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80 Alameda Countywide Homeless and Special Needs Housing Plan Financing Supportive Housing Producing affordable housing linked with services is not an easy task. Financing permanent supportive housing for long-term homeless and special needs populations is complicated and expensive. For example, several funding sources must participate in order to complete a housing development; no one source of funding will pay for all ofthe housing development costs. Housing developers must leverage funding from conventional bank loans, federal, state, and local government loans and grants, and contributions from private foundations and organizations, and secure ongoing rental subsidies. It is not unusual for nonprofit housing developers to access ten to twelve financing sources per project. In Alameda County, local funding sources typically make up about a third of the total funding required to develop affordable and supportive housing. While leveraging has some advantages-it decreases the amount of local funding required and spreads risks-it makes the development process more complex and increases costs. Every layer of financing adds different conditions, requirements, and monitoring criteria. Funds are usually targeted for specific types of projects (such as transitional or permanent housing), specific uses (such as housing development or support service delivery), and/or specific target populations. The applications themselves can be lengthy, there is intense competition for every source, and funding may be awarded based on small differences in the scoring of many excellent applications. In addition, most major sources of funding for housing operations and support services are time- limited. There is the possibility, but not usually a guarantee, of renewal. Adding to the complexity, many lenders will require that all of the necessary financing be in place before committing any funds. To increase the complexity, funding applications are usually due and funds are awarded at different times during the year. The competition for funding and intricacies of timing complicate a usually complex process of local planning, zoning, and development reviews, approvals, and permits. Not surprisingly given this level of complexity, the housing development process is both labor-intensive and time~consuming. A development project can take anywhere from three to five years (or more) to complete, during which time construction costs are likely to have increased. Typical challenges faced in financing permanent supportive housing include: · Limited rental income and limited ability to support debt. As a result, developers need to access multiple sources to complete the financing for development and operating costs. · Higher operating costs. Permanent supportive housing requires higher staffing levels to support tenants' long-term housing stability and provide an appropriate level of property management. · Operating shortfalls that get larger over time. Rental income does not keep pace with rising operating costs; that means on-going rental subsidies will be needed. · Cost of services. Rental income is insufficient to cover the costs of providing support services. Additional funding sources for services are needed. · Short-term funding. Most funding, especially for services, is short-term; permanent supportive housing needs mid- to long~term funding sources. For example, the use of low-income housing tax credits requires a 55-year term of affordability, while services are usually funded for one to three years at a time.