Financing Affordable Communities in NY

James Dittbrenner, managing director at Sterling Bank, discusses the process behind a bank's decision to finance affordable housing projects such as the Newburgh CORe Neighborhood Revitalization in Orange County, N.Y.

As the nation is currently dealing with a deficit of 7.4 million affordable units for those earning less than 30 percent of the local median income, inexpensive housing has become a sensitive issue in most major metros such as New York. Local authorities, state and federal agencies and NGOs, in partnership with developers and investors, struggle to alleviate the chronic affordable housing shortage.

James Dittbrenner, managing director of community development at Sterling National Bank

James Dittbrenner, managing director of community development at Sterling National Bank

Whether new developments or revamped older buildings, affordable communities strongly rely on banks as main financing providers. Newburgh CORe Neighborhood Revitalization is a historic rehabilitation and renovation project that includes 45 mixed-income affordable rental apartments across 15 buildings within a four-block area, a qualified low-income census tract in the City of Newburgh, N.Y. Sterling National Bank recently provided a $25.2 million credit facility to this initiative. Sterling’s Managing Director of Community Development James Dittbrenner spoke with Multi-Housing News about the reasons why banks get involved in financing affordable housing projects.

MHN: Why did you decide to provide a credit facility for the Newburgh CORe Neighborhood Revitalization project?

Dittbrenner: We made the decision to provide financing to the Newburgh CORe Neighborhood Revitalization project because Newburgh very much needs quality, affordable housing. In addition, this is a unique initiative that incorporates affordable workforce housing with community policing in an urban setting. The developer and real estate management firms (RUPCO and Safe Harbor Homes) are both known and respected in their individual rights as affordable and supportive housing developers and managers, which gave us comfort that the project would be completed and a successful addition to the City of Newburgh’s revitalization.

MHN: The Newburgh project primarily focuses on providing housing to homeless individuals, middle-income families, artists, veterans and seniors with modest means. However, most of the projects you decide to finance usually have a second ambition. For example, the Newburgh CORe Neighborhood Revitalization project also includes a rehabilitated community center with after school youth programs, studio/gallery space for artists and a computer-training lab. How important are these side components of the projects when you decide financing them?

Dittbrenner: Successful community building incorporates amenities that are supportive to the targeted resident population. This project utilizes a former manufacturing building to provide community space for youth after school programs, a computer lab, gallery space for artists to create and display their works, space for community family events and a community police hub. These are all important amenities to the working families, artists, seniors and veterans who will reside in the units.

MHN: You currently have several affordable housing projects in the pipeline. Which are most needed? 

Dittbrenner: We don’t recognize one project as more necessary than any other. The need for safe, affordable housing in community settings that provides access to services, public transportation, shopping, healthcare facilities and community activities is paramount in all our markets. Frankly, the need for projects like this far outpaces the funding sources necessary to develop units.

MHN: How can banks contribute to alleviating the affordable housing crisis in New York?

Dittbrenner: It’s not singularly banks that can help to alleviate the affordable housing crisis in New York. It takes a collaborative effort amongst developers, legislators, local municipal leaders, state and federal housing agencies and investors of all varieties. But banks will continue play a vital role in providing the supportive financing structures that allow new developments to be built.

MHN: Why did Sterling National Bank get involved in financing affordable housing projects? How risky is it?

Dittbrenner: Sterling has always maintained strong relationships with its clients, customers and communities as evidenced by our long history of satisfactory Community Reinvestment Act (CRA) evaluations. The bank is continuing to increase its investments in CRA programs and even with our commercial focus, we have demonstrated a strong ability to broadly and deeply serve our communities with focused, innovative community development strategies. Community development lending and investing is a major part of our core culture and the risk profiles are generally lower than in many other business sectors.

MHN: How complicated is the process of deciding whether a project is worth financing or not?

Dittbrenner: The process of determining whether a project is worth financing is one based on community need, viability of the project with community and agency support, strength and experience of the development team and evaluation of the financing composition.

MHN: Who are your main partners when deciding to lend?

Dittbrenner: We approach the affordable/supportive housing development sector with a “one-stop-shop” approach, evaluating both the direct lending opportunity and long-term investment through project-awarded Low Income Housing Tax Credits. We execute on this strategy by partnering with experienced syndication firms who assist with the long-term asset management of projects funded.

Image courtesy of Sterling National Bank