1. A I D S H O U S I N G
O F W A S H I N G T O N
S E A T T L E 2 0 0 2
Put Your
House in Order
Securing Your Supportive Housing
Program’s Future through Effective
Asset Management
4. ACKNOWLEDGMENTS
AIDS Housing of Washington would like to thank the author, Kristina Hals,
for her diligent research and invaluable expertise in the creation of this
guide.
We would also like to thank asset management experts David Fromm of The
Enterprise Foundation and Judith Rose of the Local Initiatives Support
Corporation for their invaluable advice regarding the content of this guide.
The research, development, and publication of this manual was funded
by the Housing Opportunities for Persons with AIDS (HOPWA) National
Technical Assistance Program in partnership with the U.S. Department of
Housing and Urban Development’s Office of HIV/AIDS Housing. The
substance and findings of the work are dedicated to the public. The author
and publisher are solely responsible for the accuracy of the statements and
interpretations contained in this publication. Such interpretations do not
necessarily reflect the views of the Government.
5. PREFACE
1. Amos Tuck School
of Business, Dartmouth
College, Lecture at Lincoln
Filenes Institute on Com-
munity Development,
Medford, MA, 1999.
“Be careful what you wish for. Now that you have created housing, you have
the responsibility of owning and managing property. If you are going to be
a landlord, then you should be a good landlord. As a nonprofit, you don’t
have the financial cushion to do this work badly. Asset management of your
property is going to be a very significant enterprise. People who are in your
housing are dependent on you to hit your targets.”1
– John Vogel, Expert on Asset Management in Affordable Housing
6. SHOULD YOU READ THIS GUIDE?
This guide is intended for anyone with a role in managing supportive
housing. By “supportive housing,” we mean residences targeted to persons
with special needs such as HIV/AIDS, mental illness, substance abuse, and
other conditions that frequently occur with homelessness. Typically, such
settings combine housing with “supportive” services to stabilize and insure
the well-being of residents. If your group owns real estate that is used to
house and support special populations in this manner, this guide is written
with you in mind.
If you simply lease property for your housing program, this guide will be an
education in the long-term issues to anticipate, should your organization
buy its own real estate in the future.
Others who may have an interest are property managers associated with
supportive housing and contract managers or underwriters working for
institutions with financial investments in supportive housing.
WHAT WILL YOU LEARN?
The material presented here is an introduction to basic concepts of asset
management. It translates practices from the more mainstream field of
affordable housing to the specialized context of supportive housing.
It encourages supportive housing professionals to step outside their tradi-
tional vantage point of measuring success in the exclusive terms of today’s
tenants’ well-being. It includes specifics about predicting trends in your
property’s finances, operating more efficiently, using systems and tools to
improve operations, and tracking financial indicators. In general, the guide
provides ideas on how to think and operate more like a business. It also
presents the argument for why an asset management approach is necessary
to protect the long-term availability of supportive housing.
Asset management should not be mistaken for property management.
Although it may take some convincing on our part, you will learn to distin-
guish between these two different aspects of managing a property. Aspects
of property management are discussed in the guide but only insofar as they
intersect with ideas about asset management. For those looking for a guide
with more substance about property management, recommended resources
on this topic are listed in the Best Picks section at the back of this guide.
WELCOME
READERS OF
THIS GUIDE
• AIDS Housing
Providers
• Supportive Housing
Groups
• Property Managers of
Supportive Housing
• Boards of Directors for
Supportive Housing
• Contract Managers of
Supportive Housing
• Underwriters of
Supportive Housing
• Staff of Supportive
Housing
7. HOW SHOULD YOU USE THIS GUIDE?
First, browse this guide for the big picture of what asset management
means. Then, go back and read topics that appear to be realistic first steps—
or next steps—for your organization to begin asset management. Review other
parts of the guide with the expectation that you will not accomplish all tasks
at once. Expect to gradually build your asset management program over time.
Consult references at the back of the guide. At the back of this guide are
numerous Best Picks that you can access for additional information related to
your particular supportive housing program. There is a wealth of publications
on individual aspects of asset management; look for materials specific to your
particular housing group, whether you operate in a rural community, are
financed by low income housing tax credits, or function as your own proper-
ty management company. Worth exploring are the listings of trainings on
asset management just for nonprofit housing groups. As a next step after read-
ing this guide, consider educating a staff or board representative to become
your in-house expert.
Share this guide with colleagues. Once you are convinced of the need for an
asset management approach, spread the word. The more that AIDS housing
and supportive housing promote asset management, the better understood
will be requests for financial resources to carry it out. Bringing this guide to the
attention of supportive housing colleagues and board members, both inside
and outside your organization, will help the AIDS housing and supportive
housing communities develop long-term strategies for staying in business.
CAN YOU AFFORD TO WAIT?
Asset management is not a rainy day project. Those who have studied
trends in the long-term stability of affordable housing indicate that asset
management is an urgent agenda for all nonprofit housing groups.2
Research shows that if housing groups wait to introduce their organization to
asset management, problems affecting financial performance may gradually
grow to the point where they can’t be reversed quickly, or at all.
Pursue both agendas of creating and preserving housing with equal com-
mitment. Historically, there has been strong emphasis on creating affordable
housing. By comparison, preserving housing owned by nonprofit groups has
received relatively little attention. The concept of asset management is an
attempt to balance these two equally important agendas. It needs to be
applied to every sector of affordable housing.
Follow the lead of affordable housing groups doing asset management.
Traditionally, supportive housing groups have not identified closely with the
wider affordable housing movement. However, asset management is an agen-
da where supportive housing has considerable common ground with the rest
of the country’s affordable housing organizations. Supportive housing groups
should seek out opportunities to gain knowledge, resources, and momentum
on asset management generated by mainstream housing groups.
2. Rachel Bratt, Confront-
ing the Management Chal-
lenge: Affordable Housing in
the Nonprofit Sector. New
School for Social Research,
1994, p. 204. Available from
the Community Develop-
ment Research Center at
the New School for Social
Research.
W e l c o m e | 7
8. WHAT DOES ASSET MANAGEMENT MEAN?
Asset management is in favor with today’s government funders and
housing groups nationwide. It is a concept that is borrowed from private
sector real estate and is increasingly relevant to nonprofit providers of low-
income housing. Yet, despite its growing popularity, asset management is
poorly understood. Often confused with property management, few groups
know what asset management might involve for them or how they could
apply it. Supportive housing providers, particularly smaller organizations
with backgrounds primarily in social services, AIDS care, or homeless pro-
grams, seem least likely of all to know about asset management.
The term “asset” refers to a piece of real estate that has current and future
value. The asset management approach asks that you consider the proper-
ties you use for supportive housing in terms of their monetary value. Asset
management means taking the long view—meaning the next ten to fifteen
years—of whether your property’s value is stable, growing, or decreasing.
The idea is that things you do today will set the stage for financial perform-
ance tomorrow.
Conventionally focused on the short term, AIDS housing and supportive
housing groups in particular need to shift their perspective if they are to
adopt this long-term approach. Ultimately, the asset management mentali-
ty translates into concrete practices and policies that will protect and
enhance the viability of the asset’s future.
3. Bratt, p.86.
4. Bob Stone, “A Guide to
the Roles and Responsibilities
of an Asset Manager,” Occa-
sional Paper Series, Local
Initiatives Support Corpo-
ration, Organizational Devel-
opment Initiative, p. 3. New
York, 1997.
INTRODUCTION
“Asset management
involves planning for
the long-term con-
cern for bricks and
mortar...the long-
term economic and
physical viability of
the building.”3
“The group’s horizon
for planning,budget-
ing,and monitoring
must be extended
into the future.We
need to do things
today to make sure
real estate endures
as supportive hous-
ing and achieves its
goals to benefit as
many people as pos-
sible in the long
run.”4
9. WHY DOES SUPPORTIVE HOUSING NEED
ASSET MANAGEMENT?
Many supportive housing providers have “backed into” the real estate
business with minimal experience owning and managing property.
Before getting into housing, most of your organization’s background may
have been in delivering support services of one kind or another. In all like-
lihood, your agency became a property owner in response to a crisis of
homelessness among your service constituency. If you are like many sup-
portive housing groups, you have a social work orientation to your housing
work. While helpful in day-to-day management of residents’ needs, this pre-
disposes the whole organization towards short-term goals. Staff may turn
over with the relatively high frequency common among social service organ-
izations. This leaves your organization without a long-term “owner” with
memory of when the housing was created. These patterns diminish the long
view of where your program has been, in what direction it is going, and
what needs doing in the long run.
The financial structure of funding for supportive housing is a weak link.
Supportive housing has evolved from a series of specialized government
funding mechanisms that have relatively short commitments. Thus, many
supportive housing groups find themselves built upon insecure, time-limit-
ed resources without contingency plans, should this money dry up.
Although some groups have taken steps to build in more long-term financ-
ing, others are left with little monetary cushion and cannot afford to do
business badly. In these situations, careful monitoring of financial trends
through asset management is essential.
