Affordable housing: survival guide: unpaid rent and operating costs are rising during today's challenging economic environment. In response, affordable housing managers need to operate smarter than ever before. These strategies can help affordable housing communities survive.

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Affordable housing communities can be more vulnerable to economic downturns because the residents living in their apartment homes often have little cushion to absorb income lost as a result of reduced hours, reduced pay or job loss. For them, hard choices have to be made, and sometimes they choose not to--or simply cannot--pay their rent.

As a result, many owners and managers are experiencing increases in unpaid rent even though their occupancy levels might be very high because of the strong demand for affordable rental housing.

At the same time, community owners are faced with sharply increasing operating costs in the areas of taxes, electricity, water and sewer charges, to name a few. Additionally, income growth remains stagnant, limiting owners' abilities to raise rent to meet the pressures of increasing operating costs. By taking steps in three key areas, an apartment owner or manager can combat these challenges and thrive in the new environment.

Cost Containment 

Not all costs can be contained by management action, but this is the first place to start responding to the new affordable housing rental environment. Consider these actions:

* Renegotiate contracts. Seek lower pricing with contracted services such as lawn care, refuse removal and painting.

* Save energy. Use retrofits to improve energy efficiency and lower utility expenses at older communities.

* Implement smart management practices. For example, encourage staff to save costs by minimizing trips to maintenance supply stores.

* Review project-staffing levels. Seek opportunities to share staffing costs across multiple projects.

If eligible, adopt a consumption-based utility allowance (per the new IRS regulations). An accurate allowance will allow an owner to charge and receive the appropriate amount of rent.

Marketing and Resident Relations

Strong demand for affordable housing exists in much of the country, but the amount of unpaid rent has increased. Owners and managers should visit collections procedures and resident selection plans accordingly.

Some of the newest prospective applicants in the affordable housing market might be previous homeowners that have lost their homes because of foreclosure or bankruptcy. Owners and managers should double-check whether their resident selection tools allow for foreclosures on a credit report.

Here are some other items to consider:

* Review the resident selection plan. Is it appropriate for the current market conditions? Are the standards too high or too low for the new environment? If a community has high demand and high resident receivables, owners and managers might consider tightening selection criteria,

* Implement safeguards against unpaid rent. Carefully manage the increased resident receivables resulting from the poor economy via strict lease enforcement and consistently applied collection policies.

* Adopt a creative marketing strategy to combat increasing bad debt. Some owners and managers have programs that allow residents who have

lost their jobs to prematurely exit leases without recourse, if the resident discloses the job loss within 14 days and is current on his or her rent payments. This strategy minimizes resident receivables and bad debt.

* Know where to direct residents for help. Although not every community has resources available, many local governments and nonprofits have programs that can assist residents with supportive services or offer temporary rent subsidies.

Maintain Stakeholder Relations

No affordable housing community is successfully developed and managed without multiple partnerships, both formal and informal. Maintaining these relationships is essential.

Whether the partner is an investor or the state-housing credit agency, keeping these and other entities updated on the status of a community as challenges surface is critical.

Investors will understandably be concerned about project performance.

Following are action steps that should help address investor and stakeholder concerns:

* Implement strong reporting and analysis to quickly identify problems and trends; reliable systems are essential to proper reporting and analysis.

* Establish aggressive action plans to identify and mitigate risks.

* Improve communication with various stakeholders (owners, lenders, investors, regulatory monitors, etc.) to give early warning of problems; don't try to hide them.

Although no one has been immune to the effects of this economic downturn, this new environment provides an opportunity for savvy owners and managing agents to excel by effectively combating new challenges.

To survive and thrive in this economy, owners and managers of affordable housing will need to operate smarter than ever before.

Brian Carnahan is Director of the Ohio Housing Finance Agency's Office of Program Compliance, where he manages the compliance monitoring of tax credit, HOME and Section 8 communities. He can be reached at [e-mail]. Tony DiBlasi is Chief of Asset Management for Ohio Capital Corporation for Housing, where he leads a team actively monitoring regulatory compliance and financial performance for nearly 300 LIHTC properties. He can be reached at [e-mail].