcing the leverage loan is key • Philanthropic resources • NSP Funding • Opportunity Zone Funds

  11. New Market Tax Credit / OZ Fund Structure Investment Fund $7,110,431 $2,610,431 Investor $4,500,000 Lev. Ln. NMTC Investor $2,610,431 OZ Investor $3,600,000 80% THPI-GP $900,000 20% Leverage Loan Lender THPI-Single Family $4,500,000 THPI-OZ Fund, LP $4,500,000 HPN – NMTC Allocatee CDE $7,110,431 NMTC Sub-CDE $7,110,431 IF Cash THPI-Single Family NMTC Revitalization I, LLC AKA QALICB THPI-Single Family NMTC Revitalization $4,500,000 Loan Funds $2,610,431 Equity THPI Manager $7,110,431 flows back to THPI-Single Family NMTC Revitalization I to cover the TDC

  12. HPI Single Family NMTC with OZ Funds Sources $7,110,431 OZ Funds $4,500,000 NMTC Equity $2,610,431 Uses: $7,110,431 Acquisition/Rehab $4,741,878 – 62 SF Homes NMTC Fees $1,110,738 Other costs $1,257,815 GAP $0 Sales Revenue: $4,960,000 (average SP $80K) Return of OZ Funds $4,500,000 Profit: $460,000

  13. Years 2 - 10 THPI-GP $900,000 OZ Investor $3,600,000 THPI-OZ Fund, LP $4,500,000 OZ Business # of Homes Year 1 - $4,500,000 62 Year 2 - $4,960,000 60 Year 3 - $4,860,000 60 Year 4 - $4,908,600 60 Year 5 - $4,957,686 60 Year 6 - $5,056,840 60 Year 7 - $5,157,977 61 Year 8 - $5,348,822 62 Year 9 - $5,545,237 64 Year 10 - $5,838,598 66 Total 615 THPI-Single Family NMTC Revitalization I, LLC AKA QALICB THPI-Single Family NMTC Revitalization I, LLC Capital - $4,960,000

  14. Year 10 OZ Investor Exit YR 10 Sales Proceeds: $6,141,476 Cash on Hand: $260,014 Developer Contribution $388,258 Total: $6,789,748 Total: $6,789,748 OZ Investor – 80% $5,431,798 THPI – 20% $1,357,950 Initial OZ investment: $3,600,000 5% annualized return to investor$1,831,798

  15. Challenges with NMTC and OZ NMTC funds must be fully deployed within 12 months of closing. There may be a conflict with the OZ program because OZ funds cannot be classified as loan funds. The NMTC structure requires a Leverage Loan, which may prohibit the use of the OZ equity. Any profits generated from the homes sales will subject the OZ investor to additional tax responsibility. • Legislative Suggestions: • Extend the 15% inventive beyond 12/31/2019 – The final rules were slow to come out • Write into the legislation an affordable housing provision: • Homes under a certain market price, as set in each market across the Country, that are created and sold through a nonprofit developer, the profits generated would be completely tax free if: • Constructed in an Opportunity Zone • Improves existing homes (using the aggregate of the substantial rehab test for scattered site revitalization initiatives) • Provide additional tax incentive to investors who invest in affordable housing • The risk/reward to do the investment is not there for national investors • Eliminate the substantial rehab test for vacant or foreclosed properties • New construction qualifies

  16. New Thinking How the FHA Nonprofit Mortgagor Program can be a tool to help address GENTRIFICATION!

  17. The Housing Partnership, Inc. New NP Holding Company Nonprofit Mortgagor Contract for Deed

  18. The New Structure HPI Lisa DeSpain COO HPI Sung Ju Park CDO HPI Patrick Cornett CFO HPI Andrew Hawes CEO New NP Holding Company Nonprofit Mortgagor Contract for Deed NDHC –CEO Board Member LHOME –CEO Board Member HPI Board Chair Member Community Board Member LMG Board Member

  19. Buyer obtains a contract for deed from holding company Holding Company obtains FHA 203(b) financing from SYB. Loan Sold to KHC for servicing. FHA Lender Stock Yards Bank New NP Holding Company Nonprofit Mortgagor Contract for Deed Kentucky Housing Corporation Servicer Buyer HPI/NDHC sells house to holding company at market value HPI or NDHC Home Sale - $80,000

  20. Buyer obtains a contract for deed from holding company Holding Company obtains FHA 203(b) financing from SYB. Loan Sold to KHC for servicing. FHA Lender Stock Yards Bank New NP Holding Company Nonprofit Mortgagor Contract for Deed Kentucky Housing Corporation Servicer Buyer Buyer pays Holding Company $550 monthly. Payment includes property maintenance fee. Holding company pays KHC $398.01 monthly and pays hazard insurance separately. Example 1 at 4.5% fixed for 30 years Sales Price: $80,000 Loan to Value: 96.5% Base Loan Amount: $77,200 Financed MIP: $1,351 Total Loan Amount: $78,551 Cash to Close: $6,128 Payment: Principal & Interest: $398.01 Hazard Insurance: $36.62 Mortgage Insurance: $58.04 Total: $491.67 Buyer can opt out of the contract for deed term by assuming the remaining balance of the FHA loan. The equity built up in the home will transfer to the buyer. Transfer of the property into the buyers name will trigger property taxes.

  21. Section 8 Example: Holding Company obtains FHA 203(b) financing from SYB. Loan Sold to KHC for servicing. FHA Lender Stock Yards Bank New NP Holding Company Nonprofit Mortgagor Contract for Deed Kentucky Housing Corporation Servicer Buyer Buyer pays Holding Company $991 monthly. Tenant Portion: $340 HAP Payment: $571 Holding company pays KHC $398.01 monthly and pays hazard insurance separately. Example 2: S8 - at 4.5% fixed for 15 years Sales Price: $80,000 Loan to Value: 96.5% Base Loan Amount: $77,200 Financed MIP: $1,351 Total Loan Amount: $78,551 Cash to Close: $6,128 Payment: Principal & Interest: $600.91 Hazard Insurance: $36.62 Mortgage Insurance: $58.04 Total: $724.17 Property management and maintenance will be provided. At the end of the 15 year amortization period, monthly rent will be reduced to the tenant portion.

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