A mission of delivering transitional housing can mean financial vulnera-
bility. For the subset of supportive housing groups who provide housing on
a short-term basis, there are inherent financial problems that come with this
way of structuring the housing. High turnover rates of residents, while desir-
able from the perspective of these groups’ missions, result in many costs and
financial losses that are difficult to recoup. A compounding problem is the
fluctuating market for supportive housing groups who operate in a special-
ized niche such as HIV/AIDS housing. If you are a niche provider, changes
in the status of your target population may reduce the desirability of your
housing program in unanticipated ways and create financial losses until
your census recovers.
I n t r o d u c t i o n | 9
10. 1 0 | P u t Y o u r H o u s e i n O r d e r
WHAT DOES THE JOB ENTAIL?
The practice of asset management is made up of a number of discrete tasks. In
planning your approach, it may be helpful to think of the work in the for-
mat of a job description with certain tasks associated with the start-up of the
project and others involved with its ongoing implementation.
Job Description for Asset Management in Supportive Housing
Start-up
• Develop long-term asset management goals reflecting the individuality of
each piece of real estate used for supportive housing.
• Create a tailored asset management plan made up of policies for meeting
the unique needs of each individual property today, such that it will per-
form best tomorrow.
• Systematize operations for collecting data on the property’s operations
and finances with well-designed forms, databases, and software.
• Assess performance against standards in the nonprofit housing industry.
• Reevaluate existing arrangements for property management with an asset
management approach.
• Compare the financial performance of the property with indicators from
comparable properties in the affordable housing industry.
• Analyze trends if the property is losing money and develop solutions.
Ongoing Implementation
• Monitor income, expenses, and cash flows to track trends in financial per-
formance.
• Inspect conditions of the property and develop timelines that anticipate
capital costs and maintenance schedules.
• Budget using a ten-year spreadsheet of anticipated capital costs.
• Save or raise money to create reserve accounts as part of project develop-
ment, or fund as part of ongoing operations.
• Assess performance against standards in the nonprofit housing industry.
• Compare financial performance of the property with indicators from com-
parable properties in the affordable housing industry.
• Analyze trends where property loses money and develop solutions.
• Report at close intervals on indicators of the property’s performance.
• Communicate with boards of directors, investors, and government agen-
cies on the property’s status, performance, and long-term needs.
• Ensure compliance with all regulations, reporting requirements, and contracts.
• Anticipate the endpoint of funding programs and seek substitutes.
11. HOW IS IT NOT PROPERTY MANAGEMENT?
Asset management is a broader, longer-term activity than property man-
agement. Property management addresses day-to-day needs of the building
by carrying out rent collection, record keeping, and routine maintenance. Its
emphasis is on details and delivery of basic services. In contrast, asset man-
agement has an extended horizon for considering the property’s needs and
the big picture of performance trends over time. For example, this extended,
broader perspective includes creating a ten-to-twenty-year spreadsheet to
predict the property’s ability to pay for its long-range expenses, secure long-
term funding, and examine long-term values in the neighborhood.
There are areas of overlap between asset and property management.
Think of property management as a discrete, specialized activity within asset
management. For example, as discussed in the next chapter, your choices of
property management arrangements should be dictated by your broader
asset management approach. Typically, property management is at the top
of a housing group’s to-do list and asset management is at the bottom.
Understanding the distinctions between asset and property management is
the first step toward correcting this imbalance.
5. Maria Gutierrez and
John Vogel, “Nuts and Bolts
of Asset Management,” Pre-
pared for the Local Initia-
tives Support Corporation,
June 1998, p. 4.
6. Jim Stockard and Bob
Engler, “A Guide to Com-
prehensive Asset and Prop-
erty Management: Manual
for Building Communities
through Good Asset and
Property Management,”
Second Edition, Local Ini-
tiatives Support Corpora-
tion,1997, p. 173.
I n t r o d u c t i o n | 1 1
Asset
Management
Hiring and Evaluating Property Manager
Developing Asset Management Goals
Refinancing/Disposition Decisions
Tracking Standards,Benchmarks,Indicators
Managing Cash and Reserves
Fundraising
Communicating with Investors
Hiring Accountant,Lawyers,and Contractors
Property
Management
Rent Collection
Day-to-Day Management
Record Keeping
Financial Reporting
Routine Maintenance
Areas
of Overlap
Tenant Relations
Annual Budgeting
Capital Costs Study
Preventative Maintenance
Regulatory Compliance
Community Relations
Crisis Management
Security
AssetValue Increase
Asset Management and Property Management Roles5
Asset Management and Property Management Timeframes6
Years: 1 2 3 4 5 10 15
Asset Management
Property Management
12. 1 2 | P u t Y o u r H o u s e i n O r d e r
SUPPORTIVE HOUSING—ADVANTAGED OR DISADVANTAGED?
Supportive housing is in a unique financial position vis-à-vis the wider
affordable housing field. Your approach to asset management will need to
reflect the special strengths and weaknesses of this position. By noting
which ups and downs associated with supportive housing apply to your
program, you will unearth areas to both focus your concern and build your
confidence.
Upsides
In many cases, supportive housing
is free from any debt. Without
debt, there is no pressure from
banks that monitor performance
or impose required practices.
A preponderance of deep rental
subsidies associated with residents
who contribute minimally to rent.
These subsidies can offset losses
when residents do not pay rent
and mask inefficiencies of opera-
tions.
A preponderance of sponsoring
organizations with charitable or
social service missions. Typically,
such groups have the means of
fundraising to pay for unmet costs
in the supportive housing pro-
gram.
A total portfolio of a few small
properties makes it easier for asset
managers to follow the details of
each property.
Downsides
Without debt, there is no outside
agent to help detect problems in
your financial status. Groups that
are debt-free need to be self-moti-
vated and watch their bottom
lines.
Many deep subsidies come from
short-term federal funding mecha-
nisms. Reliance on these sources
may leave groups without access
to longer-term funding mecha-
nisms.
Subsidization from sponsoring
organizations is an unreliable
long-term strategy for meeting
costs. Housing needs to be struc-
tured so that it can pay for itself.
Lack of a large portfolio of diverse
properties leaves the organization
vulnerable to the impact of prob-
lem properties. Buildings operat-
ing at a loss cannot be balanced by
income from other real estate.
“The asset manager
of supportive hous-
ing must understand
that their project
may need to oper-
ate with a ‘planned
deficit.’But these
deficits are okay.
It is the unplanned
ones that are the
problem.”7
7. Brigitt Jandreau-Smith,
Corporation for Supportive
Housing.
Ups and Downs of Supportive Housing’s
Financial Position
13. DEFINE YOUR ASSET MANAGEMENT GOAL
Your asset management goal will dictate many of the decisions you
make. It will be the guiding principle for how you do business. It is not
to be confused with the programmatic goals your organization has estab-
lished for the services it delivers. Most supportive housing groups have a
goal statement related to desired changes in the status of their residents.
Asset management asks that you transfer that perspective to the property
itself. Ask what goals you have for the status of your property as an asset.
To begin, review what covenants exist for maintaining your building as
affordable AIDS or special needs housing and for what period of time.
For example, many supportive housing groups are obligated to maintain
their property as affordable housing for forty or more years as a condi-
tion of their financing. Housing Opportunities for Persons with AIDS
(HOPWA) requires a ten-year commitment to housing people with
AIDS.
Within the parameters of your covenants, define your asset manage-
ment goal. One group’s goal may be to maintain a building as AIDS
housing for as long as the HIV epidemic continues and to build an addi-
tion for a day care center onto the property. Another group may intend
to sell their building in the next five years to take advantage of the neigh-
borhood’s increased real estate values and adjust their housing model to
changes in their target population’s needs. They may want to use rev-
enues from the sale to create a larger, mixed special needs housing pro-
gram in a nearby neighborhood.
Exercise in Developing Your Asset Management Goal
As an exercise, it may be helpful to think about goals for another asset that is common-
ly owned,such as a boat.A new boat is purchased with any one of several possible goals
of how it will be used. Perhaps the owners want to preserve it as a showpiece to be
passed along to future generations. Or perhaps they want to race it in regattas and sail
around the world. Depending on their goal, the boat’s owners will spend money differ-
ently and keep track of different aspects of its performance and wear and tear.Similarly,
if you are to plan how you will maintain and monitor the building you use for supportive
housing,you need to have a clear long-term asset management goal in mind.
BEFORE YOU START
14. START TO THINK LIKE A BUSINESS
The asset management approach requires an unfamiliar shift in roles.
You will need to take off your social worker and social activist hats for a
moment. Pretend you work in the private sector where work is conceptual-
ized in terms of bottom lines. In the private sector, you learn to keep your
eye on the bottom line: profits.
In supportive housing, you are trying to balance two bottom
lines: (1) meeting your costs and (2) providing the best possible
services on a day-to-day basis. This is known as the “double bot-
tom line.” In many cases, these two commitments compete with one
another, such as when more expensive programs are desired but the
budget cannot support them.
The asset management approach offers a different perspective on the
double bottom line. It suggests that the two goals of excellent service deliv-
ery and cost efficiency can complement one another. Try to reconceptualize
your approach to services from a business perspective; see how effective
social services can strengthen the bottom line. For example, programs such
as case management, relapse prevention, workforce participation services,
and personal budgeting encourage residents to have lower impacts on your
property. That is, they ultimately save you money. On the other side of the
equation, residents who are helped to increase their earnings may reduce
the amount of subsidy that comes in to the building from public funds.
Thus, there are many variables to consider.
