05/08/2025 08:00 AM House COMMUNITY & REGIONAL AFFAIRS

        HB 184-AIDEA FINANCE WORKFORCE HOUSING DEVELOP.                                                                     
                                                                                                                                
8:40:28 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HIMSCHOOT announced  that the  final order  of business                                                               
would  be HOUSE  BILL NO.  184, "An  Act relating  to the  Alaska                                                               
Industrial  Development and  Export  Authority;  and relating  to                                                               
workforce housing development projects."                                                                                        
                                                                                                                                
8:40:53 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ANDI STORY, Alaska State Legislature, as prime                                                                   
sponsor, recapped the bill from the following prepared remarks                                                                  
[original punctuation provided]:                                                                                                
                                                                                                                                
     Thank you  for hearing this  bill again.   I appreciate                                                                    
     the  committee's  continued  engagement on  the  urgent                                                                    
     issue  of housing  in  Alaska. Our  state  is facing  a                                                                    
     housing   crisis  that   is  affecting   residents  and                                                                    
     employers alike. This  housing shortage is contributing                                                                    
     to out  migration of individuals and  families who wish                                                                    
     to  stay  here but  can  not  find  housing.   Lack  of                                                                    
     available  housing  hinders   in-migration  of  skilled                                                                    
     workers that  have been offered employment,  but end up                                                                    
     not  accepting   due  to  lack  of   finding  available                                                                    
     housing.     The  need for construction  of affordable,                                                                    
     multi-unit housing is more pressing than ever.                                                                             
                                                                                                                                
     This bill  seeks to expand  AIDEA's purpose  in statute                                                                    
     to do  just that.  It  would add to the  purpose of the                                                                    
     authority   to   create   additional   employment   by:                                                                    
     providing  various  means  of financing  and  means  of                                                                    
     facilitating  the  financing  of  construction  of  new                                                                    
     workforce  housing facilities  containing five  or more                                                                    
     dwelling units.                                                                                                            
                                                                                                                                
     After  our first  bill  hearing,  there were  questions                                                                    
     about the  definition used in this  bill for "workforce                                                                    
     Housing  "and  were   these  rates  really  affordable?                                                                    
     Thanks   to  Stacy   Barnes,  Alaska   Housing  Finance                                                                    
     corporation, for providing a  chart on what these rates                                                                    
     would  approximately  be  according to  the  definition                                                                    
     used  in  this bill.    And  after  speaking to  a  few                                                                    
     developers about this definition,  who pointed out, the                                                                    
     work that they  would need to do to  verify the tenants                                                                    
     income and confirm that their  income continues to fall                                                                    
     in  the workforce  definition, which  inhibits interest                                                                    
     in an AIDEA  loan.  But most compelling of  all for me,                                                                    
     was the knowledge  shared, that for the  most part, all                                                                    
     "for   rent"  multifamily   housing  is   "work  force"                                                                    
     housing.   When potential  tenants make  larger amounts                                                                    
     of money  they typically buy a  house.  There is  not a                                                                    
     need  to  put   restrictions  on  "affordable"  housing                                                                    
     because when  a typical market rate  apartment building                                                                    
     is  constructed it  is  already providing  "affordable"                                                                    
     housing.     Putting  an affordable  component to  this                                                                    
     bill adds unnecessary obstacles  to housing.  In effect                                                                    
     it could  removes market  rate housing  developers from                                                                    
     the equation.  Based on  this I am recommending members                                                                    
     consider  a friendly  amendment be  made to  remove the                                                                    
     workforce definition  from this bill,  deleting section                                                                    
     5.                                                                                                                         
                                                                                                                                
