Home Funders’ lends capital at very low interest rates to projects that set aside at least 20% of the units for ELI families—double the state mandate—and provide long-term affordability and use restrictions. Home Funders offers flexible 2-3% loans that are available for all phases of a project – acquisition, predevelopment and bridge loans, as well as permanent financing. Most developers who access Home Funders financing utilize project-based operating subsidies (i.e. Section 8 and Massachusetts Rental Voucher Program(MRVP)) to create the deep affordability necessary for ELI units.
Home Funders created a Limited Liability Corporation (LLC) through which PRIs and grants are pooled in order to share risk. The funds are then committed to two experienced housing finance intermediaries for actual lending: The Community Economic Development Assistance Corporation (CEDAC) and the Massachusetts Housing Partnership (MHP). Home Funders Collaborative LLC lends its capital to these two intermediaries at a 1% interest rate and they, in turn, lend to housing developers at 2-3% interest rates for acquisition, predevelopment, bridge and permanent financing. Reducing the cost of capital to the developer allows them to subsidize housing units even further and make them affordable to ELI families. Channeling the Home Funders loans through existing affordable housing finance intermediaries makes it easier for developers to access the financing without additional cost. Home Funders’ loans typically represent 5-10% of total project costs.
Home Funders intermediaries: CEDAC and MHP
CEDAC provides technical assistance and early predevelopment, acquisition and bridge loans, while MHP provides long-term permanent financing. Because access to initial, higher risk affordable housing development funds is particularly important, Home Funders allows CEDAC to commit up to $1.5 million to any single project that meets Home Funders’ eligibility requirements. The LLC’s funds revolve through CEDAC’s shorter term lending. As a result, the Home Funders initial loan capital of $9.15 million at CEDAC has resulted in a total of $39.8 million in loans through December 2015.
CEDAC’s and MHP’s roles complement one another, and both have excellent track records underwriting affordable housing projects and managing portfolios. The agencies market Home Funders’ resources to potential developers, provide detailed review and underwriting of projects, and ensure that public sector resources are available to cover total development costs. These additional sources typically include Low Income Housing Tax Credits, state bond programs and local public funding sources.
Home Funders’ funds are loaned to the project at a very low interest rate; as a result, its loans allowed projects to maintain site control during the low-income tax credit market collapse or through delays caused by legal opposition to development. The ability of CEDAC to extend repayment of short-term loans in the face of serious development delays has proven critical to non-profit borrowers. At the same time, MHP’s Home Funders 20-year loans are used like equity to fill critical gaps in capital funding.
Home Funders’ loans can be used to help finance new construction, to redevelop foreclosed properties to include units for extremely low income (ELI) families, as well as for the preservation of “expiring use” rental units. These expiring use properties are privately owned but were produced using state and/or federal housing resources. The CEDAC expiring use database identifies over 100,000 units assisted through some form of mortgage subsidy or project based rental assistance. Without preservation efforts, these units could be lost to the open market, forcing out low income tenants and also reducing the overall affordable housing inventory in the state.
Advocacy for Operating Subsidy and Other Public Resources
Home Funders also supports information dissemination and advocacy to ensure that adequate local, state and federal resources are targeted for extremely low-income housing. By bringing new money to affordable housing development, Home Funders has been in a unique position to influence public policy in the area of housing for homeless and ELI families. Home Funders leverages its capital to help increase government’s commitment of operating subsidies to housing. These subsidies are instrumental in creating housing that’s affordable to ELI families.
In the city of Boston, Home Funders has successfully advocated with the Department of Neighborhood Development (DND) to attach project-based Section 8’s to Home Funders’ projects in the city. At the state level, Home Funders participates in several broad-based coalitions that advocate tirelessly for increased state MRVP rental subsidies. While the current state fiscal crisis has made it difficult to increase funding for any state programs, advocacy has been effective in preserving these subsidies.