How Can Religious Institutions Ease the Affordable Housing Crisis

The affordable housing crisis in the U.S. is achingly obvious. According to The Gap, a National Low-Income Housing Coalition report released in March, nearly 73 percent of the country’s severely cost-burdened renters, who spend more than half of their income on housing, are extremely low-income renters—households with an income at or below the poverty guideline or 30 percent of the area’s median income.

Also, there is a shortage of more than seven million affordable and available rental homes, which means only 35 units exist for every 100 extremely low-income renters. Following recent changes in the tax legislation, the affordable housing shortage is expected to grow. According to an analysis by Novogradac & Co., the tax reform would reduce affordable rental housing production by nearly 235,000 homes over the next decade.

However, one resource for affordable homes has been overlooked in recent debates—collaborations between faith-based organizations and private developers. It is a known fact that churches and religious institutions are among the country’s largest landowners. Many of them have adjacent sites that are suitable for development. Multi-Housing News spoke with Frank Cerbini, vice president of acquisitions at the NHP Foundation, and Michael Eaddy, pastor of the People’s Church of the Harvest in Chicago, in a bid to find out how feasible this solution is. Cerbini and Eaddy weighed in on how faith-based property development can be an answer to the country’s deepening affordable housing crisis.

How can faith-based institutions help ease the affordable housing crisis?

Cerbini: They can help in several ways, for example by advocating for the increase of supply of housing in their area. This can be accomplished by engaging their community, encouraging residents to do specific, necessary tasks such as seeking out zoning bonuses and incentives to support the preservation and creation of affordable housing. To the extent that they own land, or can acquire land that can be used to develop new units, they can also actively engage with affordable housing development companies to create the new housing directly.

Eaddy: There is a need for more faith-based institutions to view their presence in distressed communities as the mandate to address the affordable housing crisis. They also must build capacity to fulfill the mission through the acquisition of available vacant land and formulating a development team.

Could you offer some examples of successful collaborations between private developers and religious organizations?

Frank Cerbini and Michael Eaddy

Cerbini: We have two of our own. Roundtree Residences in Washington, D.C., is a 91-unit LIHTC property developed by NHPF with the local Allen Chapel AME Church, which sought to build a senior housing project on their land, but could not get the necessary financial support to build their dream. NHPF brought the development expertise and financial capability to secure soft money and tax exempt bonds from the District of Columbia as well as equity and a construction loan from Bank of America. Today, where a weed strewn lot was, is a new project affordable to seniors at 50 percent of the area’s median income. It filled up immediately upon opening.

Harvest Homes Apartments is a 36-unit LIHTC property adjacent to People’s Church of the Harvest, a congregation with deep roots on the west side of Chicago and a long history at its location in East Garfield Park. Harvest Homes Apartments resulted from a more than 20-year effort by the leadership of the Church to play an active role in revitalizing the surrounding neighborhood by creating high-quality, affordable housing for families with children on land that had been razed three decades ago.

People’s Community Development Association of Chicago (PCDAC), non-profit affiliate of the church, had gained control of the land a number of years ago, but could not get all of the financial support needed to build the housing. NHPF was brought in as development partner… .

Eaddy: The Lawndale Christian Development Corp. in Chicago has developed hundreds of rental units and numerous single-family homes with a total value of $140 million. Harvest Homes Apartments LLC—created by PCDAC and NHPF—constructed 36 affordable housing units valued at $13.5 million.

What is obstructing more faith-based property development across the country?

Cerbini: The first obstacle is lacking the necessary mission to get the project started. It’s a long-term, complicated and expensive process and organizations can be dissuaded by the task. Some other obstacles are lack of the financial resource and perhaps as important, lack of the necessary information and knowledge to go through the development process.

It’s not at all uncommon to spend two years or more from having the original development concept to the groundbreaking that marks the start of construction. For the most part, the faith-based partner needs to look outside of itself to find that expertise. That takes time and will also require the organization to spend predevelopment funds to move the project forward. Also, a typical property will have many different funding sources. You’ll likely have one or more levels of governmental support and approval, lenders and equity partners, all of whom have to be in agreement on the particulars of the project. It’s not uncommon to have five or more separate and distinct sources of funds.

How much land can a faith-based institution dedicate to affordable housing development?

Cerbini: That will vary by location and also depends on several factors including local zoning, depth of the rental market, amount of community and church space which will be part of the final development. There is a minimum size that will be determined by the financial feasibility.

Eaddy: This varies according to where the faith-based institution is located:

• urban—minimally one acre
• rural—two acres or more

Are there any changes in the current legislation that should be made in order to encourage more faith-based institutions to accept affordable housing projects on their land?

Cerbini: There are changes to the legislation that were not made and that might have helped make it easier to attract the necessary capital to make the development more manageable. One technical change would have been to lock the rate at which tax exempt bonds can generate tax credits for affordable housing at four percent and not have it float to market. The biggest positive change would be to increase the overall supply of sources available for the development of affordable housing.

Eaddy: A tax credits application process and requirements that are less complicated and more simplified on the city and state levels. Also, designating distressed communities with the greatest need a higher scoring classification within the application review process.

Images courtesy of NHP Foundation