     I have spoken to the Sponsor  of the Senate bill and he                                                                    
     is in agreement.    Definition for "workforce housing "                                                                    
     (as   residential housing that costs  the occupant less                                                                    
     than 30  percent of  the income  of the  household with                                                                    
     120 percent of the  median family income, as determined                                                                    
     by the  United States  Department of Housing  and Urban                                                                    
     Development,  for the  location  where  the housing  is                                                                    
     constructed).                                                                                                              
     As requested by the  committee I have invited testimony                                                                    
     from  a  real  estate  developer,  Shaun  Debenham,  of                                                                    
     anchorage.    Shaun is  the President of  Debenham LLC.                                                                    
     He has some testimony and is available for questions.                                                                      
     In closing,  AIDEA has indicated that  they are already                                                                    
     in  conversations with  municipalities  about the  need                                                                    
     for  workforce   housing  and   that  they   are  well-                                                                    
     positioned to finance such  projects through their loan                                                                    
     participation program.  Though they have  the capacity,                                                                    
     they have  not engaged  in financing  workforce housing                                                                    
     for some time.  HB 184 would add  clarity and direction                                                                    
     under  statute while  helping to  jumpstart much-needed                                                                    
     development.                                                                                                               
                                                                                                                                
      I believe House Bill 184 represents a thoughtful and                                                                      
     targeted investment of AIDEA's resources, an approach                                                                      
     I believe many Alaskans would strongly support.                                                                            
                                                                                                                                
8:45:44 AM                                                                                                                    
                                                                                                                                
SHAUN  DEBENHAUM, Owner,  Debenham  LLC,  gave invited  testimony                                                               
during the hearing on  HB 184.  He stated his  support for HB 184                                                               
because  allowing the  Alaska Industrial  Development and  Export                                                               
Authority  (AIDEA) to  financing  multi-family  housing would  be                                                               
beneficial due to their lower  interest rates, full amortization,                                                               
and longer  amortization periods.   They  also provide  a product                                                               
that are not typically available elsewhere in the market.                                                                       
                                                                                                                                
8:47:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RUFFRIDGE  shared his understanding that  AIDEA is                                                               
capable  of  providing financing  without  the  bill.   He  asked                                                               
whether Mr. Debenhaum had pursued financing previously.                                                                         
                                                                                                                                
MR.  DEBENHAUM said  when he  sought multi-family  financing from                                                               
AIDEA through a  bank, he was told that they  do not provide that                                                               
kind of financing for residential development.                                                                                  
                                                                                                                                
REPRESENTATIVE RUFFRIDGE shared his  understanding that AIDEA had                                                               
stated that they were capable  of offering multi-family financing                                                               
and asked why someone would be denied.                                                                                          
                                                                                                                                
MR. DEBENHAUM deferred to AIDEA.                                                                                                
                                                                                                                                
8:50:11 AM                                                                                                                    
                                                                                                                                
BRANDON   BREFCZYNSKI,   Deputy   Director,   Alaska   Industrial                                                               
Development &  Export Authority (AIDEA),  shared his  belief that                                                               
AIDEA  has  the  statutory  authority   to  provide  a  loan  for                                                               
commercial, multi-unit  rental development.   He deferred  to Mr.                                                               
Davis for further elaboration.                                                                                                  
                                                                                                                                
8:51:24 AM                                                                                                                    
                                                                                                                                
MARK  DAVIS, Special  Counsel,  Alaska  Industrial Development  &                                                               
Export Authority  (AIDEA), said  there has  been confusion  as to                                                               
AIDEA's capabilities.   He clarified that AIDEA  does not provide                                                               
the  kind  of  apartments  offered   by  Alaska  Housing  Finance                                                               
Corporation  (AHFC); however,  it can  invest in  commercial real                                                               
estate.   In recent years,  AIDEA has  also ramped up  its direct                                                               
lending  ability.    He  emphasized that  AIDEA  tries  to  avoid                                                               
competition  with the  bank,  but offers  a  different rate  than                                                               
federally chartered banks, as well as a longer-term loan.                                                                       
                                                                                                                                
8:53:19 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HIMSCHOOT  asked whether  the bill  would be  harmful or                                                               
helpful to AIDEA's operations.                                                                                                  
                                                                                                                                
MR. DAVIS said  no, it's not harmful.  It's  helpful in the sense                                                               
that  it  would provide  clarification  for  situations like  Mr.                                                               
Debehnhaum's.                                                                                                                   
                                                                                                                                
