Merritt Closes $179M Affordable Housing Fund

Santa Fe Commons. Rendering courtesy of Merritt Community Capital

Merritt Community Capital has closed its largest fund to date, at $178.6 million, which finances affordable housing development across California. Fund 23 has attracted 13 investors and currently finances nine projects, totaling 729 affordable homes in the state.

The announcement comes on the heels of Merritt’s previous fund closing, in December last year—the nonprofit company previously raised $137 million for its 22nd fund, from 12 investors.

The current round of funding featured six new or re-engaged investors, as well as four returning investors that made their largest contributions to date. One new partner is Self-Help Enterprises, a community development organization which focuses on low-income families. Self-Help Enterprises is sponsoring Santa Fe Commons, the first of two phases of an affordable housing community being developed in Tulare, Calif.

Santa Fe Commons is currently under construction and will feature 120 fully affordable units at 537 N. West St. in Tulare. According to Yardi Matrix, the property received three construction loans—secured by Pacific Western Bank ($24.7 million), Self-Help Enterprises ($4.8 million) and the city of Tulare ($1.8 million). The community will include 35 units dedicated to families working in the California agriculture industry. Santa Fe Commons is planned to be a carbon net zero, 100 percent electric development, and will feature solar units to offset power usage.

Targeting the housing deficit

Out of the 729 homes to be constructed using Merritt’s latest round of founding, 31 percent will be senior housing, 27 percent will be used for people with special needs, while 5 percent will be set aside for people working in the agriculture industry. Additionally, 30 percent of the homes are planned to serve extremely low-income residents (earning at or below 30 percent of the average median income), while 50 percent of the homes are for low-income residents (between 31 and 50 percent of median income). Overall, the Fund 23 homes are estimated to save $5.7 million in rent per year, reduce emissions by 1,339 metric tons, and reduce vehicle miles travelled by 2.7 million miles per year.

According to a study commissioned by the National Multifamily Housing Council and National Apartment Association, the U.S. needs another 4.3 million apartments by 2035 to meet demand and affordability. A deficit of 600,000 homes resulted from the 2008 crisis, while another 3.7 million are estimated to comprise future demand. About 40 percent of this future need is estimated to be contained in three states: California, Texas and Florida.

Another recent initiative targets California’s middle-income housing demand—Standard Communities and Faring formed a $2 billion joint venture for the creation of housing across California, through both acquisitions and new development. The partnership uses California’s public-private structures, relying on tax-exempt bond financing. Standard-Faring Essential Housing already created 650 units across three properties, with a capitalization of more than $400 million.