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Private Money Creates $30M Bridge Loan Fund for Site Acquisition
Published: June 10, 2008
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By Anuradha Kher, Online News Editor
Christiansburg, Va.--Virginia Community Capital (VCC) and the National Housing Trust Community Development Fund (NHTCDF) recently launched an acquisition loan pool to help preserve Virginia’s affordable rental housing.
With the help of private capital, VCC and NHTCDF have created a $30 million site acquisition loan pool called Preservation Acquisition Loan (PAL) to preserve and improve affordable rental homes in Virginia. PAL will provide flexible bridge financing of two to three years so affordable housing providers can acquire and hold affordable properties while they secure long-term financing.
The fund is open to for profit and non-profit developers who will reserve a majority of their units for affordable apartment rental to individuals or families earning 80 percent or less of the Area Median Income (AMI). The loan amount could be anything from $100,000 to $4 million.
“This project represents a significant public-private-nonprofit partnership that will benefit the most vulnerable Virginians,” says Jane Henderson, president of VCC. “Safeguarding affordable rental homes is the essential first step in solving Virginia’s housing dilemma.”
Affordable housing providers need quick access to flexible financing in order to act fast to acquire affordable apartments that are at a risk of being lost.
Since the fund has just been launched, there are no examples of properties that have been preserved so far. The National Housing Trust did however, recently preserve Hazel Hill Apartments (pictured), a 147-unit property in Fredericksburg, Va. Hazel Hill Apartments is a 100 percent project-based Section 8 property and a good example of the type of properties that will benefit from this new acquisition loan pool. Built in 1971, by early 2004 the property had twice failed HUD’s property inspections.
“The owner was facing foreclosure and residents, many of whom had lived in their homes for 30 years, were facing displacement,” Todd Nedwick, assistant director, National Preservation Initiative at NHT, tells MHN. “Instead of letting the property deteriorate, NHT acquired the property in July 2004 and secured the financing needed to complete $7 million in property renovations.”
The supply of affordable rental units in Virginia is on the decline. According to Harvard University's Joint Center for Housing Studies, from 1995 to 2005, the nation lost 1.4 million apartments that rent for $600 or less because they were converted to higher priced rentals, federal subsidies waned, or aging properties deteriorated.
“This report and the recent housing crises, has led many people to try and find regional solutions to this problem,” Heather Toro Derrick, marketing and communications manager at VCC, tells MHN about the timing of the launch.
Apartment homes created with the help of the federal government provide some of the most affordable housing in Virginia. But much of this housing is at risk. Over the next five years, contracts on more than 17,000 project-based Section 8 units in Virginia will expire, giving owners an opportunity to opt out of the program or sell to market-rate developers. Additionally, Virginia has more than 10,000 Section 515 rural housing units. Many owners of these properties are interested in selling due to market forces.
The Preservation Acquisition Loan (PAL) brings together public, private, and non-profit partners to stem the loss of affordable rental homes. Funders include the Virginia Department of Housing & Community Development, and the Virginia Housing Development Authority, as well as private lending institutions including Bank of America, SunTrust, and Wachovia.
