May 18, 2005
LISC Commits $300 Million to Preserve Affordable Housing for Low-Income Earners
by William Baue
The Local Initiatives Support Corporation will work with its affiliates, the National Equity Fund
and the Community Development Trust, to counteract expiration of affordable housing subsidies.
What do Boston's South End and Pittsburgh's East Hills neighborhood have in common? Both faced the
loss of affordable housing for low-income individuals and families, and both were able to preserve
this housing with the help of the Local Initiatives Support Corporation (LISC), the nation's largest community development intermediary with
34 local offices countrywide. Earlier this week, LISC announced the expansion of its Affordable Housing
Preservation Initiative through the commitment of an additional $300 million over the next
three years with the goal of preserving 30,000 affordable apartments by the end of 2007.
"The loss of affordable apartments not only displaces existing residents, but
permanently reduces housing options for low-income households in the future," said Vincent
O'Donnell, LISC's vice president for housing preservation. "These trends force current residents
to compete for scarce housing, often far from the homes in which they have lived for years."
The problem, in a nutshell, is that while Americans have invested over $60 billion in
affordable rental housing between 1965 and 1990, federal financing or subsidy agreements for about
1.4 million affordable houses and apartments will expire if not renewed. The financing and subsidy
agreements are a part of several federal programs, including Department of Housing and Urban
Development (HUD) Section 221(d)(3) Below Market
Interest Rate (BMIR) and Section 236 mortgage subsidy programs, and the Section 8 New Construction
and Substantial Rehabilitation program. Unfortunately, several factors confound prospects for
renewing these programs, according to a recent LISC report entitled
Preserving America's Affordable Housing: Retooling a 20th Century Asset for 21st Century
Increased real estate market values in some regions, such as Boston's South
End, make it difficult for property owners to continue to rent to low-income earners at
below-market rate when they could be earning much more renting to higher income earners. LISC
helped preserve affordable housing in three South End buildings with 345 apartments by helping the
owner, a residents' association called Tenants Development Corporation (TDC), navigate Section 8
subsidy contract renewals, and also by infusing necessary capital.
Pittsburgh's East Hills
neighborhood faced the opposite problem, with buildings going to pot and shopping centers
abandoned, discouraging property owners from sinking investment into what was perceived as a region
spiraling downward. In conjunction with nonprofit, state, and corporate entities, LISC lent a hand
to the 326-household Second East Hills Apartments through a $300,000 predevelopment loan and
technical assistance with renewing and restructuring federal subsidies. The move set a positive
precedent, and several other buildings in the neighborhood are now under redevelopment.
The infusion of new money into the Affordable Housing Preservation Initiative comes from
several sources, including a $2 million award from the Community Development Financial Institutions
Fund (CDFI Fund) in the US Department of Treasury. Other support comes
from the Fannie Mae Foundation,
the Home Depot Foundation, and
LISC is taking a multifaceted approach to distributing these funds. One prong
consists of making equity investments using Low Income Housing Tax Credits through its affiliate,
National Equity Fund (NEF). Another
affiliate, Community Development Trust (CDT), a community development real estate investment trust
(REIT) focused exclusively on affordable housing, is also making long-term loans and investments.
"Projects in any of the 33 LISC program areas can apply for predevelopment grants or
below-market loans to help get their projects off the ground," explained Michael Rubinger,
president and CEO of LISC. "They also have access to permanent and construction financing, and
there are also capacity-building and technical resources available across the country to solve
specialized preservation problems."
"Additionally, those with a low-income housing tax
credit allocation would have access to tax-credit equity, which often represents as much as 50
percent of a project's development costs," Mr. Rubinger told SocialFunds.com.
also represent a doorway for investors to support affordable housing preservation by LISC and its
"NEF's relationship with investors is as a syndicator of the Low Income
Housing Tax Credit--NEF raises capital from institutional investors, such as banks, government
sponsored enterprises, or corporations, to create Tax Credit Investment Funds," said Mr. Rubinger.
"Those NEF-managed Funds then invest in affordable housing projects that have a low-income housing
tax credit allocation."
"LISC and NEF are willing to talk with any new investors
interested in affordable housing production," he added. The Community Development Trust, however,
is not seeking new investors, according to CDT President and CEO Judd Levy.