Bridging the Technology Divide
Unleashing Broadband in Affordable Housing
By James Sison, Eureka-Waitt Fellow
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
Making IT Work for Government-Assisted
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
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,”
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.
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.