1 4 | P u t Y o u r H o u s e i n O r d e r
Example of the “Double Bottom Line” Approach
AIDS housing offers a good example of the merits of thinking in terms of the “double
bottom line.”There is a current trend toward residents’unprecedented independence from
home-based support services observed nationwide. In modifying programmatic models
to better fit residents’changed status,AIDS housing providers need to consider what is good
business. If they simply cut back on support services in response to this new pattern, they
may set off trends that deteriorate the property’s financial status. For example, having
fewer case managers may reduce regularity of rent payments, lead to higher turnover of
units, and allow more damage to the property to occur. When problems compound them-
selves over time,these results may cost more money than the investment in consistent sup-
port services. Ideally, AIDS housing providers will learn to give both bottom lines equal
weight when making these kinds of choices.
15. B e f o r e Y o u S t a r t | 1 5
ANSWER SOME BASIC QUESTIONS
A good simple exercise to get started in asset manage-
ment is to sit down with your accountant and look at the
income statements for your property. Explore the simple
questions outlined below. Your answers to these questions
should help ignite concern for how you can continue to
provide a clean, safe, and comfortable environment, if you
don’t start evaluating and planning how to manage this
asset over the long term.
Simple Questions for Your Accountant
• Does our supportive housing program meet its costs now?
• If there is a larger sponsoring organization, then what size subsidy is the
larger group contributing to keep us in the black?
• How much government subsidy does our program receive? What is the
likelihood that it will be renewed?
• Is subsidization of the housing program growing each year?
• Is the sponsoring organization in a reliable position to maintain this subsidy?
• What factors are causing the property to lose money?
• What specific system upgrades would reduce our operating costs?
• Does our program have operating reserves for planned deficits? How long
will they last?
• Are there any costs showing unanticipated increases?
• Is the tenant rental income stable or does it fluctuate from month to month
or year to year?
• How much do we write off on average for failing to collect at least 90 per-
cent of rent contributions each month?
• How long does it take on average for us to fill a unit after it is vacated?
• What is our average vacancy rate?
• Do we know what big-ticket (capital) expenses are likely to accrue and
when?
• Is there money in reserve accounts for unanticipated operating deficits
and longer-term major improvements that may be needed for the property?
• Are we underinsured or do we have an insurance deductible that is bur-
densome?
• Are we insured against local hazards, such as earthquakes, that could
expose us to high repair costs?
• Do we know of any code upgrades our property currently needs?
• Do the owners of this property (e.g., the board) know the answers to these
questions?
16. A Guide to Comprehensive Asset and Property Management. . . . . . . . . . . . . $13
Nonprofit Housing and Management Specialist Course. . . . . . . . . . . . $800
Asset Management Training Curriculum . . . . . . . . . . . . . . . . . . . . . . . . $100
Selecting a Management Firm: Workbook and Sample Forms . . . . . . . . . . . . $11
Build a Manual Software Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $65
TrackPro Software. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,500
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,489
See Best Picks at the back of this guide for details on where to obtain these items.
FIND A LITTLE MONEY TO START
Getting started on asset management will not be a costly endeavor. Your
initial expenses will be modest investments in training, publications, soft-
ware, etc.
1 6 | P u t Y o u r H o u s e i n O r d e r
Larger organizations may want to put a line item in their budgets for per-
sonnel costs associated with asset management, perhaps an amount
equivalent to one-quarter of a full-time management-level employee. If you
can’t find the money in your budget, look to your local community develop-
ment or housing agency for “one time only” seed grants to get you started.
Sample Starter Kit on Asset Management
17. FIND MORE MONEY AS YOU GO
Plan on needing some grant money to do asset management. As your
group begins to implement asset management practices, the need for money
will become evident. In particular, raising money to invest in reserve
accounts is perhaps the biggest financial obstacle to overcome without some
external source of subsidy.
It is worth noting the precedents for grant making in support of asset man-
agement. Mainstream affordable housing groups have received various
forms of financing, usually from national intermediary groups, to do this
work over the last decade.8 Explaining this history is a good starting point
for arguing your case with potential funders.
You may want to partner with other supportive housing groups in your
region to organize efforts to raise money for asset management and, in par-
ticular, for reserve accounts. As a group, you would be in a better position to
approach local government officials and sources of private financing in your
community about the need for resources.
The Need for Incentives
“There is always a conflict between spending on your operations and committing to your
capital reserve in this business. It’s tough. I know of a foundation that created a matching
fund for youth centers, in which groups that saved money to improve their buildings were
given an equivalent amount in grants. Maybe this could be replicated for supportive
housing.”
—Terry Gagnon, Director of Finance, Paul Sullivan Housing Trust 9
8. Bratt, p. 191.
9. Terry Gagnon, Direc-
tor of Finance, Paul Sullivan
Housing Trust.
B e f o r e Y o u S t a r t | 1 7
18. DELEGATE ASSET MANAGEMENT RESPONSIBILITY
There are many ways to delegate the responsibilities of asset management.
Your choices will depend on the size and skill of your staff. Perhaps your
organization’s busy schedule makes it seem that there is no choice at all. In
fact, many supportive housing groups believe that asset management will be
an extra burden that their organization cannot bear with their current
staffing. But, in all likelihood, it will just require thinking creatively about
how the work can be accomplished. Keep in mind that asset management
is the responsibility of the actual owner—your agency’s board of directors—
so the work should be done as close to the hierarchy of the board as possible.
How One Supportive Housing Administrator
Became an Asset Manager
Don Maison, President and CEO of AIDS Services of Dallas (ASD), heard
about the concept of asset management from colleagues operating afford-
able housing in his region of Texas. Interested in improving the perform-
ance of his organization’s housing, Don followed a recommendation that
he enroll in a four-day class to become a Nonprofit Housing Management
Specialist (see Best Picks at the back of this guide). The course appealed to
Don’s belief that there is much to be learned about nonprofit housing out-
side the AIDS housing field.
While it involved travel and time away from his organization, the course
proved worthwhile. Most importantly, it offered Don exposure to basic con-
cepts, such as replacement reserves and capitalization rates, as well as strate-
gies such as computing net operating income. He felt his overall compre-
hension of asset management components improved. “It is nice to be
exposed to what these terms mean when discussing financial issues with
real estate attorneys and funders.”
Don returned to Dallas with some forms and tracking sheets that he shared
with the facilities and maintenance staff of his organization. As a result, the
staff changed how they track work orders and “make-readies” (getting units
ready for new tenants). In general, he raised the staff’s consciousness about
the importance of tracking what it costs and how long it takes to turn over
and lease-up units. The staff now understand that this is an area where
money is saved or lost. However, because each of ASD’s properties operates
on a unique model of housing, Don finds that the condition of his proper-
ties varies so much from one to the next that national standards don’t apply.
On an ongoing basis, Don consults a publication from Local Initiatives
Support Corporation, “Guide to Comprehensive Asset and Property Man-
agement” (see Best Picks), to learn about asset management or to refresh his
memory. He finds it well organized and easy to look up any topic and find
quick answers.
“What is important
is not who takes on
the role but that it
is taken on explicit-
ly by someone and
that the organiza-
tion finds ways to
support the func-
tion.”10
1 8 | P u t Y o u r H o u s e i n O r d e r
10. Stockard and Engler,
p. 176.
19. Don is growing naturally into the role of asset manager for his organization.
The board of directors falls into the role of oversight and buy-in of his work.
Next steps in asset management for AIDS Services of Dallas include research-
ing and purchasing some kind of software to improve property management
(see Best Picks). Currently, they use Excel. Don plans to explore LISC’s
“Track-It!” software, which is designed to produce reports on asset manage-
ment for nonprofit housing providers.
The creation of replacement and operating reserves for all ASD properties is
also on Don’s longer-term agenda. As required by one of the organization’s
funding mechanisms, the Low Income Housing Tax Credit Program, one of
the organization’s properties already has such a reserve. Although he has yet
to find the time or resources to expand this standard to all the properties,
Don now better understands the need for them.
Like those of most AIDS housing organizations, ASD’s properties do not
meet their costs independent of the organization’s reserves. AIDS Services of
Dallas has been fortunate over the years to “tap into a lot of freebies” and
benefit from successful capital campaigns. Nevertheless, this is not a secure
plan for doing business. Don’s long-term strategy for getting ASD properties
to pay their costs is to diversify the organization’s real estate portfolio to
include non-special needs housing that will have a healthier cash flow than
AIDS housing. He believes all supportive housing groups need to become
more familiar with funding streams that are not dedicated to AIDS, home-
less, or special needs populations (see Best Picks). “Were it not for HOPWA
[Housing Opportunities for Persons with AIDS], what does the future hold
for small AIDS housing groups reliant on these narrow resources?”
Don’s example points to the benefit of becoming educated about asset man-
agement through the many courses, printed materials, web sites, and soft-
ware packages that exist outside the supportive housing field. His work also
demonstrates that introducing asset management is likely to be a gradual
process that will build over time.
Options for Delegating Asset Management11
a. For small organizations, the executive director may make recommendations and the
board make decisions.
b. A new trend in larger nonprofits is to have a full-time asset manager on staff.
c. Middle-sized organizations may have the housing director serve as asset manager in
addition to other responsibilities.
d. The property manager may be delegated asset management functions if the indivi-
dual or firm has the necessary experience to do so.
