The new year is a time for CDFIs to review their landscapes for opportunities, challenges, and potential partnerships. So many gaps exist in the financing markets, but every issue presents its own set of obstacles.
I’d like to suggest one gap that I believe is ripe for more attention from CDFIs: the lack of affordable, longer-term capital for nonprofit housing developers that acquire, rehabilitate, and either resell or rent vacant single family housing stock. Currently, “hard money” lenders fill this gap with expensive, short-term capital aimed at small, “fix and flip” developers, while equity investors provide capital to large institutional investors who have been buying single family homes for rental housing.
The fast growing activity of both large and small investors has heightened the need for a nonprofit response to the changeover of neighborhoods from homeownership to absentee-landlord rental. Many community-based developers have the know-how to effectively operate in the acquisition, rehabilitation and resale/rental space to support both homeownership and affordable rental in communities facing stabilization challenges. But CDFIs have always shied away from lending to nonprofit, single-family developers, especially those attempting scattered-site, single-family rental.
Conversations among the few CDFIs working in this space suggests a need for increased collaboration to build more capacity among CDFIs while also building better lending products and underwriting guidelines. A recent CDFI partnership in Chicago between the Chicago Community Loan Fund, the Community Investment Corporation, and NHS of Chicago produced a successful lending effort for the redevelopment of 1-4 unit properties for quality, affordable housing. It is these efforts that can help shape future initiatives by those CDFIs willing to address this gap in the financing marketplace.
The National Community Stabilization Trust (NCST) has been an intermediary between sellers of foreclosed homes and local affordable housing developers for 10 years. Our work has resulted in the transfer of over 23,000 properties to be returned to productive use. But these local developers desperately need more capital to continue their important work.
NCST has approached OFN about the creation of a Single Family Acquisition and Rehab “special interest community” on OFN’s new online CDFI Connect Community. The goal of this community would be to help build the interest and capacity of CDFIs to enter this lending space or expand their current activity. Please let my colleagues Julia Gordon or Rob Finn know if you would be interested in being part of this group.