Low Income Investment Fund
The Low Income Investment Fund (LIIF) is a Community Development Financial Institution (CDFI) that serves low-income families and communities through investments in affordable housing, childcare, education and related community development projects. To support acquisition and development of affordable homes, LIIF makes available predevelopment and acquisition loans of up to $3.5 million to nonprofit organizations, mission-based for-profits and public and quasi-public entities. As of 2015, LIIF helped to make available 67,000 units of affordable housing and invested nearly $1 billion in capital and technical assistance to affordable and supportive housing developers.
Metropolitan Transportation Commission
Bay Area, Calif.
In early 2011, the Metropolitan Transportation Commission (MTC), the metropolitan planning organization for the San Francisco Bay Area, approved the creation of a revolving loan fund to finance acquisition of land in transit-accessible areas for development of affordable housing. Offered through its Transportation for Livable Communities program, which provides grant funding for innovative transportation and streetscape projects, the Bay Area Transit-Oriented Affordable Housing Fund was capitalized with an initial pledge of $10 million from MTC. These funds were then supplemented by an additional $40 million from financial institutions and philanthropic organizations.
South Corridor Land Acquisition Fund
In 2005 the Charlotte, N.C. City Council capitalized the South Corridor Land Acquisition Fund with $5 million in appropriations to support the purchase of land near planned stations along the South Corridor Light Rail line. Using fund revenue as part of a joint development agreement with the local transit authority, the city purchased 17 acres at the Scaleybark Station for development of a mixed-use project to include 80 affordable units built by the Charlotte Mecklenburg Housing Partnership as part of a 900-unit development that also includes retail, hotel space and park land. The project ran into some delays in 2010 and 2011, but as of 2014 efforts were underway to revive plans for the mixed-use development.
Denver Regional Transit Oriented Development Fund
The Denver Regional Transit Oriented Development (TOD) Fund is a land acquisition fund supporting the preservation and creation of affordable housing near current and future transit stations in the Denver region. Since 2010, this partnership between the Urban Land Conservancy, Enterprise Community Partners and the City and County of Denver, along with several other investors, has facilitated the preservation or creation of more than 626 affordable units by extending $13.5 million in capital available at a low interest rate to enable the purchase and holding of sites by affordable housing developers for up to five years. Originally limited to acquisitions within Denver County, the fund was expanded in 2015 into a $24 million regional resource that can also be used to preserve affordable properties or future affordable development opportunities throughout the Denver region.
For More Info:
Brad Weinig, Enterprise Community Partners
Many states across the country have lending programs that provide pre-development and acquisition financing for affordable homes. These programs are often administered by the state housing finance agency. Typically, states loan money directly to the organization that will be developing the homes.
Predevelopment Loan Program
Connecticut’s Predevelopment Loan Program provides no-interest loans to cover pre-development expenses associated with the construction or rehabilitation of homes affordable for low- and moderate-income households. The maximum loan is $250,000 and is repayable upon receipt of permanent financing. The state may forgive loans if permanent financing cannot be obtained.
Housing Development Fund Pre-Development Loans
The Delaware State Housing Authority’s Housing Development Fund Loans are funded in part through the state’s HOME allocation. Loans are made to nonprofit organizations to cover acquisition and pre-development expenses associated with the development of homes for low- and moderate-income households. Repayment is due upon receipt of construction financing, although the loan may be waived if development cannot proceed due to factors outside of the borrower’s control.
Pre-Development Loan Program
The Florida Housing Finance Corporation offers the Predevelopment Loan Program to nonprofits, local governments and public housing authorities seeking to increase the supply of affordable housing. The maximum loan for pre-development and site acquisition is $750,000. Interest rates generally fall between 1 and 3 percent. In order to qualify for the Predevelopment Loan Program, at least 20 percent of the units in rental developments must be affordable for households earning 50 percent or less of area median income (AMI); in homeownership developments, at least 50 percent of the units must be affordable for households earning 80 percent of AMI and the remainder must be affordable to households at or below 120 percent of AMI. Technical assistance is provided to ensure that applicants have a feasible plan for obtaining construction and permanent financing. Repayment is deferred for three years or until construction or permanent financing is obtained.
