Housing Alaska's Seniors

Anchorage’s image as a wild wild western town or a young Twin Peaks doesn’t square with who we really are today. Instead, we are growing up. The over-60 crowd is our fastest growing population. This fact has housing implications that are a challenge and an opportunity for both government and the private sector.

A good private-public partnership is a 46 unit apartment project for low-income seniors that Alaska Housing Finance Corporation just-approved. The structure of the financing shows how government can encourage something while keeping its fingers out of most of the planning and execution.

Consider the need. There are 2500 elderly (over age 65) households in Anchorage with incomes under $25,000 per year. About 1800 households are not living in group facilities like Mary Conrad or Pioneer homes. They have their own homes; many are empty nesters, making do for want of an attractive alternative.

As they grow older, their needs increase. Of our population over age 75, twenty percent need assistance with daily activities. The older people don’t leave, the demographics tell us; they stay in Alaska, where they have friends and family.

It’s uneconomic for the private sector to build senior housing, however. Government tends to do all that sort of thing badly, even when there is a political will, so there are no prospects for government-owned senior housing beyond the Pioneer Homes. Some of the largest non-profit groups can create a Mary Conrad Center, but not nearly enough to fill the need.

What it takes is a government incentive, a private sector profit motive, and a non-profit operational entity that knows the population. Enter the tax credit program.

The federal government apportions tax credits among the states. In Alaska, AHFC passes them out annually to projects that meet socially desirable objectives. Last year the major tax credit project was the Access Alaska barrier-free project under construction at Independence Drive and Abbot Rd. In 1995 it looks like seniors will get their turn.

This is a vast oversimplification of an extremely complex program, but here’s how it works. The developer figures out what it costs to build 46 units of seniors housing. In this case it’s $3.9 million. Based on current rents and expenses, the developer then structures the cash flows and calculates how much conventional debt the project can carry. It works out to about 32 percent of the cost. That loan of $1.275 million of bonded debt at 9.625% interest for 30 years, is what AHFC approved at its January 20 board meeting.

Where does the developer get the remaining 68 percent, $2.7 million, of the project cost?

Tax credits make the project viable. This spring AHFC will probably allocate tax credits to the developer who will sell them to a for-profit entity—banks like to buy them—to raise capital. In the seniors project the proceeds from tax credits would be $1.4 million, or another 35 percent of the cost.

Grant funds and deferred developer profit make up some of the balance of the project cost. The remainder, $763,620 or 19 percent, is a “soft second” of AHFC money at 1.5% interest. This debt only gets paid from the excess cash flow, when there is any, from project operations.

The brains behind much of this is Ken Gain, long-time Anchorage real estate syndicator and advisor. The one who knows the population is Loretta French-Jardel. She was the force behind the creation of the senior center and apartment complex in Chugiak and has been honored for her community work by both the Legislature and the Municipality. The architect is Phil Thern of Chugiak and the developer is one of a handful of women in this field: Jan Lazarus. She has a track record in shopping centers and apartment buildings. The limited partner who will buy the tax credits, and the contractor, have not yet been selected, according to Gain.

“All the economic benefits of the project flow to the limited partner,” Gain says. “Their rate of return on that investment over 15 years is about 14 percent.”

With tax credits in the deal, the building has to be used for this purpose for 30 years. After that, Abundant Living, Inc., the nonprofit organization formed by Lazarus and Gain for this project, owns the property with its debt paid off.

The project is off Old Seward between O’Malley and Dimond, just to the north of an apartment and condo complex. There’s room to expand the project further, Gain says, with a senior center, more units of this type and eventually some unsubsidized housing. “Trying to do it all at once was just too complicated,” he said. “It’s taken us three or four years just to get this far with it.”