8:54:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRAX asked  whether AIDEA  has access  to capital                                                               
that most commercial banks do not.                                                                                              
                                                                                                                                
MR. BREFCZYNSKI said AIDEA has access  to its own capital and the                                                               
ability to bond.                                                                                                                
                                                                                                                                
MR. DAVIS  added that AIDEA's  funds are  those that it  has made                                                               
over the years from return on investments.                                                                                      
                                                                                                                                
REPRESENTATIVE  PRAX  asked  whether   AIDEA  would  do  its  own                                                               
underwriting and servicing of the loan.                                                                                         
                                                                                                                                
MR. DAVIS  answered yes, when a  loan is presented to  AIDEA from                                                               
the bank, it goes to the  loan participation program and then the                                                               
investment committee.                                                                                                           
                                                                                                                                
REPRESENTATIVE  PRAX asked  whether AIDEA  would have  to develop                                                               
policies on the risk versus reward for this type of investment.                                                                 
                                                                                                                                
MR. DAVIS answered yes; there  two types of collateral for multi-                                                               
family housing: the  building and the rent.  If  the loan were to                                                               
default,  the  first remedy  would  be  to  take over  the  rent,                                                               
followed by the building itself.                                                                                                
                                                                                                                                
8:58:39 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRAX asked  whether AIDEA  has enough  surplus of                                                               
capital for the bill to work out as intended.                                                                                   
                                                                                                                                
MR. DAVIS  said it  would depend  on the  investment.   He shared                                                               
several  scenarios  involving  work  with a  bank  and  the  loan                                                               
participation program, where  both the bank and  AIDEA would take                                                               
portions of  the loan.   With  a direct  loan, AIDEA  might still                                                               
consider a consortium  of lenders.  In terms of  capital, he said                                                               
AIDEA would avoid taking on an entire loan due to risk factors.                                                                 
                                                                                                                                
REPRESENTATIVE PRAX asked whether the  bill is directed at rental                                                               
properties or condominiums for sale.                                                                                            
                                                                                                                                
MR.  DAVIS   answered  no,  [AIDEA   would  not   participate  in                                                               
condominiums  for sale]  because with  mortgages, the  bank holds                                                               
the  title  to the  property,  so  nothing  is left  for  AIDEA's                                                               
collateral.  In  a rental situation, he reiterated  that both the                                                               
rent  and building  can be  used  as collateral  if the  borrower                                                               
defaulted on the loan.                                                                                                          
                                                                                                                                
9:03:11 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  MEARS  asked  whether  AIDEA  could  give  priority  to                                                               
funding projects  with a community  priority, like  housing, that                                                               
would be a greater benefit to the state.                                                                                        
                                                                                                                                
MR.  DAVIS answered  yes, and  referenced AIDEA's  investments in                                                               
Cook Inlet that arose from community concerns.                                                                                  
                                                                                                                                
9:05:41 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOLLAND  asked whether funding is  the solution to                                                               
the  workforce  housing  challenge,  or  whether  other  barriers                                                               
contribute to this issue.                                                                                                       
                                                                                                                                
MR.  DAVIS  said  financing  is one  mechanism  that  could  make                                                               
housing   more   affordable   and   financeable;   however,   the                                                               
construction costs  are greater  than the value  of a  new build,                                                               
which creates a gap that AIDEA financing can help close.                                                                        
                                                                                                                                
REPRESENTATIVE  HOLLAND  asked  how  multi-family  owner-occupied                                                               
complexes could be made more  investable to close the gap between                                                               
renting and owning single-family housing.                                                                                       
                                                                                                                                
MR. DAVIS  said the  major problem for  condominiums is  the high                                                               
price of construction and the  inability to obtain a construction                                                               
loan, as working capital is needed  until all the units are sold.                                                               
He added that AIDEA does  not finance construction loans to avoid                                                               
interference with  the bank  and because  its forte  is long-term                                                               
loans.                                                                                                                          
                                                                                                                                
