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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.

NEF, 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.

The credits 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.


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