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Bridging the Technology Divide
Unleashing Broadband in Affordable Housing
By James Sison, Eureka-Waitt Fellow
EMAIL: jsison@one-economy.com

Although practically every unit built today has technology infrastructure for telephone and cable access, only a small percentage of units can truly be considered wired for the 21st Century. Having a complete broadband network infrastructure—one that integrates both wireline and wireless technologies—is fast becoming an integral part of construction standards for all housing, not just luxury and student housing.

Developers and owners of government-assisted housing are exploring the benefits of having a high-speed data network for their properties. Strategic investment in a property’s telecommunications infrastructure is the key to unlocking the pent-up demand for broadband. Developers must weigh the costs and benefits of making high-speed Internet access a standard amenity for each property. Those who understand the broadband benefit can recognize substantial cost savings during construction but lose those advantages the longer they wait to implement.

Tax Credit Incentives
Senators John Kerry (D-MA) and Orrin Hatch (R-UT) garnered broad bipartisan support for legislation (S. 305) to amend the Internal Revenue Code governing the Low Income Housing Tax Credit (LIHTC). The bill would add high speed Internet access to the list of things that state agencies could consider when awarding tax credits.

To date, Kentucky, California, Nebraska, Oregon, Wisconsin and Pennsylvania have adopted language in their tax credit allocation process that encourages developers to include high-speed Internet access in new construction. In August 2002, the Kentucky Housing Corporation became the first public affordable housing organization in the country to make this a design requirement for all new construction and renovation of affordable housing in the state.

“We need more states to follow Kentucky’s lead to include more people in our digital economy,” says Dr. Randal Pinkett, president and CEO of Access One, a telecommunications firm that provides wiring and broadband network solutions for public and affordable housing. “As networking technologies evolve and become more commonplace, developers can expect prices to drop and systems easier to implement.” Pinkett considers a building’s technology infrastructure a vital asset that, if designed and managed properly, can generate additional revenue for the property—which can be used by developers to close financing gaps, fund reserves or realize long-term cost savings.

Making IT Work for Government-Assisted Housing
The Illinois Housing Development Authority (IHDA) offers a $0.50 state tax credit to companies that donate land, casho or equipment to affordable housing developments.
Don Samuelson of DSSA Management, a Chicago-based property management firm, was one of the first to use the new tax credits to purchase discounted equipment from Motorola and Cisco Systems to renovate a 303-unit public housing development in south side of Chicago.

The IHDA Donor Tax Credit is further leveraged when the equipment donation is made to a nonprofit organization, which can provide an additional $0.36 federal tax deduction. Samuelson is using the subsidy and private funds—roughly $300 per unit—to pay for the technology upgrades for the property.

He hopes this investment will generate additional revenue and substantial cost savings from enhanced security and improved property management. “There are things we can do better with the right technology infrastructure,” says Samuelson. He plans to connect a five-station computer lab, leasing office, security cameras and individual units on a singular broadband network at the New Englewood Terrace (NET), which will feature several wireless technologies throughout the campus.

Making the Right Moves
Multifamily executives have mixed feelings about the need to invest in their technology infrastructure. They do, however, generally agree that firms should examine their own capacity and commitment to investing in the technology infrastructure of their properties. The following is a list of considerations to justify the investment:

1. Good Design Lowers Costs and Risk
For $150 per unit on new construction projects, owners can have a building that integrates voice, video and data on the same network.

2. Better Negotiation Power with Local Telecoms
When the developer owns the wires, they own the means to deliver the telecommunication services that tenants want most: telephone, cable or satellite television and broadband Internet access.

3. Additional Source of Revenue for Property
Just like laundry income, passive income from a well-structured building wiring agreement can increase the bottom line.

The decision to invest in a building’s technology infrastructure should not be based exclusively on the economics of that property. “All businesses operate within a context,” says Leroy Kennedy, Associate Vice President at the Illinois Institute of Technology, who thinks that developers are the key to opening new markets. Because local telecoms can deliver a T1 line anywhere in the city—as opposed to having to construct a costly DSL “plant”—developers are in the position to aggregate demand and share a singular broadband connection among the individual units, computer labs and leasing offices. “If every new unit built in mid-south Chicago (the home to many public housing communities) were connected to the Internet, the economics of this neighborhood would change dramatically,” Kennedy explains.

Technology infrastructure is only one part of a comprehensive plan to turn several blocks of public housing into mixed income neighborhoods. “Now is the time to be thinking about leveraging tax credits for energy efficiency, security and connectivity for new units, not after they have been built,” adds Kennedy.

The decision to invest in a property’s technology infrastructure is relatively low-risk with a potential for high return. As Congress debates a national policy for broadband, cash-strapped telecommunications firms are reluctant to spend their own capital to reach new customers. Regardless of the outcome of the debate, multifamily housing executives are in a good position to deliver those customers to market and capitalize on new opportunities with a well designed broadband network.


DON’T SPEND A DIME UNLESS YOU…


1. Know Thy Customer
Survey your tenants regularly to gauge their demand for broadband services. This can be done informally through focus groups at the property management office or satisfaction surveys.

2. Do an Independent Technology Assessment
You can estimate the cost to upgrade your telecommunications infrastructure by looking at your blueprints, maintenance records and service provider contracts. You will have better negotiation power with you local service provider.

3. Get Several Bids
Prices may vary wildly, depending on the variety of bidders. Choose a group that has experience with your type of development (i.e. retrofit MDU) and can produce a list of references.

BIO
James Sison is a Eureka-Waitt Fellow with One Economy Corporation, a national nonprofit dedicated to using technology to end economic and social isolation. Prior to moving to Chicago, James designed a pilot program for the Local Initiatives Support Corporation (LISC) to bring small community based nonprofits in San Diego up to speed on information technology. A graduate of UC Berkeley and certified instructor for the National Foundation for Teaching Entrepreneurship, James continues his fieldwork on technology strategy and management while helping nonprofits invest in their neighborhood’s technology infrastructure and improving their ability to build housing for the 21st Century.