11 Stockard and Engler.,
p.169–180
B e f o r e Y o u S t a r t | 1 9
20. PLAN FOR ASSET MANAGEMENT TO BE TAKEN SERIOUSLY
Making sure asset management is taken seriously may require some formal
steps to heighten the awareness of personnel in your organization. For a
moderate-sized housing organization, it is estimated to take approximately
23 hours a month to do asset management.12
How to Emphasize Asset Management
through Job Structure13
a. Add the terms“asset management”to a job title.
b. Provide time and money for training staff in asset management.
c. Redistribute existing job responsibilities to asset management tasks.
d. Take the asset manager seriously by making time for asset management reports.
Distribute reports.Use reports in key decisions.
e. Raise the salary of the staff member designated as the asset manager.
12 Workshop: Nuts and
Bolts of Asset Management,
Lincoln Filenes Center for
Community Development,
Tufts University, 1999.
13 Stockard and Engler,
p. 176.
2 0 | P u t Y o u r H o u s e i n O r d e r
21. EDUCATE YOURSELF
Invest time in reviewing materials about asset management. Realize that
this guide is a basic primer. Many more detailed resources about asset man-
agement are available and are listed in Best Picks at the back of this guide.
In recent years, several national organizations have collaborated on devel-
oping trainings, publications, and conferences on asset management
in the nonprofit housing sector, all of which are available at afford-
able prices.
Questions to Anticipate from Staff
HOLD A MEETING
Expect that it will take some focused time to introduce the concept of
asset management to staff and board members. Set aside a special meet-
ing to cover the topic well the first time. You want to convey that while staff
and board may identify strongly with the nonprofit sector, by virtue of work-
ing in housing they have crossed over into the business world. If the organi-
zation’s assets (its housing resources) are going to be protected and reach
their full potential, everyone will need to be business savvy.
In meeting with staff, plan a presentation that works for the diverse back-
grounds and learning styles that are especially common in supportive hous-
ing organizations. Try using a variety of approaches, including small group
discussions, to help them grasp your message. Conclude your meeting by
outlining the first steps your organization will take and their anticipated
time frame.
FIRST STEPS
a. What does asset management mean?
b. How does it differ from property
management?
c. Why is it important?
d. What will it entail to start?
e. How will this affect our current jobs?
22. Questions to Help Generate Staff Discussion on
Asset Management
• “How many of you can think of a special needs housing program of some
kind that has gone out of business in our community? What problems
contributed to its demise? What do you think the sponsor could have
done differently to avert these problems? What lessons for our work can
we take from these observations?”
• “If you joined an Internet start-up company with employee stock options,
what would you want to know before you took the job? How would you
evaluate whether to stay with that company? How would you obtain the
information you need to make your career decision? What parallels exist
within this context and how should staff of our organization evaluate the
status of our properties?
START A BINDER
Experts recommend that housing groups create detailed Asset
Management Plans. Don’t mistake the need for such a plan as an empty
formality. Basically, the Asset Management Plan is a collection of written
strategies and policies for how the property will be administered.
Think of your Asset Management Plan as a work in progress. A simple
way to approach the task is to put in writing all the decisions that are made
along the way. Then create a binder with tabbed dividers and add elements
as your asset management work progresses. Have copies of the plan avail-
able at each of your sites.
The objective of the plan is to transform your hard work into a lasting
tool and standard that can be passed on to staff members who inherit the
responsibility of preserving your housing program. Whatever format you
follow, taking the time to write down how things get done is a worthwhile
investment of your time and energy. If your organization is like most sup-
portive housing organizations, it has a relatively high rate of turnover at the
managerial level. The Asset Management Plan will outlast such personnel
changes and pass on a permanent standard.
2 2 | P u t Y o u r H o u s e i n O r d e r
23. WHAT GOES IN AN ASSET MANAGEMENT PLAN?
An Asset Management Plan need not conform to any standard or model.
It is primarily an internal document and its workability should reflect that.
You can follow the recommended format below or, alternatively, invent
names of elements that are most relevant to your particular housing group.
Note that a good Asset Management Plan makes a strong impression on fun-
ders and underwriters. They will gain confidence in your operations from
reading it on their visits to your site.
Contents of the Asset Management Plan14
a. Goals explaining why you own and provide supportive housing
b. Finance Plan containing your initial pro forma and a twenty-year spreadsheet
for operations
c. Copies of legal documents that have covenants that need to be monitored (e.g.,
Funding and Disbursement Agreement)
d. Monitoring Strategy detailing how you will study financial trends and upkeep
of the property
e. Annual Budget compared to Actual Comparisons
f. Updated Pro Forma Budgets that capture information that changes over time
g. Property Management Plan outlining the day-to-day operations of the building
h. Finance Plan enumerating all funding sources and obligations
i. Long-Range Capital Plan explaining the intended sources that will pay for major
costs in the future
j. Resident Participation Plan encouraging involvement of consumers in oversight
of the housing
k. Resident Selection Plan defining the eligibility and tenant-screening criteria and
process used for applicants to your program
l. Preventative Maintenance Plan outlining detailed plans for maintaining major
building elements in good working order
14 Workshop: Nuts and
Bolts of Asset Management.
F i r s t S t e p s | 2 3
24. SPECIAL WORDS ABOUT THE PROPERTY MANAGEMENT PLAN
Fundamental to all the written policies will be your Property Manage-
ment Plan. The Property Management Plan explains how the building will
be managed on a day-to-day basis and what standards are expected. Hous-
ing experts say that before longer-term asset management can be achieved,
the Property Management plan must be perfected.
Every housing program will have its unique property management
needs. Variables influencing these needs include the target population,
security issues, marketing dynamics, support services, and lease provisions.
Given these variables, you will find that copying a generic property man-
agement plan is not a good idea. Experts recommend that you create a plan
to represent your specific tenant clientele and to meet your particular goals.
Find a general model of a plan you like and then carefully tailor your own
documents for each housing program you operate. See Best Picks at the back
of this guide for publications and software that can help you create a fine-
tuned Property Management Plan.
2 4 | P u t Y o u r H o u s e i n O r d e r
25. F i r s t S t e p s | 2 5
Asset Management Advice Column
Dear Advice Guru,
I am the director of housing programs for a large social service agency. Among the
programs I manage is a small multi-family property used as special needs homeless
housing. The property was bequeathed to my organization, which is primarily a
social service provider, before I started working here. When they received it, my
organization had no experience, or strong interest for that matter, in managing
rental property. As a result, I inherited the job of managing the building with noth-
ing in writing and skeletal systems in place. While the building is in good condi-
tion and the residents are generally very satisfied and stable, the long-term outlook
for the property is vague. Our income does not begin to meet our costs, so my organ-
ization must contribute money from its own reserves. There are questions about how
long this can continue. In this vacuum of clarity, management is a challenge. It is
hard to know how to make decisions regarding improvements, clarify my role, plan
for the building’s long-term needs, and balance the double bottom line of excellent
service delivery with cost efficiency. What should I do?
Sincerely,
Housing Director
AIDS Series Committee, your town
Dear Housing Director,
You’ve come to the right place. If things continue along their present course, your
organization will probably be forced to sell its property some time in the future and
the residents will lose their home. Your organization needs to begin an Asset
Management Plan. Start with writing a Property Management Plan right away.
Put everything you do now—tenant issues, maintenance, grievances, rent collec-
tion, inspections, etc.— in writing right away. The more detail and specificity, the
better. Then take your work, your concerns, and literature about asset management
to a meeting with administrators of your organization. Make your case for the asset
management approach and ask that your efforts be supported.
Advisedly,
Your Guru
26. a. Marketing and Outreach Strategies
b. Eligibility Requirements and Required
Documents
c. Tenant Selection Screening
d. Credit Check Process and Fees
e. Waiting List Practices
f. First and Last Month Rent/Security
Deposit Policy
g. Leasing Procedures
h. Move-In Procedures
i. Tenant Orientation
j. Common Space and Building Rules
k. Parking
l. Community Relations
m. Resident Involvement Practices
n. Drug Policies
o. Guest/Visitor Policy
p. Pet Policy
q. Storage Policy
r. List of Furnishings
s. Pest Control Practices
t. Unit Inspection Practices
u. Cleaning Practices
v. Grievance and Complaints Policies
w. List of Maintenance Priorities
x. Work Orders
y. Unit Turnover
z. Security
aa.Forms and Permits Required by
City/State/County
15 Workshop: Nuts and
Bolts of Asset Management.
2 6 | P u t Y o u r H o u s e i n O r d e r
Table of Contents for a Property Management Plan15
27. EVALUATE YOUR PROPERTY MANAGER
Reevaluate your current arrangements for property management with
the asset management approach. Whether to self-manage or contract out
property management is a key decision. This is because bad day-to-day
management situations can be damaging to the long-term status of a
property. You may assume that as an organization’s portfolio of housing
grows, property management is typically moved inside. However, many
nonprofit housing groups have not followed this evolution.16 There
are no definitive rules.
Property Management Options
a. Manage property internally within your organization.
b. Hire a consultant to help with setting up an internal property management team
and systems such that you can self-manage your property.
c. Hire a private company to be your ongoing property manager.
d. Hire another nonprofit organization specializing in affordable housing to be your
property manager.
