MacArthur Foundation Program Preserves Affordable Homes
Chicago, IL. December 14, 2010 - An innovative partnership to finance the preservation of federally-subsidized rental housing in underserved markets brings together major financial institutions, philanthropy, and the federal government.
The John D. and Catherine T. MacArthur Foundation, which is providing a $20 million guaranty in connection with this new effort, aims to attract $100 million for non-profit developers working to preserve and renovate approximately 20 rental properties nationwide serving more than 2,000 low-income residents. Projects already slated to move ahead include renovations of affordable rental housing for low-income families and seniors in Minneapolis, Oklahoma City, Omaha, and Toledo.
"Our nation's need for affordable rental housing has never been greater and continues to grow," said Debra Schwartz, MacArthur's Director of Program-Related Investments.
"This innovative approach, which brings together major financial institutions, philanthropy, and the federal government, shows that we can mobilize the capital needed to save thousands of at-risk affordable rental homes, even in difficult economic times. Much more needs to be done but this model offers one creative way forward."
As part of the public-private partnership, The National Affordable Housing Trust (NAHT) and Cornerstone Real Estate Advisers LLC jointly closed an investment fund through the federal Low-Income Housing Tax Credit, a program that provides incentives for private investment in developments serving low-income renters. Investors in the fund include JPMorgan Chase, MassMutual, MetLife, and United Bartle NAHT and Cornerstone will jointly manage the fund.
"This fund is an example of how public and private organizations working together creatively can engineer socially responsible investments that work for everyone involved, most notably the residents of the affordable housing that this fund will help preserve," said David J. Reilly, Cornerstone's president and CEO.
Since its creation in 1986, the Low-Income Housing Tax Credit has been the nation's primary source of low-cost capital for the development and preservation of affordable rental housing. However, in the wake of the recent financial crisis, participation in the program declined sharply. While the market for Low-Income Housing Tax Credits has begun to rebound, investors are focused disproportionately on major markets and new construction projects, causing many rental preservation projects to stall, especially in smaller and rural communities.
The new fund widened the range of rental housing projects that mainstream investors will support. MacArthur's financial support addressed investor concerns regarding construction and lease-up risks as well as the funding of certain federal subsidy programs. Additionally, capital for the projects was attracted to Cornerstone's innovative two-tier structure, which provides additional collateral coverage for the senior investors.
The fund will support nonprofit housing developers acquiring and renovating hundreds of existing, affordable rental homes in five states, including:
- Nicollet Towers, a landmark building in Minneapolis occupied by more than 300 low-income families and seniors, will be renovated by Volunteers of America. The overhaul will incorporate many new energy-efficient features, including re-facing of the fac;ade. A groundbreaking event is scheduled for December 15.
- Southwoods Apartments, a 100-unit affordable rental property in Oklahoma City, will be renovated and managed by Volunteers of America. In addition to energy efficiency upgrades, a new wireless emergency call system will be installed to enhance the health and safety of the building's elderly residents.
- Millard Manor, an outdated but fully occupied rental property in Omaha will be significantly expanded to provide more suitable homes for its low-income senior citizen residents. The project is being renovated and managed by Good Samaritan Society.
- Renaissance Place is a 100 year-old property in downtown Toledo, adjacent to the famous Valentine Theater. National Church Residences will fully renovate and manage the property's 53 rental apartments. A groundbreaking event is scheduled for December 14.
Other properties to be renovated in this initial phase are located in Findlay and Highland Hills, Ohio, and Leominster, Mass.
The MacArthur Foundation has a long history of supporting affordable housing. This loan guaranty is part of its $150 million rental housing preservation initiative, "Window of Opportunity." In addition to its grantmaking, MacArthur has provided $377 million in program-related investments, which are charitable-purpose loans, equity investments, or loan guarantees.
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