In what is good news for upstate builders of affordable housing, a new threshold for loans has been established that will allow smaller commercial lending institutions leeway to invest in affordable and senior housing in their communities.
Before the recession hit, many large banks invested in affordable housing to receive federal tax credits. But as programs and profits dried up, so, too, did such financing.
The new program encourages smaller local and regional banks to get involved in affordable housing projects by lowering the minimum investment in a tax credit fund from $1 million down to $250,000, bringing it within reach of smaller financial institutions.
The new equity fund has been established by Great Lakes Capital targeting smaller community based banks and financial institutions to induce them to invest in a Low Income Housing Tax Credit program, called the Upstate New York Community Fund (UNYCF).
The new fund provides an option for financial institutions to invest in their own communities and will provide a double benefit, says James L. Logue III, chief operating officer of Great Lakes Capital Fund.Â
“Regional banks have a double bottom-line opportunity to do well by doing good,” said Logue. “They can get a good economic return on their investment through tax credits and strong interest rates, and an important social return by supporting affordable housing, stimulating job creation and economic activity, and fulfilling their requirements under the (federal) Community Reinvestment Act.”
“I think it”™s important to the entire affordable housing industry in upstate New York,” said Steve Aaron, founder and managing partner of Birchez Associates, a company that has developed and operates four senior public housing projects in Ulster County. “All of us are facing the same problem, the availability of equity through tax credit. This puts another player in the game focused on making these deals in upstate New York work to make sure there is financing available for these projects. It”™s a very important step toward addressing what has become a very important problem.”
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“The economic crisis has jeopardized the ability of developers to secure funding from some traditional sources,” said Deborah VanAmerongen, commissioner of New York State Division of Housing & Community Renewal. In recent years, much of the funding for affordable housing projects stemmed from tax credit programs from profitable mega-banks. But with those banks suffering losses, there are no profits that require tax credits to offset, and thus no investment.
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But most of the nation”™s local and regional banks did not embark on the subprime mortgage roller coaster and have not seen losses like bigger banks have suffered.
“That”™s why we are encouraging our local and regional banks to participate in the Upstate New York Community Fund,” said VanAmerongen.
She was speaking at a meeting of bankers, government officials and community representatives held last month at The Birches at Esopus, one of several senior living communities built by Birchez Associates (with a “z”), and which will have a ribbon cutting ceremony to show off the facility September 3.
Aaron said he wanted to host the gathering to show bankers that while the terms affordable housing and affordable senior housing sound scary, the reality is a tidy well-built community that is a sound investment
Modeled after larger national equity funds, the Upstate New York Community Fund will help investors keep their investments local and add to the vibrancy and economic stability of their own communities.Â
Aaron said that since the meeting was held earlier this summer, officials at Great Lakes have been contacted by various officials from banks throughout the Hudson Valley and upstate to begin investigating investment possibilities.
Aaron said that Birchez has another senior affordable housing project in Greene County is ready to proceed but lacks funding. He said officials at Great Lakes expressed hopes that the UNYCF initiative could produce financing for the project in the fourth quarter of 2009 or the first quarter of 2010.