Communication with your property manager is key. Ideally, whether in-
house or contracted out, the relationship between asset management and
property management should be close and organized by a system of antici-
pated reports, site visits, and meetings. Problems occur when in-house prop-
erty managers are micromanaged by administrators. Instead of overinvolve-
ment in the minutiae of property management activities, administrators
should use information provided by the property manager to gain a per-
spective on the bigger picture of the property’s performance and the agency’s
goals.
If you choose to self-manage, do so with realistic expectations. Don’t do
self-management primarily as a cost-savings strategy. Furthermore, don’t
assume you will get better results. Nationally, there is no conclusive evidence
that housing groups have better success, or even lower costs, with inside,
rather than with contracted management. However, there is a good argu-
ment for self-management: to be more familiar with your residents’ lives. If
you follow the self-management route, be sure to use benchmarks (dis-
cussed in the next section) that will help you keep spending on desired serv-
ices within limits that your program establishes.
16 Bratt, p. 75.
F i r s t S t e p s | 2 7
28. Criteria for Deciding Between Inside and Outside
Property Management17
a. Availability of outside management agents, including other housing nonprofits or
housing authorities in your area
b. Private managers’willingness to work with a nonprofit client
c. Pressure from your financing agents to“go outside”for management services
d. Your interest in staying close to your residents’day-to-day lives
IF YOU CONTRACT OUT PROPERTY MANAGEMENT
Those who contract out property management have special concerns. If
you follow this route, make sure that your organization does not divorce
itself from the property so much that you lose track of information needed
for asset management. In addition, think through the criteria by which you
will evaluate your property manager. Expect more than the minimum yard
work, painting, exterminating, etc. Communicate that you want the proper-
ty manager to contribute value to your asset.
The selection and contracting process sets the tone for your relationship
with your property manager. Try to come across as professional and knowl-
edgeable. A formal process to choose your vendor will help give this impression.
Recommended Steps for Choosing a Property Manager19
a. Do outreach to property management firms.
b. Prepare a formal request for proposal.
c. Review and evaluate the proposals with a ranking sheet.
d. Check references.
e. Look for experience with the U.S.Department of Housing and Urban Development
housing programs.
f. Review their presentation of financial data for other projects.
g. Compare administrative fees among management firms.
h. Negotiate a deal to suit your specific project and goals.
i. Educate your property manager about the particular needs of the residents you house.
j. Outline the criteria on which the property manager will be evaluated.
Be vigilant in your checks and balances of property management ven-
dors. As an industry, property management suffers from a reputation of ille-
gal activities such as kickbacks. Plan on verifying the property manager’s
work by visiting the site and checking with residents on a regular basis.
“You are not simply
a community group
dabbling in housing
and desperate to
find someone to
solve management
problems.”18
17 Ibid.
18 Joan Wallstein,
“Selecting a Management
Firm: A Workbook and
Sample Forms,” Occasional
Paper Series, Local Initiatives
Support Corporation, Orga-
nizational Development
Initiative, 1996, p. 11.
19 Ibid., p. 5.
2 8 | P u t Y o u r H o u s e i n O r d e r
29. GET ORGANIZED
Asset management involves tracking indicators and monitoring trends in
the property’s performance. Gathering these data in a timely, organized,
and efficient fashion is key. Designing your system for data keeping may
bring the kind of satisfaction one gets from a well-organized basement.
Every piece of information has its place and is easily located. To get there,
you will need different kinds of forms. Some will record daily information
such as move-ins/move-outs and work orders. It is also useful to have forms
that summarize information such as capital improvements that will be nec-
essary over the next ten years.
Well-designed forms are essential for managing data about your proper-
ty. Supportive housing providers often use simple systems such as entering
all their data into an Excel spreadsheet. Switching to more carefully crafted
schedules and forms may produce more organized and thorough informa-
tion from which to make your analysis. For example, poorly structured rent
schedules are a common problem in supportive housing that can be easily
fixed with the right format.
A number of ready-made prototype forms have been developed specifi-
cally for nonprofit housing groups to use. They save time and offer a variety
of ideas about how to collect information. See Best Picks at the back of this
guide for a list of publications and software you can purchase that come
with ready-made forms both in hard copy format and on diskette. Among
the many useful forms available is one for creating a Monthly Asset
Management Report, available with Track-It! software. You can also create
your own with contents similar to those outlined below.
F i r s t S t e p s | 2 9
30. 20 Track-It! Asset Manage-
ment Software Instruction
Guide, Local Initiatives
Support Corporation, 1998,
p. 21.
3 0 | P u t Y o u r H o u s e i n O r d e r
Contents of a Monthly Asset Management Report20
Net profit per unit Occupancy rate
Total operating expenses Average unit turnaround time
Budget to actual expenses Turnover rate
Capital reserve contribution per unit Families on wait list
Collection rates Average unit preparation time
Tenant receivables per unit Work order backlog
Subsidy receivables per unit Average work order
completion time
Accounts payable per unit Percentage of units in arrears
31. 21 Terry Gagnon, Paul
Sullivan Housing Trust.
START RESERVE ACCOUNTS
Creating reserves may be the single most important step in asset man-
agement. By investing money into reserve accounts today, you will have
funds to pay for expenses that will occur in the future, whether anticipated
or not. This source of financial security will avert the financial problems and
disruptions to operation that occur when housing groups encounter expens-
es that cannot be covered by operating income, as they inevitably do. As
with any form of savings, reserve accounts require doing without money in
the short term so as to create long-term security. Similar to saving for a
child’s education, it is best to start making contributions as early as possible.
Typically, you make monthly deposits into each of these cash reserves in a
standard amount. These funds grow over time to give your organization
more value for its investment.
Supportive housing has few examples of ample reserve accounts. In fact,
for some supportive housing organizations, they are an unknown. If yours
is a housing group that does not even meet its existing costs, it may be dif-
ficult to imagine finding the money to squirrel away into reserves. These
adverse conditions require a concerted effort if supportive housing groups
are to catch up to other parts of the housing sector in protecting their assets
through reserve accounts.
Low Income Housing Tax Credit properties have a better outlook. Groups
with this form of financing are an exception. For one, they are mandated to
contribute a portion of their operating budget to a reserve account. In addi-
tion, this program allows for a Support Service Reserve to be included in the
capital budget.
If you do not have Low Income Housing Tax Credit funding, you will need
to experiment with your budgets to determine whether it is permissible to
use the grants you receive for reserve accounts. Alternatively, consider chan-
neling a portion of your residents’ rent contributions directly into your
reserves.
“Regardless of how
well or poorly
endowed your hous-
ing group is, there
will always be a ten-
sion between spend-
ing on operations
and contributing to
reserves.”21
F i r s t S t e p s | 3 1
32. Four Reserve Accounts for Supportive Housing
a. Social Service Reserve—Puts aside funds equivalent to a percentage of your social
service budget to be used to continue seamless service delivery.It protects against an
unexpected reduction or termination of funding for services.This reserve also allows
you to bridge gaps in funding when one source dries up and another takes its place.
b. Operating Reserve—Puts aside funds equivalent to a percentage of your day-to-day
operating budget to pay for unanticipated increases in operating expenses.Examples
include spikes in the price of your property taxes, utilities, or insurance.This reserve
allows you to meet such costs without throwing your operating budget out of kilter.
c. Capital Reserve (also called a Replacement Reserve)—Puts aside contributions equiva-
lent to a percentage of the total replacement cost of your building.It is used to pay for
repair and replacement of elements such as roofs, elevators, etc.The rationale for a cap-
ital reserve is that eventually your building is going to cost you money you don’t have.
d. Rental Subsidy Reserve—Puts aside money to be used when rental subsidies are short
term and the provider wants to ensure that the target population can be served for a
longer period.It can also be used when no other subsidy is available for a unit.
3 2 | P u t Y o u r H o u s e i n O r d e r
33. “Do not turn away
from the establish-
ment of a capital
reserve—it will not
go away.Do not let
the account slide.
This would be sign-
ing a death warrant
for your property.If
necessary, cover the
need in phases.But
do cover the need.”24
22 Bratt, p. 86.
23 LISC, p. 119.
24 Text from Institute
for Real Estate Management
Course #305, p. 16.
PLANNING YOUR CAPITAL RESERVE
The need for a capital reserve deserves special priority. Research into the
longevity of affordable housing resources reveals that groups who lack ade-
quate capital reserves have an uncertain future.22 For-profits in the real estate
industry have heard this warning and are generally better prepared to pay for
what they will need. The practice of saving large sums of money in a capital
reserve generally runs contrary to common practice in nonprofit housing,
where practitioners are constantly trying to do more with less. Reserve plan-
ning is an area where nonprofits would do well to mimic more closely their
for-profit counterparts.
Start your capital reserve by estimating savings goals for the amount of
money you want to accumulate and maintain in your reserve. Keep in mind
that moderately rehabilitated properties will need capital infusions much
earlier than buildings developed as new construction or complete rehabili-
tation. All the major elements of your property will ultimately need repair
or replacement.