Community Economic Development Assistance Corporation
The Commonwealth of Massachusetts created the Community Economic Development Assistance Corporation (CEDAC) in 1978 to provide resources and expertise to organizations engaged in affordable housing creation and community development. CEDAC is a public-private community development financial institution (CDFI) offering technical assistance, pre-development lending and consulting services to nonprofit organizations, including neighborhood development corporations, nonprofit developers and tenants’ associations.
CEDAC works with partner agencies at the state level to focus resources in support of nonprofit development as an important element adding to Massachusetts’ stock of affordable housing. CEDAC is also active in national housing preservation policy research and development and is widely recognized as a leader in the nonprofit community development industry.
Land Acquisition for Affordable New Development
Minnesota’s Land Acquisition for Affordable New Development (LAAND) initiative provides loans to help defray high land costs and enable the development of new affordable homes. The program is administered by Minnesota Housing, the state housing finance agency, in partnership with the Metropolitan Council, the Twin Cities regional planning agency and the nonprofit Family Housing Fund, each of which contributes program funding. Eligibility is determined by each of the funders, but in general the program is open to local governments and their agencies, nonprofit organizations and private developers, all of which submit an application specifying the details of the proposed development to Minnesota Housing.
Funding decisions are based on several criteria, which vary somewhat depending on whether the proposal targets a site within or outside of the Twin Cities metropolitan area. In all areas, however, applicants who demonstrate the ability to leverage LAAND funds with financial or in-kind support from local entities and whose projects will be located in high-income neighborhoods receive greater consideration, as do those whose projects target sites near job centers and public transit (or otherwise minimize transportation costs). All sites must be located in areas consistent with the locality’s strategic growth goals.
Beneficiaries of the program must bank the land for at least one year, and development must begin within five years of the loan agreement. Loans are repaid at the time of sale of the land. At least 20 percent of residential units developed on sites acquired through LAAND must be affordable to households at 60 percent of the area median income in the Twin Cities metro and 80 percent of AMI in the rest of the state. Homeownership units must remain affordable for at least seven years and rental units for at least 15 years, although projects that build in longer terms of affordability receive higher priority for funding.
Affordable Housing Development Fund
The Mississippi Affordable Housing Development Fund is a revolving loan fund that provides pre-development and acquisition financing as well as construction and rehabilitation loans. Loans are made for rental homes that are affordable to households earning 60 percent or less of AMI and to homeownership developments that will be affordable to households at or below 115 percent of AMI. A Land Use Restrictive Agreement will ensure affordability for at least 15 years. Interest rates may be as low as 3 percent, and loans may be amortized or deferred with repayment due within 3 years. Priority is given to developments that serve broader state goals such as housing for senior citizens and developments with resident management or other self-sufficiency programs.
Primero Loan Program
The New Mexico Mortgage Finance Authority’s Primero Loan Program began in 1993 as a source of pre-development and acquisition financing and was expanded in 2002 to provide financing for all other stages in the development of affordable rental or special needs housing when other financing is not available. The maximum loan is $1 million. Repayment is due within 5 years or upon receipt of subsequent financing.
Supportive Housing Development Program
The North Carolina Housing Finance Agency provides limited pre-development loans as part of its larger Supportive Housing Development Program. Loans of up to $25,000 are available for non-profits and local governments to develop emergency, transitional, and permanent service-enriched housing for the homeless and/or people with disabilities.
Pre-Development Loan Program
Oregon’s Predevelopment Loan Program provides below-market interest loans of $40,000 to $1.5 million to cover acquisition and predevelopment expenses for the construction or acquisition and rehabilitation of affordable homes. Loans of more than $500,000 are due in no more than six months; loans of $500,000 or less are due within two years. Developments funded by this program must have either 20 percent of units affordable for households earning 50 percent area median income or 40 percent of units affordable for households earning 60 percent of AMI. Up to one-third of units may be affordable to households earning more than 120 percent of AMI. Both rental and homeownership developments with at least five units are eligible for funding.
Loan Guarantee Program
Oregon’s Loan Guarantee Program provides guarantees of up to 25 percent of the principal of loans for the acquisition and rehabilitation of affordable homes, or for new construction. Developments that receive loan guarantees should include homes that are affordable to households earning 80 percent of AMI or less. An annual fee of 1 percent of the guarantee amount is charged. Mixed-income developments may receive a smaller loan guarantee than fully affordable developments.
