New Partnership to Fund Affordable Housing Renovations
- Dec 21, 2010
Chicago–The John D. and Catherine T. MacArthur Foundation, the National Affordable Housing Trust (NAHT) and Cornerstone Real Estate Advisers L.L.C. have partnered to preserve federally subsidized rental housing in a number of markets. The properties are mostly in second- and third-tier markets, which the partnership views as relatively neglected by the affordable housing industry in favor of major U.S. metro areas.
The seed money for the partnership is from the MacArthur Foundation, which is providing a $20 million guaranty in connection with the effort, and which aims to attract $100 million all together. That funding will provide nonprofit developers capital to preserve and renovate about 20 rental properties nationwide serving more than 2,000 low-income residents, the partnership estimates.
As part of the effort, the National Affordable Housing Trust (NAHT) and Cornerstone Real Estate Advisers jointly closed an investment fund through the federal Low-Income Housing Tax Credit program, which provides incentives for private investment in developments serving low-income renters. Investors in the fund include JPMorgan Chase, Massachusetts Mutual Life Insurance Co., MetLife and United Bank. NAHT and Cornerstone will jointly manage the fund.
In the wake of the recent financial crisis, participation in the Low-Income Housing Tax Credit program declined sharply. While the market for the credits has begun to rebound, according to NAHT and Cornerstone, investors are focused disproportionately on major markets and new construction projects, causing many rental preservation projects in smaller and rural communities to stall.
“By virtue of the two-tier structure and the foundation guaranty, we’re able to enhance the risk-return profile for projects that might otherwise be passed over because they are small, or in smaller markets, or require significant revitalization,” Debra Schwartz, the MacArthur Foundation’s director of program-related investments, tells MHN. “Also, due to the foundation guaranty, we’re able to attract capital for projects with a federal subsidy contract nearing expiration that’s expected to be renewed. Ordinarily most Low-Income Housing Tax Credit investors will avoid such projects.”
The fund’s projects already slated to move forward include renovations of affordable rental housing for low-income families and seniors in Minnesota, Oklahoma, Nebraska and Ohio. In Minneapolis, Nicollet Towers, a landmark building occupied by more than 300 low-income families and seniors, will be renovated by Volunteers of America to include new energy-efficiency and other features. In Oklahoma City, the 100-unit Southwood Apartments will also be renovated by Volunteers of America, including energy efficiency upgrades and a new wireless emergency systems to benefit the property’s elderly population.
In Omaha, Millard Manor, an outdated but fully occupied rental property, will be significantly expanded by the Good Samaritan Society to provide more suitable homes for its low-income senior-citizen residents. The 53-unit Renaissance Senior Apartments, a 100 year-old property in downtown Toledo, will be fully renovated by National Church Residences.