Two Ways to Estimate Savings Goals for a Capital Reserve
1. The simplest strategy is to adopt the nonprofit housing industry’s standard of accumu-
lating savings equivalent to 5 to 20 percent of your property’s replacement value.23
Because major components may need replacement sooner, moderately rehabilitated
buildings will require a higher percentage set aside than either new construction or
substantially rehabilitated property.To calculate, consult your property insurance carrier
each year for an updated estimate of the replacement value for your property.A draw-
back to this method is that it doesn’t project anticipated expenses along a timeline,
leaving you without a sense of when your savings goals must be met.
2. The most thorough strategy is to conduct a capital cost study of all the major elements
of your building and predict both the life expectancy of each element and the future
replacement costs.Use these calculations to estimate the total amount of the capital
reserve goal and the timing of future outlays.See the following page for a breakdown
of steps in such a survey.
F i r s t S t e p s | 3 3
34. Major Building Elements of a Capital Cost Survey
Steps of a Capital Cost Study
1. Find a knowledgeable person, such as a general contractor or experienced facilities
manager, to do a walk-through of your property and evaluate major elements.
2. Realize that a contractor, who will look at your building free of charge, may overesti-
mate the work needed.A building inspector will charge a fee but will provide a more
reliable estimate.
3. Ask for written estimates on the life expectancy of each of your building’s major
elements.
4. Research the cost of replacement for each element.Local vendors are probably best
at answering questions pertaining to replacement costs for major appliances and
systems.
5. Pull all this information together in a spreadsheet that maps out the anticipated
costs over time according to your predictions.
6. Tabulate the costs to provide at least a ten-year analysis of your anticipated capital
needs.Some groups go so far as to calculate twenty-year spread sheets.
7. Match the anticipated capital needs with the reserves you have accumulated to date.
The difference will give you saving goals for your capital reserve.
Regional Capital Cost Study
“Our housing organization does have an operating reserve but, unfortunately, no
capital reserve to tap for major building improvements. However, here in
Connecticut, we are lucky in that there was an initiative to create a statewide bond
fund to pay for major capital expenses in HIV/AIDS housing. First, there was a
process of systematically assessing the needs of all the properties. Then the state
floated a general obligation bond to pay for those repairs and refurbishment. For
us, this has been a great resource.”25
a. Roof
b. Exterior paint, siding
c. Windows
d. Furnishings
e. Elevators
f. Heating systems and
water heaters
g. Air conditioning
h. Plumbing
i. Wiring
j. Carpets, flooring
k. Security systems
l. Required system
upgrade
m. Major appliances
n. Weather protection
o. Trees, shrubs
p. Fire extinguishers,
alarms
q. Compactors, dumpsters
25 David Mensah,
Connecticut AIDS Residence
Program.
3 4 | P u t Y o u r H o u s e i n O r d e r
35. Exterior Building Component Analysis (for 2001)26
Item Cost Life
Roof – pitched $.75/sq.ft. plus $1.00 per 15 years
sq.ft. for plywood repair
Roof – flat $2.50/sq.ft. 12 years/10 in
extreme climates
Siding – vinyl $1.50/sq.ft. Indefinite if good
and aluminum material and if cared for
Siding – hardboard $1.00/sq.ft. Indefinite
Painting $.50/sq.ft. 5 years
Paving $.60/sq.ft. 15 years
Interior Building Component Analysis (for 2001)27
Item Cost Life
Boiler/Furnace Variable Indefinite if maintained
properly
Heating – individual Variable Gas – Indefinite
units Electric – 20 years
Air Conditioning – Variable 15-18 years
central
Air Conditioning – $600/each 15 years
individual
Hot Water System – Variable 15 years
central
Hot Water System – $240 each 12 years
individual
Elevators Variable Indefinite – 30 years
26 Institute for Real Estate
Management Course #305.
27 Ibid.
F i r s t S t e p s | 3 5
36. 28 Institute for Real Estate
Management Course #305.
3 6 | P u t Y o u r H o u s e i n O r d e r
Interior Small Items Building Component Analysis28
Item Cost Life
Carpet in units $10/sq.yd. 12 years
Carpet in 8 years
common areas
Tile in units $10/sq.yd. 18 years
Tile in common areas 12 years
Cabinets $150/linear foot 18 years
minimum
Ranges $400 minimum 15 years
Refrigerators $350 minimum 15 years
Disposals $75 12 years
Exhaust Fans $80 8 years
Dishwashers $410 minimum 8 years
Washers $410 10 years
Dryers $300 minimum 12 years
37. THE NEED TO COMPARE YOURSELF
The affordable housing community has agreed upon certain perform-
ance standards towards which nonprofits can strive in the way they do
business. These performance standards prompt an organization to
push itself towards optimum efficiency and financial stability.
Performance standards are not to be confused with service
delivery standards. In fact, in many cases the performance of the
asset can be hidden from tenants, who may feel well served
and satisfied with their experience in your supportive housing
facility. A program may be functioning at a high level in terms
of service delivery despite problems with performance.
To date, no special performance standards have been created just for sup-
portive housing. However, there are some documents spelling out “stan-
dards of care” for supportive housing. If you obtain these documents, you
will find some recommendations related to asset management issues that
will be worth your attention. Consult Best Picks at the back of this guide for
a listing of standards-of-care publications.
For now, supportive housing groups need to look outside their own
housing niche for performance standards. As there are, to date, no official
standards for the specialty of supportive housing, you will need to start by
consulting those of the broader field. Note those standards with which your
group is consistently out of line. Ask yourself if there is anything about the
profile of your housing that makes these standards not applicable. Consider
adopting those standards that seem relevant to the context of your work and
write them into your Asset Management Plan.
RISE TO THE STANDARD
38. PERFORMANCE STANDARDS TO CONSULT
Performance Standards re: Budgeting
a. The budget is developed annually and reviewed monthly.
b. An income and expense report is produced and revised monthly.
c. The operating budget is sufficient to cover all expenses.
d. Variance between spending and allocations in your annual budget is within 10%
for the year.
e. Total operating expenses are less than 90% of your income.The remaining 10%
of income is put into an operating reserve.
f. A capital reserve is maintained, equivalent to 5% to 20% of the estimated value
of your property.
g. An operating reserve is maintained, representing between 10% and 25% of the
annual operating budget, depending on how much cash flow is generated after
debt service.
h. A supportive service reserve is maintained, equivalent of 20% of your annual
supportive service budget.
i. Expenses incurred once or twice in a year are divided into twelve monthly
increments in the annual budget.
Performance Standards re: Leasing
a. 95% of your rental units are occupied at all times.
b. 95% of your rents are collected from tenants by the middle of the month.
c. Your waiting list is updated every three months.
d. Five active applicants are on the waiting list for every available unit size in your
facility.
e. A unit is made ready for occupancy by maintenance in one to two days and leased
in another two to three days.
f. Management screens tenants on your waiting list before units become vacant.
g. Management consults references from prospective tenants’ last two housing
arrangements.
h. Average monthly turnaround time is ten to fifteen business days.
i. No more than 15 to 20% of units turn over in a month.
3 8 | P u t Y o u r H o u s e i n O r d e r
39. Performance Standards re: Maintenance
a. Every unit is inspected once a year.
b. Emergency maintenance is performed within twenty-four hours.
c. Routine maintenance is performed in three to seven business days.
d. Preventative maintenance is performed every two weeks.
e. The curb appeal of the building is superior or comparable to the surrounding properties.
f. There are monthly inspections of curb appeal.
Other Performance Standards
a. A capital needs study is undertaken every five years.
b. Utility consumption is monitored as well as costs.
c. Energy bills do not vary out of proportion to changes in utility rates and weather
conditions.
d. Bills are paid within thirty days of receipt.
e. All reports are submitted within ten days of the deadline.
f. Resident satisfaction with the property and its management is assessed annually.
g. Appropriate emergency drills (e.g., fire, earthquake, tornado) occur twice a year.
R i s e t o t h e S t a n d a r d | 3 9
40. RED FLAGS TO WATCH FOR
There are indicators that problems may lie ahead for your property. It is
helpful to have an idea which of these indicators may signal problematic
trends. If such trends persist, changes are needed.
Indicators of Problems Ahead29
a. Rent collection is less than 90% of rent roll.
b. Accounts receivable are greater than 20% of your current assets and tenant
accounts receivable are greater than 50% of your total accounts receivable.
c. There is a growing gap between your expenses and income.
d. The capital reserve is less than 5% of the replacement cost of the property.
e. The operating reserve is less than 10% of your operating budget.
f. The vacancy rate is higher than acceptable.
g. The turnover rate is higher than acceptable.
h. There are an inordinate amount of maintenance costs.
29 Bratt, p. 119.
4 0 | P u t Y o u r H o u s e i n O r d e r
41. FIND WHERE THE MONEY GOES
The asset management approach schools you in the art of saving money.
Whether your program is financially stable or troubled, there are always
going to be areas where operations contribute to financial losses. Rather
than jumping into austerity measures in an effort to save, it is worthwhile
to first study where the money goes. Part of this process also involves
distinguishing between controllable and uncontrollable costs.
Performance indicators and benchmarks identify where you are leaching
money. Note that performance indicators are different from performance
standards discussed in the last chapter.
Using both indicators and benchmarks requires research and tracking
data. It may be easier to start with performance indicators, as no outside
information will be required. Benchmarking is a longer-term project that
would involve the cooperation of the supportive housing providers in your
community.
