Fiscal board questions high cost of proposed affordable units in Bayamón

By THE STAR STAFF

The Financial Oversight and Management Board for Puerto Rico has requested an urgent meeting with local housing authorities after raising concerns about the financial viability and cost structure of a proposed affordable housing development in Bayamón, which at first glance does not appear to be so affordable.

In a recent letter to La Fortaleza Chief of Staff Francisco Domenech, the oversight board acknowledged receiving documentation from the Fiscal Agency and Financial Advisory Authority (AAFAF by its initials in Spanish) seeking approval for a debt transaction tied to the Apolonia Apartments project. The development, which would add 138 units, carries an estimated price tag of $101.6 million, funded through $79.6 million in Community Development Block Grant Disaster Recovery funds and $22 million from Low-Income Housing Tax Credits (LIHTC).

Although the project complies with federal program standards and U.S. Department of Housing and Urban Development (HUD) guidelines, the oversight board expressed serious reservations under Section 207 of the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA. The board noted that the cost per unit -- some $736,000 -- is significantly higher than similar LIHTC projects previously approved, and nearly half of the total development costs are attributed to soft costs and developer fees. It also highlighted that the project anticipates operating losses for the first 20 years, requiring a $7.8 million reserve to offset deficits. Forecasts show annual operating expenses of $7,300 per unit, well above the average for comparable developments, and a projected $21.8 million deficit in years 21 through 40.

Beyond the financial concerns, the oversight board questioned whether the island Housing Finance Authority (HFA), Department of Housing (DOH), and AAFAF have a coordinated, long-term strategy to maximize federal funds and expand affordable housing efficiently. The DOH’s own estimates place average development costs at $300,000 per unit, far below the Apolonia project’s figures. The board also requested clarity on the procurement process and how qualified allocation plans and notices of funding availability are marketed to ensure competitive bidding, the Dec. 10 letter said.

The oversight board called for a joint meeting with the DOH, HFA and AAFAF before this Friday to discuss oversight, financial thresholds and a harmonized housing strategy.