Atlanta Spurs Affordable Development Through a Housing Production Fund

Atlanta Spurs Affordable Development Through a Housing Production Fund

With rental costs rising and wages remaining stagnant over the past several years, the Atlanta metropolitan area has lost thousands of affordable housing units. As of 2021, the metropolitan area had a deficit of 121,163 units affordable to households at or below the extremely low-income threshold. An estimated 50.5 percent of city renters were cost burdened in 2022, paying more than 30 percent of their monthly income in rent. The Atlanta City Council sought innovative ways to address these challenges and, in partnership with the city’s public housing agency, Atlanta Housing, launched a revolving housing production fund (HPF) to generate affordable housing. Financed through bond proceeds, the HPF offsets construction costs through low-interest loans for mixed-income housing on city-owned land.

Atlanta Urban Development Corporation

In April 2022, Mayor Andre Dickens launched several initiatives to prioritize the development of affordable housing in Atlanta. Mayor Dickens set a goal to create or preserve at least 20,000 affordable housing units in the city by 2030. Matthew Bedsole, director of the Housing Innovation Lab in the Office of the Mayor, indicated that the city is on track to produce approximately 80 percent of the mayor’s goal but would fall short by 4,000 to 5,000 units by 2030. In June 2022, Atlanta officials participated alongside five other jurisdictions in a 10-month national program called Putting Assets to Work (PAW), led in part by the Government Finance Officers Association. During the PAW program, Atlanta leaders conducted a public land portfolio analysis and determined that hundreds of acres of city-owned land could be developed to help achieve the affordable housing goal.

In July 2023, Atlanta Housing launched the Atlanta Urban Development Corporation (AUD), a nonprofit organization tasked with developing mixed-income housing on publicly owned land. In July 2023, the city provided a $4 million seed grant to launch AUD and pay for initial staffing. The Atlanta City Council authorized the allocation of a $100 million Housing Opportunity Program bond in March 2023 to finance the production of affordable housing. The city allocated $38 million of the $100 million bond proceeds to AUD to launch the revolving HPF for public land development. Invest Atlanta issued the bond, which was backed by the city.

Atlanta’s Housing Production Fund

The $38 million housing bond can fund up to approximately 20 percent of total development costs through the revolving HPF. The HPF provides low-interest mezzanine financing for new mixed-income, publicly owned projects without Low-Income Housing Tax Credit funds. Atlanta’s HPF replaces other equity sources in the capital stack, and it generates interest. HPF loans also cycle out of projects at stabilization and refinance, with the goal of a 5-year deployment per project. AUD charges each project an interest rate ranging from 3 to 6 percent, which it pays to Invest Atlanta to help cover the debt service that is sustaining the housing. “Although the city is providing the seed and initial fund, the [HPF] is very close to being self-sustaining,” said Bedsole. Approximately 60 to 75 percent of the interest goes toward paying the city’s debt on the bond. Over the 20-year term of the bond, AUD hopes that the HPF can support approximately $150 million in construction loans.

Developing City-Owned Land

The city of Atlanta transferred three publicly owned properties valued at approximately $40 million to AUD as startup developments — Midtown Fire Station 15, Thomasville Heights, and Gun Club Park — to yield approximately 800 mixed-income units by 2030. In January 2024, AUD issued its first request for qualifications (RFQ) for the redevelopment of Midtown Fire Station 15 to include market-rate and affordable units above the firehouse. Built in 1986, Midtown Fire Station 15 is in the heart of midtown Atlanta, near Piedmont Park, the Atlanta Beltline, universities, theaters, and museums. AUD is in the final stages of selecting a developer for the project. Development plans for the site will separate the fire station from the housing units through a condominiumization structure to ensure that the city can maintain uninterrupted ownership and long-term operations of the station. The fire station will occupy the first two floors and will include apparatus bays, office space, locker rooms, and sleeping quarters. The completed project will be 30 to 40 stories.

The city of Atlanta and Atlanta Housing also own several vacant parcels in southeast Atlanta’s Thomasville Heights neighborhood. In addition to single-family housing, the neighborhood consists of the 36-acre site of the former Thomasville Heights public housing project, which Atlanta Housing demolished in 2010. In October 2022, the city relocated approximately 200 Section 8 tenants from Forest Cove, another apartment complex in the neighborhood, which had fallen into disrepair and was later condemned. Redeveloping the Thomasville Heights public housing site will be the focus of the initial phases of revitalizing the neighborhood. Working alongside the city, Atlanta Housing, and local housing advocates, AUD issued an RFQ for the site in March 2024. Between 80 and 120 housing units, including single-family homes and townhouses for ownership and rental, will be constructed on approximately 8 acres during the project’s first phase. Bedsole indicated that the main goal will be to “rapidly relocate the displaced families from the Forest Cove development in Thomasville Heights.

The third city-owned site preparing for AUD development is Gun Club Park. A former gun range, the site was converted to a city park in the 1960s and eventually was abandoned in 2002. Gun Club Park and the adjacent West Highlands housing project encompass more than 50 acres in west Atlanta. AUD began the public engagement and planning process for the site in November 2023 and initiated the rezoning process in April 2024. AUD is considering developing a mix of single-family and multifamily housing on the site. The RFQ for the project is forthcoming.

In developing these city-owned sites, AUD aims to meet several overarching goals. AUD is seeking qualified development partners who are interested in a collaborative process in which the public entity assumes the lead role and is the primary owner of the project. In addition to meeting the specific development goals for each site, AUD is striving to find partners interested in developing affordable housing by “working with a public entity [in] a new and different way,” said Bedsole. Approximately 70 percent of the total units developed on these three city-owned sites will be market-rate units and 30 percent will be affordable units. AUD aims to standardize affordability levels, with 20 percent of units targeted to households earning up to 50 percent of the area median income (AMI), 10 percent of units targeted to households earning up to 80 percent of AMI, and most units priced for households earning up to 140 percent of AMI. The revenue from the market-rate units will help support the long-term affordability of the below-market units. The affordability levels will increase as debt services are paid down and projects refinance.

Bedsole indicated that these first three projects will take a shared ownership equity model “where it’s really a joint venture between the AUD and the selected development partner who we anticipate would contribute some equity to the partnership with...the AUD being the majority owner, and ultimately being the entity that can control when the project refinances [and] how we set rents in the future.” AUD will require its partners to contribute between 20 and 30 percent of total costs, and they can exit the deal once projects stabilize at the 5-year mark. “They can also stay in the deal if they like, and our goal for them is that they can expect the same level of return in these deals as they would expect in any other market-rate deal that they participate in,” said Bedsole. Channeling money to the HPF and leveraging philanthropic sources will help fuel continued affordable housing development.

Looking Ahead

Atlanta officials are working urgently to meet affordable housing targets by 2030, and the HPF is a crucial component in their toolkit. Through the allocation of bond proceeds, Atlanta’s revolving HPF is accelerating and streamlining housing production. AUD’s approach is “a way to inject market feasibility or market viability into projects that could not be underwritten otherwise.” Incorporating stringent underwriting and deep market analysis at the beginning is helpful in the long run to ensure that projects are within strong markets that can support affordable housing. The HPF and public land will support the construction of approximately 800 units by 2030, of which approximately 240 will be affordable to low-income households. The remaining affordable units needed to meet the 20,000 affordable unit goal will be developed through other AUD initiatives. Once it demonstrates the efficacy and viability of the initial three projects, AUD hopes to increase the bond proceeds by $40 or $50 million to add more units of affordable housing.