YOUR CHOICE OF PERFORMANCE INDICATORS
There is much to be learned from the wider nonprofit housing field
about performance indicators. Other nonprofit housing providers have
developed recommended measures for reviewing the performance of assets
over time and identifying positive and negative directional movement. You
will find many of their indicators applicable to your particular supportive
housing project(s).
Choose some measures of interest to you and set up your organization to
produce monthly reports on these particular trends. A simple Excel spread-
sheet can help you calculate and track this information. However, Local
Initiatives Support Corporation’s Track-It! software may be a more useful
tool for tracking and calculating this information. Track-It! allows you to
create charts and tables to view monthly trends and changes over time. See
Best Picks at the back of this guide for information on how to obtain it.
FIRST INDICATORS TO STUDY
A few simple calculations on a monthly basis will produce informative
indicators. These relate primarily to housing groups with income tied to
their tenancies. Some supportive housing has no reliance on occupancy to
generate income. However, if, like most housing organizations, your prop-
erty’s revenue is based on the number of units leased and/or rent contribu-
tions, try calculating the indicators described below.
L O O K F O R L O S S E S
42. 30 Gutierrez and Vogel,
pp. 2-3 to 2-9.
4 2 | P u t Y o u r H o u s e i n O r d e r
Monthly Calculations30
Occupancy Rate =
(# days in the month x # of units) – (total vacant days for all units in the month)
# days in the month x # of units
This calculation is the first indicator to measure each month. It tells you the
percentage of actual tenant days versus the total number of potential tenant
days. Consider how your occupancy rate compares with the allowances built
into your pro forma and funding streams. Low occupancy rates affect your
bottom line and may signify problems with your market, an insufficient
waiting list, or lack of appeal of your property or service program, etc.
Average Turnaround Time =
total # of days all units re-rented this month were vacant
# of units re-rented during the month
This calculation tells you the amount of time it takes from the day a tenant
vacates a unit to the day the next tenant moves in. It is an indicator of man-
agement efficiency. More detailed analysis could include clocking the steps
in between, such as the time it takes to complete inspections and make
them ready. Over the long term, slow turnaround is typically one of the
biggest drains on rental real estate.
Average Turnover =
# of move-outs which took place during the month
# of units
Turnover is a measure of trends in tenants moving in and out of the build-
ing. Unless short stays are part of your program’s mission, high turnover
should be avoided as it creates high costs in cleaning and preparing apart-
ments for new tenants. A high turnover may be an early warning sign that
problems exist in the resident community.
Rent Collection Rate =
total actual rent collected during the period – amount collected in arrears
gross potential rent – vacancy loss
This tally speaks to the effectiveness of management’s collection efforts and
policies. Many supportive housing providers choose not to pressure tenants
for their rent contribution. If this is your organization’s policy, track your rent
collection rate for a few months and calculate your losses. Then consider
whether those losses over the long term of five to ten years are tolerable.
43. INDICATORS PARTICULAR TO SUPPORTIVE HOUSING
It may be of interest to track per-unit costs of supportive services.
Although the overall budget for support services is usually static on a
month-to-month basis, support services calculated on a per-unit (i.e., per
consumer) basis often fluctuate widely from one building to the next. Try
comparing your per-unit costs for support services with another housing
program on either a monthly or annual basis.
Comparing per-unit service delivery costs provides perspective on the
cost effectiveness of your program. If you are a provider who bills third
parties for supportive services on a per-unit basis, you have a different set of
reasons for measuring this kind of cost effectiveness. While it doesn’t affect
your bottom line to spend less on each consumer, it does improve your bar-
gaining position with parties providing reimbursement.
OTHER INDICATORS OF INTEREST
Another strategy for tracking your performance is following operating
expenses on a monthly basis and then dividing by the number of units in
your property. These are referred to as per-unit per-month costs. Those that
pertain to utilities should be broken out on a seasonal, as opposed to
monthly, basis to achieve the most relevant comparisons. For example, elec-
tric bills looked at from one summer to the next will tell you the extent of
increased savings made on air-conditioning.
Use your per-unit per-month calculations to focus your attention. After
several months of tracking this information, you may identify some indicators
that are consistently high or steadily increasing. Pay attention to those costs
that are within your power to control. After identifying your building’s prob-
lem areas, you can campaign to bring those expenses down. This information
can also be used to support requests for an increase in rental subsidies.
Heating and cooling are a primary focus for savings, both in cold parts of
the country such as the Northeast and in areas experiencing an energy crisis
such as the Northwest. For example, unanticipated heating and air-condi-
tioning costs may warrant investing in energy conservation and weatheriza-
tion projects. The results of your efforts to reduce these costs will be evident
in your ongoing collection of per-unit performance. Some utilities give
rebates for weatherization organization; check in your own community for
this potential option.
Per-unit Per-month Operations Indicators
a. Water/sewer expenses per unit
b. Other utilities per unit
c. Maintenance costs per unit
d. Insurance costs per unit
e. Taxes per unit
f. Overall profit per unit
g. Other per-unit per-month indicators that
have relevance to your particular program
L o o k f o r L o s s e s | 4 3
44. ANOTHER STRATEGY: BENCHMARKS
Yet another approach to saving money is “benchmarking” your costs.
This means comparing your property’s controllable costs against “bench-
marks” representing the average price paid industry-wide. Benchmarking is
used widely in private sector real estate management and is increasingly of
interest in nonprofit real estate as well.
Benchmarks are just numbers, not quality indicators. They are available
to help you target your energy and put your efforts into big savings. For
example, if benchmarks indicate that your utility costs are twice the average
of other supportive housing in your region, focus your energies there.
However, in some instances, spending more money than others do to buy a
lasting-quality product, such as a top-grade elevator, may produce more sav-
ings in the long run. So keep benchmarking data in perspective.
Benchmarks are also good motivators for staff to change. When present-
ed with data showing how something is done at a lower cost somewhere
else, staff gain confidence that perhaps your organization can do it cheaper
as well.
Recommended Costs for Benchmarking31
31 Guitierrez and Vogel,
p. 4-2.
4 4 | P u t Y o u r H o u s e i n O r d e r
a. Total operating costs
b. Administrative costs
c. Utilities
d. Maintenance
e. Property insurance
f. Management fees
g. Replacement
reserves
h. Capital expenses
45. 32 Judith Rose, Senior
Program Officer, Local Ini-
iatives Support Corporation.
FINDING RELEVANT BENCHMARK DATA
Currently, there is no database of benchmarks for nonprofit housing.
Some national organizations are working with the Multi-Family Housing
Institute to establish such a resource sometime in the future.
Until benchmarks for nonprofit housing exist, consult community devel-
opment officials and nonprofit housing leaders for leads on local bench-
mark data or suggestions for gathering data for such a project. You may also
want to take a look at data supplied by the Institute for Real Estate
Management’s Income and Expense Exchange. See Best Picks at the back of
this guide for how to contact them.
Keep benchmarks in perspective. It is important to find benchmarking data
representing properties comparable to your own in size, location, and other
variables. For example, it is much more expensive to operate a moderately
rehabilitated building than new construction, or to gut rehabilitation. So if
your building is a rehab, stick to comparing it with other rehabs.
Additionally, don’t let benchmarks cloud your judgment about the need for
quality investments in your building’s infrastructure. Nonprofit housing
groups, in particular, cannot afford the maintenance costs that result from
skimping on quality.
“One of the best
services that could
be provided to the
supportive housing
constituency would
be to create a spe-
cialized benchmark-
ing database just for
this sector of hous-
ing, and then make
it available to these
groups.”32
L o o k f o r L o s s e s | 4 5
46. MORE WAYS TO MAKE AND KEEP MONEY
Asset management requires ongoing vigilance to find money and sav-
ings. Therefore, in addition to the strategies discussed so far in this guide
(standards, indicators, and benchmarks), it is important to hunt for other
clues about how to adjust your finances.
The more money you earn and save, the better protected your program
will be from the vagaries of your property’s future. Use your resource-
fulness to try to make adjustments on both sides of the financial equa-
tion: what you bring in and what you spend.
In choosing where to put your energies, recognize that your time
is money. Before setting off in a particular direction, ask yourselves if you
can afford the cost of paying staff for their time on such work. Is it worth
the anticipated outcome? Furthermore, before changes are made, always
evaluate the payoff. Cost considerations should include not only price but
also value. In supportive housing, it is a challenge to take care of a proper-
ty without good investments in high quality infrastructure.
Three Options for Financial Adjustments
MAKE GAINS
a. Cut your operating costs.
b. Increase your effective gross income.
c. Subsidize your financing with other sources.
47. CUT YOUR OPERATING COSTS33
Start your search for gains by brainstorming on how to cut your operating
costs. Consult the list below for ideas.
Tips on Saving Administrative Costs from a
Housing Group in Seattle
George Osborne, a consultant to nonprofit housing development firms, finds that patroniz-
ing “big-box” supply stores such as Home Depot is not always cost-effective for affordable
housing groups.As an alternative approach,he recommends seeking out smaller vendors to
form long-term relationships. A paint store, for example, might agree to track the colors of
paint used in your building and store partially used paint for you in return for your commit-
ment to buy exclusively from them. A locksmith could track codes for all the keys in your
building in return for the same commitment. In the long run, these partnerships can save
you money by eliminating administrative functions and guaranteeing good service.
