A score of affordable federally-subsidized rental housing properties will be preserved and renovated under a partnership involving philanthropy, finance institutions and Uncle Sam. Together, the projects are home to more than 2,000 low-income residents.
The John D. and Catherine T. MacArthur Foundation is providing a $20 million guaranty in connection with this new effort, which aims to attract $100 million for non-profit developers. Projects in Minneapolis, Oklahoma City, Omaha and Toledo already slated to move ahead under the initiative.
As part of the public-private partnership, the National Affordable Housing Trust and Cornerstone Real Estate Advisers LLC jointly closed an investment fund through the federal low-income housing tax credit program, which provides tax breaks for private investment in developments serving low-income renters. Investors in the fund include JPMorgan Chase, Massachusetts Mutual Life Insurance Company, MetLife and United Bank. NAHT and Cornerstone will jointly manage the fund.
"This innovative approach shows that we can mobilize the capital needed to save thousands of at-risk affordable rental homes, even in difficult economic times," said Debra Schwartz, MacArthur's director of program-related investments. "Much more needs to be done but this model offers one creative way forward."
Conerstone President David Reilly said the fund is "an example of how public and private organizations working together creatively can engineer socially responsible investments that work for everyone involved."
Since its creation in 1986, the low-income housing tax credit has been the nation's primary source of low-cost capital for the development and preservation of affordable rental housing. However, in the wake of the recent financial crisis, participation in the program declined sharply.
While the market for the credit has begun to rebound, investors seem to be focused disproportionately on major markets and new construction projects, causing many rental preservation projects to stall, especially in smaller and rural communities. Consequently, the new fund widens the range of rental housing projects that mainstream investors will support.
MacArthur's financial support addresses investor concerns regarding construction and lease-up risks as well as the funding of certain federal subsidy programs. Additionally, capital for the projects was attracted to Cornerstone's two-tier structure, which provides additional collateral coverage for the senior investors.
