Finance Authority of New Orleans will play a role in new housing plan
A city agency that in recent years lost its luster as a place where low-income New Orleanians could go for low-interest mortgages is set to re-emerge as a key player in plans to develop more affordable housing in the city.
Under a deal approved by the City Council last month, the Finance Authority of New Orleans will oversee programs that freeze taxes for developers who reserve a portion of new apartments for low-income residents. The complexes must be built in areas close to where residents work and want to live.
In doing so, FANO officials hope to take part in efforts to lessen a citywide affordable housing shortage, and to restore its own once-strong reputation by becoming a small but important driver of such development, said Damon Burns, the agency's executive director, in a recent interview.
"This means that we should be able to have more affordable housing activity in New Orleans," Burns said of his agency's new mandate. "It's a big need."
The ability to approve tax breaks for apartment developers represents a shift in how the agency has traditionally operated.
Created by the City Council in 1978, FANO was one of dozens of municipal housing finance agencies formed across the country at that time to provide affordable housing in urban areas.
Using bond proceeds, FANO issued loans that often carried interest rates below what banks would offer. And coupled with grants that helped buyers with their down payments, FANO loans were often the best deals eligible home buyers could find.
"A lot of people, even today, say, 'Oh, I got my first home from FANO back in '93,'" said Burns, a New Orleans native. "Or, 'My auntie got her first home from FANO when I was in elementary school.' I hear those stories all the time."
But Hurricane Katrina in 2005 left thousands of FANO mortgage holders with homes in disrepair. Many moved and paid off their mortgages through Road Home money, insurance or other proceeds. That meant FANO lost out on the interest those home loans, given time, would have accrued.
The financial crisis and recession in 2008-2009 then hurt the agency's funding sources as its access to global financial markets was tightened, Burns said.
In 2010, the agency came under fire by federal auditors for being too generous with interest-free home loans and closing-cost assistance, including to families who made too much money to qualify. Soon afterward, Mayor Mitch Landrieu's administration took ownership of the "soft-second" mortgage program FANO once managed.
The result of the post-Katrina changes was that FANO's asset portfolio shrank from $600 million to $25 million, and the agency became a shadow of its former self. While FANO's original mortgage program has continued, it offers interest rates that are above market and aren't attractive even to lower-income home buyers.
Enter the city's new "inclusionary" zoning policy, which requires housing developers to reserve some units in pricey, centrally located high-rises and condos for the hospitality industry workers, teachers and other low- or moderate-income residents who have been forced out of desirable neighborhoods.
Under the deal between Mayor LaToya Cantrell's administration and the City Council, FANO will be the agency that can freeze taxes for developers who apply for tax breaks and meet certain affordable-housing requirements. FANO will also issue tax-exempt bonds to help finance some housing aimed at low-income residents.
"This is something that we have always recommended, that the Finance Authority take its place inside of the affordable housing industry," said Andreanecia Morris, executive director of the housing advocacy group HousingNOLA. Morris is also a member of FANO's board.
Morris said FANO's involvement is critical, especially since state and city agencies are not keeping pace with goals for housing production that HousingNOLA has recommended. That group released a report last year showing the city was losing more affordable units than it created.
The tax freezes had long been handled by the Industrial Development Board, though FANO is expected to charge lower fees than that agency has charged to developers for administering the program. The percentage charged will vary by a project's value and the amount of affordable housing it provides.
For Burns, the deal will hopefully be a springboard for FANO's larger plan to rebrand itself as a "green" finance agency, one that not only provides affordable housing but finances the home improvements that can help homes better withstand the kind of natural disasters that brought FANO and the city to their knees in the first place.
With climate change likely to bring future disasters to the coastal city, FANO's focus has to be on ensuring that the homes it finances have porous paving, strong roofs and other similar improvements, Burns said.
"It's really important to help somebody get their first home, but it's also important to make sure that their first home will be around for 15 or 20 years," he said.