Oregon Housing Acquisition Fund
The city of Portland and the state of Oregon have worked together since 2007 to offer a revolving loan fund to finance the purchase of at-risk, affordable properties and preserve their affordability until permanent financing is available. The Oregon Housing Acquisition Fund offers two types of loans: one for at-risk, subsidized properties and the other for market rate properties that will be converted to affordable units. The Fund also has a Green Pilot program that offers financial support for integrating green and sustainable building practices into the renovation of preserved properties, to help minimize operating costs and create healthier living environments for tenants.
The Housing Acquisition Fund is part of an umbrella initiative known as the Oregon Housing Preservation Project, which aims to preserve 6,000 at-risk units statewide (80 percent of the state’s estimated at-risk stock). As of 2013, OHPP had achieved 78 percent of this goal. The Acquisition Fund and the Oregon Housing Preservation Project are both administered by the Network for Oregon Affordable Housing.
For More Info:
Rob Prasch, Network for Oregon Affordable Housing
Land Acquisition Program
In 2007, Washington State created a land acquisition pilot program to facilitate the development of affordable homes. The state has leveraged its initial $1 million appropriation to raise nearly $1 million more for the fund. The land acquisition program is a revolving loan fund that can be used to acquire sites for the development of affordable homes or facilities for the provision of supportive services. Development should occur within eight years and repayment of the loans is also due within eight years or upon receipt of construction financing. Homes should be affordable to households at or below 80 percent of AMI for at least 30 years.
In addition to programs offered by state housing finance agencies, some local governments also provide pre-development and/or acquisition loans or loan guarantees. Some local financing programs, such as in New York and Oakland, provide financing for a broad range of affordable housing developments by both nonprofit and for-profit developers. Other local financing programs, such as Washington D.C.’s McKinney Act Loans, are crafted to assist with more limited types of affordable housing.
New York, N.Y.
New York City Acquisition Fund
The $230 million New York City Acquisition Fund used $8 million from the city’s housing trust fund, combined with $32 million in loan guarantees from private philanthropic organizations, to leverage more than $192 million in private financing in order to facilitate site acquisition for the construction or preservation of thousands of affordable homes.
The fund, which was established in 2005, provides loans at a level just below (approximately 60 basis points) the prime rate. Financing is available to both nonprofit and for-profit developers. As of 2016, the New York City Acquisition Fund had invested $279 million in New York City and had created or preserved more than 7,500 affordable rental, homeownership and supportive housing units.
Predevelopment Loan Program
The Oakland Community and Economic Development Agency’s Predevelopment Loan Program provides pre-development loans of up to $35,000 (and up to $75,000 in the Central District) for nonprofit affordable housing developers. The planned developments can include rental or homeownership homes, and at least 40 percent of the units must be affordable for households earning less than or equal to 80 percent of the AMI. In order to receive the loan, applicants must raise matching funds from non-city sources equal to at least half of the requested loan amount. The loan has a 6-percent interest rate and must be repaid upon receipt of permanent financing or within 18 months.
Site Acquisition Funding Initiative (SAFI)
The Site Acquisition Funding Initiative (SAFI) of Washington, D.C.’s Department of Housing and Community Development provides access to acquisition and pre-development funding for nonprofit affordable housing developers. SAFI consists of a $20 million revolving loan that can be used for site acquisition and pre-development expenses associated with the construction or rehabilitation of affordable rental or homeownership homes.
McKinney Act Loans
Another financing source for pre-development and acquisition expenses in Washington is the D.C. Housing Finance Agency’s McKinney Act Loans. McKinney Act Loans can be used for expenses related to acquisition, pre-development and rehabilitation of homes affordable to very low-income households. The funds can be used by tenant groups seeking to purchase their building under Washington’s Right of First Refusal law, by nonprofit organizations developing affordable service-enriched housing or to pay for pre-development expenses associated with the development of affordable homes. Loans are generally under $300,000 and carry an interest rate of 2 percent below prime with a 1-percent origination fee. Repayment is due within two years.