Occupancy and Ongoing Operations

(Note: The occupancy/ongoing operations phase is typically not the domain of the municipality, but it is important for those involved in planning for housing to have a good understanding of the entire development process).

Once construction is complete and a predetermined percentage of the units are occupied, the developer can close on the project's permanent financing and proceed to property and asset management. Property management involves the day-to-day operations. Asset management is the positioning of the property to ensure its soundness as an asset and resource. 

This section of the guide provides an overview of the following aspects of occupancy and ongoing operations:

• Closing on permanent financing
• Property management
• Asset management
• Providing services

Closing on permanent financing 

Permanent lenders require a certain level of occupancy before closing on the development's permanent financing. Once this is achieved, the developer can pay back the construction lender, encumbering the property with long-term debt from the permanent lender.

Property management 

The developer/owner may manage the property or contract with an outside company. The more complicated a project, the more important it is that it be managed by an experienced property manager. Typically the permanent lender must approve the management company. Property management tasks include:

• showing and leasing apartments
• collecting rent
• establishing occupancy policies and other building rules
• overseeing short- and long-term maintenance, including contracting with third-party contractors for repairs
• operating within the proposed budget
• generating necessary reports for lenders, the owner, and others as required by any and all legal documents affecting the property (zoning, and loan/subsidy documents)

In addition, property management includes ensuring compliance with affordable housing restrictions and fair housing laws. To verify affordable housing restrictions, the permanent lender will request rent rolls detailing tenant incomes and how many people are living in each unit on a quarterly or semi-annual basis. This information will be checked against the affordable housing agreement. In the case of 40B projects, lenders or monitoring agencies will go one step beyond rent rolls and request third-party verification to ensure that the agreed-upon income mix is being served. In order to verify fair housing compliance, process and procedures relative to unit lease-ups are monitored. In order for the property manager to be as efficient and effective as possible, the developer must relay relevant property information in a concise and cohesive way. This includes project plans, specifications and warranty information, copies of relevant loan documents that specify reporting requirements, and any state and federal requirements related to public money investment into the property. 

Asset management 

Asset management takes a longer view of the health of the property and is part of overseeing real estate as a long-term investment. The goal of asset management is to ensure that all aspects of good property management are being followed. A property owner may have capacity in-house or may use a third party. Asset management tasks include:

• regular review of the property's ownership plan and making adjustments as necessary
• measuring a property's ongoing financial performance against expectations, and revising the operating budget as necessary to include realistic projections of income and expenses
• reviewing key property indicators such as days vacant/unit, outstanding accounts payables, and timely response to maintenance calls
• maintenance of adequate reserve balances
• monitoring a property's physical condition
• projecting capital improvement needs and responding to those needs
• ensuring that the property is in compliance with all reporting requirements and other requirements of lenders, investors, and subsidy providers
• ensuring that the property continues to meet social goals 

In consideration of the building's physical and financial condition, along with market condition and other external factors, an asset manager takes necessary action to maintain the property in good physical and financial health. 

Providing services (if applicable) 

A project may have a primary service provider to plan and oversee resident services. The primary service provider should be involved from the early stages (e.g., on the development team) to help meet the needs of residents through the location of the housing, the layout of the housing, the incorporation of community spaces for service delivery, and the size and number of bedrooms in the individual units.