Non-Profit Community Developers Face Challenging Financing Environment

A “constrained funding environment” is a key challenge facing non-profit community development companies today, says Eileen M. Fitzgerald, CEO of NeighborWorks America.

Equity composes the most important piece of funding for the development or rehabilitation of affordable housing, as this form of financing go the furthest in making possible lower rents, Fitzgerald tells MHN.

Yet various forms of equity today are all becoming more limited. Notably, it is highly competitive to obtain allocations under the Low Income Housing Tax Credit program, and the prices investors will pay for housing tax credits have dropped. At the same time, federal sources of grants for non-profit developers, such as HOME and the Community Development Block Grant, are being cut or are at risk. In addition, tightening of credit–“a much more risk-adverse credit environment”–is also a significant financing obstacle, says Fitzgerald..

Non-profit developers are dealing the best they can with these challenges by resorting to creativity, she says. “Sometimes, they have to produce less housing. Some are focusing more on acquisitions and rehabilitation than new construction, and others are expanding their footprints to other localities,” says Fitzgerald.

NeighborWorks is a congressionally chartered organization that distributes grants and loans and provides advice and training to its network of non-profit community organizations. The institution has 235 organization members that own tens of thousands of affordable housing units nationwide, as well as develop and rehabilitate new affordable housing units.

Other challenges facing the non-profit community owners of affordable housing include spiking energy prices, which makes it much more difficult to keep rents low, says Fitzgerald. “It is a huge challenge when the energy prices have increased 50 percent, and properties do not necessarily have the ability to absorb those cost increases.” One solution, she says, is to execute rehabs that incorporate a significant amount of green measures to reduce utility costs in the long run.

Another challenge for the non-profits, says Fitzgerald, is the higher level of demand for affordable housing and serving the greater numbers of people needing affordable housing.