NRP Group’s Unconventional Solution to the Affordability Challenge
The firm’s head of affordable housing sheds light on an innovative program.
The U.S. has been going through an affordable housing crisis for decades. The pandemic and its associated downturn have made things worse, increasing the number of low-income communities across the country that suffer from a lack of safe and affordable homes. The crisis has also spotlighted health inequities and the major role social determinants play on good health outcomes and overall health status.
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Through the Health and Housing initiative—previously known as Housing First—The NRP Group and several other national developers actively partner with hospitals and other health-care providers to address social determinants of health in low-income communities across the U.S. and promote healthy neighborhoods through affordable housing.
The properties that are included in this program do more than just provide much-needed affordable housing options. We invited The NRP Group Vice President of Development & Head of Affordable Housing Aaron Pechota to tell us more about the initiative.
When did The NRP Group join the Health and Housing initiative and how have things progressed?
Pechota: We have been working at this for six years and we are getting ready to break ground on our third Health and Housing format project, Churchill Gateway in Cleveland, later this year.
Across the country, health-care providers are looking to engage with the communities in which they are located to address social determinants of health. They need physical space in which to do that. What we provide is high-quality, Class-A commercial space co-located with high-quality housing. We build the properties and create opportunities for health-care providers to interact with community members and deliver critical services.
What we are talking about has not coalesced into a defined national initiative in the real estate community, nor in terms of federal housing policy. It consists of a few pioneering real estate development firms partnering with a handful of health institutions willing to try a new approach. Together, we are piloting this new way of delivering housing and supportive services bundled together in pockets here and there throughout the U.S.
That said, more and more people are becoming cognizant of the fact that access to safe, high-quality, reliable and affordable housing is an important role in the long-term health outcomes of individuals and families, especially in low-income communities and communities of color.
Tell us more about The NRP Group’s partnership with hospitals and health-care providers to address social determinants of health in low-income communities.
Pechota: The way we look at it is that housing is both a physical structure and a financial vehicle to help people. Our contribution is to provide the space. We bring in partners who have the know-how to provide services. Those partners’ areas of expertise are wide-ranging depending on the needs of the community.
Sometimes, services include community college access or other kinds of education. Other times, it can include education about nutrition, maternal and infant health, or technology and/or financial literacy. Services also can be as simple and direct as food distribution. We work with our institutional partners to tailor the space based on what they think the community will need.
What are The NRP Group’s responsibilities associated with participation in the initiative?
Pechota: Typically, on these deals, The NRP Group’s contribution is providing the know-how and man-hours to actually develop and build the project. The NRP Group sources the debt to finance the development and puts together the application to secure the competitive tax credit subsidies. To date, the breakdown has been 80 percent of the financing in the form of federal subsidies—low-income housing tax credit equity—of 15 percent traditional permanent debt sourced by NRP, with health-care or other institutions providing 5 percent through grant contributions.
As a result, institutions, such as hospitals or universities, get access to high-quality commercial space located in the neighborhoods they serve, at a fraction of the price it would otherwise cost them if they were constructing a new, standalone building without a housing component.What about benefits?
Pechota: With changes to Medicare and Medicaid, many health-care institutions are moving to a value-based system. They are incentivized to address and narrow the disparate health outcomes between people with and without financial means.
What the data has shown is that a small percentage of a given population—those without means—can account for a large percentage of health-care spending. Delivering impactful health-care and other services to that population at the lower end of the economic spectrum, can both improve their health outcomes and lower the costs. Helping people within these communities helps the bottom line.
What are the key challenges and issues of Health and Housing for staff members? How has the pandemic impacted the residents living in these communities and staff working in this field?
Pechota: It goes without saying that the services provided by the institutions in these spaces were all in-person. At our first Health and Housing community in Columbus, Ohio, named The Residences at Career Gateway, we had to put the workforce training classes on pause. The pandemic demonstrated how great the need for services was. While some things were shifted online, in-person delivery of services is still deemed critical.
Did you have to rethink your approach during the health crisis?
Pechota: Since these projects typically take 18 to 24 months to construct, by the time they will be ready for occupancy, The NRP Group expects we will be on the other side of the pandemic. For that reason, we have not changed the design much or altered how we approach putting the projects together from a financial perspective.
Even before the pandemic, The NRP Group wired all its affordable housing communities for high-speed, reliable internet access. This proved prescient when schools, workplaces and everything else shifted to online formats during the lockdown.
At our planned multiphase Churchill Gateway community in Cleveland’s Glenville neighborhood, the 2,500-square-foot community outreach center was originally designed to enable University Hospitals and the Cleveland Metropolitan School District to deliver health education and workforce training, respectively. It will still serve that purpose.
However, the pandemic prompted us to also include two soundproof rooms, where residents and community members can access telehealth services provided by University Hospitals. The truth is that despite the site being only a mile away, due to the city’s layout of highways, it can take an hour-long bus ride to get to the hospital from this neighborhood. The rise of telehealth has the potential to vastly expand access to health-care services to this underserved demographic, and physical spaces devoted to this purpose are a component of that.
What do statistics reveal? From your experience, what is the success rate of the initiative?
Pechota: We developed our first Health and Housing community, Residences at Career Gateway in Ohio, in partnership with Community Development for All People and the Nationwide Children’s Hospital. The development included a 2,500-square-foot conference room and training facility that the hospital uses to host regular job training courses for residents seeking employment with the hospital.
The workforce training program has been well received and extremely successful. Data reveals that within the first year of the pilot program, Nationwide Children’s Hospital from South Side increased entry-level new hires by 15 percent and has hired a cumulative 31 team members from Career Homes. Attendance and participation in the program remain high.
Is it correct to say that the pandemic helped people see the homelessness issue more clearly and perhaps encourage a more collaborative effort? What are the barriers to a more widespread rollout of the initiative?
Pechota: Our program does not provide homeless housing, specifically. What we can say is that the scarcity of affordable housing units across the country is a glaring problem that requires many creative and nonconventional solutions and the participation of many stakeholders.
Raising awareness about The NRP Group’s partnership approach, including through coverage in Multi-Housing News, definitely helps lower one of the barriers to wider rollout.
We want more institutions, hospitals, universities and not-for-profits to know that by partnering with The NRP Group, they get access to high-quality Class A commercial space for pennies on the dollar, enabling them to deliver their support services in the communities they are seeking to serve, in targeted locations, with the knowledge that those services can be physically bundled with affordable housing units built above the commercial space.