With national housing at a crisis level, underproducing millions of units annually, public and private partnerships are getting more creative about how to solve this puzzle across the country.
Traditional sources of government funding are limited, traditional lending is expensive and institutional investors are pulling back from housing investment. Now, developers and new funders are finding ways to collaborate with cities and states to bring more units online.
The Urban Land Institute recently hosted a panel of national developers, lenders and thought leaders to share concepts for creative housing development ideas and financing alternatives. Here are some of the concepts they shared that we found enlightening.
By unlocking “soft” sites controlled by health care systems, schools and even corporate campuses, developers are creating partnerships with cities and leaders in these markets to identify land they can convert to affordable housing.
The upside is identifying projects that align with the mission of organizations not traditionally involved with housing, but whose leaders understand the importance of available housing to health care, education and job growth in a community.
Equity Fund Matching
Corporations are also looking at creative ways to have social impact on the housing market. By developing their own equity funds, they can offer gap financing to applicable housing projects near their locations. Large companies like Amazon have started small by donating a building and offering a housing match. Their positive community impact and employee satisfaction have encouraged even more investment.
Developers can seek out these low-cost fund matches or equity funds based on the markets they serve.
Local Housing Trust Funds
More cities and states are considering local housing trust funds that dedicate local public resources for grants and loans. Funds can be used to provide down payment assistance, rental assistance and homebuyer counseling services in addition to development, rehabilitation and financing of housing.
Cities and states can also support higher density housing by offering tax abatements and exemptions to targeted developments, particularly when a nonprofit is involved with the project.
For long-term holds, ESG-aligned housing projects can make economic as well as environmental sense. Developers are exploring solutions such as solar tax credits paired with LIHTC to promote to investors as well as integrating property assessed clean energy (PACE) programs to provide gap financing.
Although there is still resistance from the NIMBY perception about affordable housing, developers and public entities are getting more refined in their stakeholder communication regarding the need for workforce, student and senior housing. In addition, mixed-income housing projects tend to reduce this resistance while also increasing potential private investment.
Mixed-income housing can attract public and private investment while serving the needs of the community. Seeking the public and private partnerships mentioned in this article can make mixed income development possible, attractive and affordable for all. These projects also face less restriction from zoning ordinances, which expands land use opportunities.
Panelists on the Urban Land Institute roundtable included institutional lenders and private corporate funders, which showcases the value of bringing traditional lending and alternative financing opportunities together to solve the housing crisis.
If you are a housing developer, private investor or a not-for-profit aligned with a housing development entity, LvHJ can advise on accounting advisory, tax planning and audit solutions.