Staffing Cost Savings
a. Comparison shop for an affordable staff benefits package.
b. Evaluate the costs and benefits of contractual services versus paying hourly wages
to contractors.
c. Carefully consider the level of experience needed for staff positions and avoid hiring
overly qualified personnel who cost more.
Utilities Cost Savings
a. Educate tenants about energy conservation and provide incentives for them to change
their energy-use habits.
b. Integrate energy conservation into community activities and the responsibilities of tenants.
c. Contact your utility companies and request an analysis of their rate schedule to ensure
that you are getting the lowest possible rate.
d. Request a use audit from your utility company and use it to analyze where and how you
are spending.
e. Ask your electric and gas companies for free energy-saving devices that may be available.
f. Upgrade windows and exterior doors for greater heat retention.
33 Birute Skurdenis, “Tips
and Strategies for Control-
ling Costs in Affordable
Housing,” p. 1.
M a k e G a i n s | 4 7
48. Administrative Cost Savings
a. Refinance your mortgage to reduce debt-service costs.
b. Analyze your bank account for fees and interest rates.Could you save money elsewhere?
c. Ensure that your replacement reserve is in a longer-term, higher-interest instrument.
d. Consider placing all your deposits in a market-rate account.
e. Comparison shop for your accounting, insurance, and legal services.Look for group rates
on insurance and pro bono legal services.
Maintenance Cost Savings
a. Evaluate the cost/benefit of contractual services versus hourly labor.
b. Regularly obtain bids on costly items such as carpet, painting, etc.
c. Increase recycling to save on dumpster charges.
d. Purchase maintenance items through catalogs or join a buyer’s club.
e. Purchase janitorial equipment that can withstand heavy use of multi-family properties.
f. Maintain a full inventory of specialty items that may be more costly to buy locally.
g. Encourage donations of maintenance items and solicit volunteer labor and free skilled
work in areas such as painting and grounds work.Try forming a partnership with a local
corporation, sheltered workshop, or local college for this purpose.
4 8 | P u t Y o u r H o u s e i n O r d e r
49. “You can increase
your Effective Gross
Income and not con-
tradict the afford-
able housing mission
by implementing
efficient manage-
ment policies and
procedures.”35
34 Mark Woeful, Property
Manager, Rogerson Commu-
nities, Boston.
35 David Fromm, Effecting
Income, p. 1. Available online:
www.enterprisefoundation.org.
INCREASE EFFECTIVE GROSS INCOME
Effective Gross Income is your ability to maximize earnings from rent
contributions. Many supportive housing providers have a pattern of main-
taining tenants who are not paying rent or who are no longer eligible or cer-
tified for the program. Such providers often believe the special circum-
stances of their residents’ lives require extra flexibility and tolerance around
lease violations.
Residents who do not pay rent or are delinquent can cost you in several
ways. It is important to take into account that such residents can have a dou-
bly negative impact if they are occupying without paying for units that could
bring in revenue. Apart from loss of income, there is also a spillover effect
from rent payments that get written off. Other residents are less likely to pay
when there is no clear and universal expectation from the owner regarding
timely payment of rent.
If you have a low Effective Gross Income, think of the issue in terms of
costs and benefits. Is forgiving your tenants’ rent obligations creating a ben-
efit to you or to them that outweighs the costs of lost revenue?
The Right Place for Compassion
“Supportive housing groups need to learn to be consistent and not tolerate lease vio-
lations such as unpaid rent. Residents will stay inside the lines in an atmosphere of
consistency. Don’t let up on tenants who owe money. Every tenant should feel the
obligation of rent. It’s a mistake to try to be compassionate about rent. Put your
compassion into finding other places for a resident to live who can’t make it in your
program.”34
M a k e G a i n s | 4 9
50. Strategies for
Increasing Effective Gross Income
a. Be familiar with social service supports in your community that can stabilize
tenancies and increase the likelihood of rent coming in.
b. Apply for project-based rental assistance programs to subsidize tenants’rent
contributions.
c. Cultivate a sense of urgency for apartment lease-up and best maintenance
systems for preoccupancy preparations.
d. Arrange for“protective payee”rent contributions whereby rent is garnished
from entitlement checks, such as social security, and entered directly into a
local bank account set up for rent contributions.
e. Plan on avoiding evictions as a last resort, given their high costs.
f. Enlist a lawyer to help you perform proper and timely evictions.
g. Send notices of eviction at the earliest possible time.Delays in sending notices
cost money.
h. Grant yourselves permission to perform timely and efficient evictions.
i. Have the asset manager in your organization play the“bad guy”role with
collections and evictions, underscoring the significance of rent to the future
of the housing program.
j. Perform proper and timely recertification for rental subsidies if participating
in any public- or tax credit-financed projects.
5 0 | P u t Y o u r H o u s e i n O r d e r
51. REFINANCE
Refinancing debt can be a tool for bringing down monthly costs.
Increasingly, supportive housing providers are using loans from private
banks in conjunction with grants to pay for their programs. Even if your
property carries no debt today, in the future, your housing group may be
forced to enter into loans, if there is a change in your existing funding or if
there is a gap that cannot be filled by other resources. Thus, all supportive
housing groups should have an idea of how to benefit from refinancing.
If you have any mortgage on your property, the asset manager should
make an annual evaluation of the desirability of refinancing based on cur-
rent interest rates and the overall benefits over a ten-year period to the prop-
erty’s financial status. It is important to figure in the fees associated with refi-
nancing.
Before entering into refinancing, put your best financial foot forward.
You can do this by “dressing up” the financial status of your property to look
its best. Suggested strategies include deferring big-ticket items so that your
balance sheet looks optimally balanced. You can also work to reduce insur-
ance, support service, or other costs that, in light of your limited income,
may appear expensive to a potential lender.
Know the “Five Cs” of Refinancing36
a. Character—your overall reputation in the community.
b. Credit—your track record of repaying other loans.
c. Capacity—whether you have executed a project of similar scope.
d. Cash Flow—whether there is sufficient anticipated cash flow from the building
to pay the debt with a cushion.
e. Collateral—the ratio of loan to value of the building.The bank will want to know,
if it needs to seize the property, whether it can sell it for at least 75% of the
original price on today’s market.
36 Vogel.
M a k e G a i n s | 5 1
52. SUBSIDIZE WITH FUNDRAISING
Private fundraising is one financial arena in which supportive housing
providers have an advantage. Relative to mainstream housing counterparts,
many supportive housing providers have strong track records with fundrais-
ing and capital campaigns. Perhaps the unique appeal of serving special
needs groups has given supportive housing its advantage in this arena.
If your organization has yet to tap into this particular capacity for suc-
cess, it is essential that it explore avenues of private fundraising from foun-
dations and individual donors. Set a goal of trying to raise at least 10 per-
cent of your budget from private sources. If you have already achieved this
level, it may be a mistake to believe a track record of success in private
fundraising will continue indefinitely. Public donors can be fickle. They
tend to change their priorities over time, and this can leave organizations
vulnerable if they come to rely on these monies.
SUBSIDIZE WITH OTHER PUBLIC FINANCING
In all probability, your existing public financing structure is not ideal. If
you are like many supportive housing groups—Section 8 Moderate
Rehabilitation recipients being a lucky exception—your existing financing is
on a short time frame. This inherent financial uncertainty is so typical of
some supportive housing that it is often perceived as a necessary way of
doing business. Many providers seem to operate on faith that grants will be
renewed or that some other resource will magically come their way.
The only way to guard against funding instability is through proactive
efforts to expand financing options. In all probability, there are other
funding mechanisms for which your housing group would qualify. A diverse
funding stream may add complexity to your operations, but it will stabilize
your bottom line. Learning about other funding sources may also inspire
your organization to expand its portfolio of housing by developing new
programs. Such organizational growth may have a stabilizing effect on your
existing financial profile. To learn details about all public sources of financ-
ing that may apply to supportive housing and how to pursue them, see Best
Picks at the back of this guide.
“The key to asset
management for
supportive housing
groups is to under-
stand all the subsidy
and subsidy-renewal
processes and proce-
dures, as well as
funding availability
in their local area.”37
37 Brigitt Jandreau-Smith,
Corporation for Supportive
Housing.
5 2 | P u t Y o u r H o u s e i n O r d e r
53. Public Financing Sources for Supportive Housing38
a. Section 8 Housing for People with Disabilities Single Room Occupancy
b. The Supportive Housing Program
c. Project basing of Shelter Plus Care
d. Low Income Housing Tax Credit Program
e. Housing authorities’ability to project base Section 8’s
f. Homeless Providers Grant and Per Diem Program
g. Supportive Housing for Persons with Disabilities—Section 811
h. Ryan White Comprehensive AIDS Resources Emergency Act (CARE)
i. Runaway and Homeless Youth Program,Transitional Living Program for Homeless Youth
j. Section 515: Rural Rental and Cooperative Housing
k. Health Care for the Homeless
l. Community Development Block Grant
m.HOME Investments Partnership Program
n. Housing Opportunities for Persons with AIDS (HOPWA)
o. Emergency Shelter Grants
38 Financing Supportive
Housing, AIDS Housing of
Washington, 2002.
M a k e G a i n s | 5 3
