April 11, 2001
Bank of America Invests in Affordable Housing
by Mark Thomsen
Funding of a non-profit syndicator of federal tax credits is part of a 10-year, $350 billion
commitment to community development banking.
Bank of America(ticker: BAC)
recently announced that it would invest more than $85 million in the first-ever single-investor
fund created and managed by the National
Equity Fund, Inc. (NEF, Inc.). NEF, Inc. is the largest non-profit in the country that
syndicates low-income housing tax credits.
"We are extremely pleased to team with
NEF, Inc. in creating a fund that will provide developers with an incentive to create affordable
housing for our communities, and spur economic development," said J. Michael Pitchford, Community
Development Real Estate Executive for Bank of America Community Development Banking.
Inc., based in Chicago, has raised more than $3 billion from community-focused investors to help
finance 50,000 affordable homes nationwide. In 2000 alone, NEF, Inc. invested $425 million in
gross equity to fund the development of 5,000 units of low-income housing.
syndicated by NEF, Inc. are part of the Low Income Housing Tax Credit Program (LIHTC), a federal
tax credit program created as a part of the Tax Reform Act of 1986. To qualify for LIHTC,
developers of rental housing must meet certain affordability tests: one-fifth of the units must
rent at 50 percent of area median income, or two-fifths at 60 percent of area median income. If
program standards are met and approval for the project is given in advance, investors receive ten
years of federal tax credits.
In the past, NEF, Inc. has pooled money from multiple
investors to create an investment fund. It then typically worked with community development
corporations to identify projects that met investors' demands for return on investment. The
returns include the tax credits as well as losses from interest on loans. The Bank of America
investment will be the first time NEF, Inc. is working with just one investor on a fund.
"We are excited that Bank of America has spearheaded our first single-investor fund, and that
it has made such a significant investment to launch it," commented Joseph S. Hagan, president and
CEO of NEF, Inc. "This commitment will mean a great deal to communities across the country."
NEF, Inc. has managed multi-investor tax-credit funds since 1987. The addition of
single-investor funds will allow banks, corporations, and government-sponsored enterprises to
target certain types of projects or geographic areas for their affordable housing investments.
NEF, Inc. was established by the Local
Initiatives Support Corporation (LISC) after LIHTC was created. LISC, founded in 1979, works
to rebuild whole communities through supporting community development corporations. It is the
largest organization of its kind, operating local programs in 38 cities and 66 rural areas.
Bank of America is also a leading funder of LISC. It has provided $49 million in grants and
loans to community development corporations in 38 LISC program areas across the nation.
The thousands of affordable housing units funded by NEF, Inc. is hard evidence that federal programs such as
LIHTC are working. With continued commitment from companies such as Bank of America, communities will have
a better chance at ensuring that some of their residents are not left out in the cold.