Government Business Model Evolution
A housing authority becomes proactive to meet its mission
- Duration: 2013 to the present
- Goal: use the client’s assets to build new sustainable revenue streams
- Partners: Perkins + Will, Globecrossing, Perkins Eastman
- Deliverables: Market study, Highest, and Best Use study, multiple project financial models, Partner Selection RfP
- Interesting issues addressed: TIF use, potential partner identification, financial discussions with capital sources, real estate development strategy, housing authority strategy
Our client, the housing authority of a mid-sized Southern city, provides housing to the area’s poor and working poor families. Their mission is to develop communities and support services that help their tenants to live dignified and productive lives. The city in which the client is located has experienced a growth boom over the past decade and is attracting investment from local, regional and even institutional sources. The client owns a number of large parcels of land on main thoroughfares, one of which is literally in the heart of the city’s downtown.
The federal revenues that the housing authority relies on to support its mission are declining and are unlikely to ever grow, particularly as housing authorities across the US are moving away from owning housing assets.
Key question and answer
The key question for the engagement was then how to create sustainable non-governmental revenue streams to support the agency’s mission? Our answer, which was well received by the client, is to use a captive development entity that the housing authority owns to co-develop or simply be an equity partner in developing its under-utilized land assets.
The proposed development plan is designed to provide the city’s housing authority an equity-based revenue sharing model with private developers such that the housing authority will generate sustainable, market-based revenue from its assets to use for its affordable housing mission by becoming a partner (through its development unit) with the developer, using its land as its equity contribution to the project. The Daedalus team worked with an architectural team from Perkins+Will to create a mixed-use, mixed-income site development plan for the target parcel that is centrally located in the heart of the city’s downtown, near the national headquarters for a number of financial entities. This effort required a flexible and innovate approach to working with both the public and private sector entities. In addition, the analysis involved: 1) creating a market study to understand (for both market rate and affordable housing) the population, income, employment and real estate trends affecting city as a whole, the submarket and the site, in particular, 2) building a bespoke financial and economic development model to evaluate the financial results of the development option under a range of scenarios that varied development intensity, timing, tax credits and a TIF to produce a highest and best use assessment and 3) determining the social and economic impacts of the project on its constituents and the wider metro area.