MR.  DEBENHAUM  commented  on  the   difficulty  of  obtaining  a                                                               
construction loan because they are  not offered by Frannie May or                                                               
Freddie Mac.   He said  construction loans that convert  to long-                                                               
term financing would be a huge benefit to developers.                                                                           
                                                                                                                                
REPRESENTATIVE HOLLAND  sought to clarify whether  the bill would                                                               
allow AIDEA to offer construction loans.                                                                                        
                                                                                                                                
MR. BREFCZYNSKI  said AIDEA  provides construction  loans through                                                               
an indirect financing  program for certain projects,  but not for                                                               
residential housing or owner-occupied housing.                                                                                  
                                                                                                                                
CO-CHAIR HIMSCHOOT sought to verify  whether the bill would allow                                                               
AIDEA to  finance construction  loans for  multi-family workforce                                                               
housing.                                                                                                                        
                                                                                                                                
9:16:15 AM                                                                                                                    
                                                                                                                                
MR.  DAVIS  emphasized  the  issue  for  lending  on  residential                                                               
housing  developments is  collateral.   He  reiterated that  with                                                               
residential housing,  the mortgage  is owned by  third-party bank                                                               
and if something goes wrong  with development, all that's left is                                                               
the vacant  land.  He  said AIDEA  is focused on  commercial real                                                               
estate, of which  workforce [housing] is a form of.   He said the                                                               
bill  provides  clarification  that   AIDEA  could  do  workforce                                                               
development, which he characterized as "beneficial."                                                                            
                                                                                                                                
9:17:49 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRAX asked  whether the  bill would  transfer the                                                               
issue from workforce housing onto [another class of housing].                                                                   
                                                                                                                                
REPRESENTATIVE   STORY  said   she's   recommending  a   friendly                                                               
amendment that  would remove the definition  of workforce housing                                                               
in Section 5 of  the bill.  She expressed her  hope that the bill                                                               
would jumpstart more development  of workforce housing facilities                                                               
containing five  or more dwelling  units, which is  lacking right                                                               
now.                                                                                                                            
                                                                                                                                
REPRESENTATIVE PRAX  expressed concern  that the bill  would take                                                               
business  away  from banks  and  change  AIDEA's business  model,                                                               
which  was  originally  focused   on  the  development  of  large                                                               
commercial    projects    intended   to    increase    employment                                                               
opportunities, thereby disrupting the balance.   He asked to hear                                                               
from the banks.                                                                                                                 
                                                                                                                                
9:25:42 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HALL expressed concern  that jobs in manufacturing                                                               
industries  would  not  be  filled   without  housing  for  those                                                               
workers.                                                                                                                        
                                                                                                                                
9:26:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RUFFRIDGE sought  clarity on  the removal  of the                                                               
definition  of  "workforce  housing" and  whether  the  intention                                                               
would be to remove "workforce" from the entire bill.                                                                            
                                                                                                                                
REPRESENTATIVE STORY answered no,  the language would still state                                                               
"new   workforce  housing   facilities  containing   5  or   more                                                               
dwellings."   She  clarified that  her  intent is  to remove  the                                                               
income  limits  from  the  definition  and  the  term  "workforce                                                               
housing" would remain.                                                                                                          
                                                                                                                                
9:28:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RUFFRIDGE speculated  that a  building with  5 or                                                               
more dwelling  units is ostensibly  workforce housing.   He asked                                                               
whether  removing  the term  "workforce"  would  be considered  a                                                               
friendly amendment.                                                                                                             
                                                                                                                                
REPRESENTATIVE  STORY indicated  that "workforce"  may be  needed                                                               
for AIDEA to finance.                                                                                                           
                                                                                                                                
REPRESENTATIVE RUFFRIDGE  asked whether  the term  "workforce" is                                                               
needed for the bill to apply to AIDEA.                                                                                          
                                                                                                                                
9:30:46 AM                                                                                                                    
                                                                                                                                
MR.  BREFCZYNSKI   offered  to  follow  up   with  the  requested                                                               
information.                                                                                                                    
                                                                                                                                
CO-CHAIR HIMSCHOOT announced that HB 184 would be held over.