Scattered-Site Rehabilitation Pilots New RAD Section 18 Blend in Springfield, Missouri

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Scattered-Site Rehabilitation Pilots New RAD Section 18 Blend in Springfield, Missouri

 

After Springfield, Missouri, released its 40-year comprehensive plan in 2020 aimed at creating thriving communities, the Housing Authority of the City of Springfield (HAS) turned to its existing housing portfolio to find ways to align with the plan's goal to preserve and modernize affordable housing. During that time, HUD's Rental Assistance Demonstration (RAD) and Section 18 Blend emerged as a financing mechanism to help public housing agencies with aging infrastructure while maintaining long-term affordability.

HAS decided to leverage the program by partnering with Knight Development to rehabilitate seven affordable housing sites across the city. The project, Keystone Family Homes, opened in 2023 as one of the first projects in the country to pilot financing through the RAD and Section 18 blend. The 297-unit project received a 2024 Novogradac Development of Distinction Award for its preservation of family housing.

A Scattered-Site Rehabilitation

Keystone Family Homes required careful planning and execution across multiple neighborhoods to minimize disruption to residents. Construction began in 2021, with the COVID-19 pandemic adding logistical challenges, including supply chain delays and the need for enhanced health protocols. Holly Knight, chief executive officer of Knight Development, noted that the company offset potential supply shortages by using a centrally located warehouse to store materials. The development team hired an onsite liaison to facilitate residents' temporary relocations during rehabilitation and ensure efficient communication among HAS, property managers, and subcontractors.

The construction was phased by site, beginning with Keystone Village, which consists of 76 units ranging from 1 to 5 bedrooms, and a new community building. The next phase involved the construction of Greenway Village, consisting of 33 two- and three-bedroom units, and Cedarbrook Estates, the largest component of the project, with 80 one- to four-bedroom units. Next came Arrowhead Townhomes, consisting of 32 units with 1 to 4 bedrooms, and Carson Lee Estates (the fastest renovation in the project, lasting just 4 months), with 24 one-bedroom units. The final phase focused on Circle and Scatter, which consists of 52 one- to three-bedroom units. All sites except for Carson Lee Estates required subphases to allow tenants to remain housed onsite while portions of the properties were rehabilitated.

Despite the pandemic-related challenges, Keystone Family Homes was completed ahead of schedule and under budget. By May 2023, all 297 units were fully leased to residents paying no more than 30 percent of their income for rent. Households earning no more than 60 percent of area median income (AMI) are eligible to apply for units in Keystone Family Homes, and 25 percent of the units are reserved for households earning no more than 30 percent of AMI. Each townhome and duplex received modern upgrades, including new washers, dryers, dishwashers, and LED light fixtures, and building wide improvements included upgraded plumbing, electrical, and mechanical systems. Shared amenities include community spaces, computer centers, and green spaces with eco-friendly recreational areas.

Piloting the RAD/Section 18 Blend

In navigating the complexities of financing the affordable housing project, Knight Development incorporated HUD's RAD/Section 18 blend to maximize funding opportunities. This financing strategy allowed the developer to secure higher contract rents, which were important in overcoming unforeseen financial hurdles. For example, the developer originally was rejected for 9 percent low-income housing tax credits (LIHTCs) for a 48-unit rehabilitation. In response, the development team expanded the project to 297 units and transitioned to a 4 percent LIHTC application, which was accepted. On top of the LIHTCs, the developer was able to leverage the RAD/Section 18 blend for additional financial support. By combining rental subsidies, the development secured higher contract rents that helped cover renovation, redevelopment, and long-term operation costs. In addition, the program incentivizes energy utility savings, which allowed the developer to increase RAD rents by 75 percent of the energy utility savings and boosted annual rental income by nearly $60,000. The lower monthly utility costs for tenants, made possible by the utility incentives, justified the rent increase. Despite the 75 percent rent increase, housing costs for Keystone Family Homes tenants are less than they would have been if rents had stayed at the post-renovation level without accounting for utility savings.

The $42.8 million project relied on other sources of funding, including tax abatements, to supplement the RAD subsidies (table 1). Knight Development engaged with local authorities early in the process, resulting in more than $800,000 in tax abatements. The development also benefited from $22 million in tax-exempt bonds from the Industrial Development Authority of the City of Springfield.

Financing

Resident Empowerment at Keystone Family Homes

One tangible benefit for Keystone Family Homes residents has been financial relief. In particular, the reduced monthly utility costs allow residents greater financial stability. In addition to affordability, the development integrates educational and supportive programs that offer residents tools for long-term success. The affordable housing community offers personal development programs, including financial literacy courses, parent education, life skills training, and entrepreneurship and employment support. Food distribution programs and housekeeping seminars help residents create healthier home environments and reduce daily living costs. With more than 95 percent occupancy across all sites, Holly Knight explained, resident satisfaction reflects the success of this approach.