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Innovative Public-Private Partnerships for Affordable Housing Development

Community Development
Innovative Public-Private Partnerships for Affordable Housing Development

Teaming Up for Affordability: How Public-Private Collaborations are Reshaping the Housing Landscape

As someone deeply passionate about affordable housing solutions, I’ve had the privilege of witnessing firsthand the incredible impact that public-private partnerships can have in addressing this critical issue. It’s a story of collaboration, innovation, and a shared commitment to ensuring that everyone, regardless of their income level, has access to safe, high-quality, and affordable places to call home.

The Affordable Housing Crisis: A Daunting Challenge

The affordable housing crisis is a persistent challenge that plagues communities across the nation. Rent increases continue to outpace wage growth, leaving countless families and individuals struggling to find a place they can truly afford. In the bustling metropolis of Montgomery County, Maryland, for instance, the median household income stands at a respectable $103,178, yet the average annual income for Housing Opportunities Commission (HOC) customers – many of whom are working adults, seniors, and/or persons with disabilities – is a mere $18,600. This disparity highlights the stark reality that government resources for affordable housing development are dwindling, forcing low- and moderate-income households to seek refuge in the county’s outskirts, often without access to reliable public transit or high-performing schools.

The Power of Collaboration: Partnering for Solutions

Faced with this daunting challenge, the Housing Opportunities Commission of Montgomery County recognized the need for a bold and innovative approach. They decided to team up with a private, mission-driven organization – the Morris and Gwendolyn Cafritz Foundation – to create a groundbreaking financing structure that would fund the development of new affordable housing units near a future public transit hub. This partnership not only preserved existing affordable units but also increased the overall supply, ensuring that residents could remain connected to vital community resources and employment opportunities.

The Lindley: A Shining Example of Public-Private Collaboration

The Lindley, a 200-unit high-rise building in Chevy Chase, Maryland, stands as a shining example of the power of public-private partnerships. By selling a portion of the original site to a private developer, EYA, and consolidating the low-rise garden apartments into a more efficient high-rise structure, HOC was able to leverage the land value in the desirable Chevy Chase Lake neighborhood. This innovative approach allowed them to secure direct capital investment from the Cafritz Foundation, a private, mission-aligned organization, at a lower cost of capital than traditional financing sources.

The Lindley’s unit mix includes 96 one-bedroom, 89 two-bedroom, and 15 three-bedroom units, with 40 units restricted at up to 100% of the area median income (AMI) as workforce housing and the remaining 40 units restricted at 50% of AMI to serve very low-income families. Notably, all 15 three-bedroom units are restricted at 50% AMI, ensuring that larger families can access the strong network of schools in the Bethesda-Chevy Chase community.

According to the National Association of Housing and Redevelopment Officials (NAHRO), HOC is the first public housing authority (PHA) in the country to include private foundation capital as a source of equity while maintaining principal control and ownership of the property. This innovative approach not only secured a lower cost of capital but also ensured that the units would remain affordable for the long-term, as HOC retained ownership and control of the property.

Expanding the Affordable Housing Footprint

The Lindley’s success has inspired HOC to explore other public-private partnerships as a means of expanding the affordable housing footprint in Montgomery County. By collaborating with private developers and mission-aligned organizations, they’ve been able to leverage land value, secure additional funding sources, and create long-term affordable housing solutions that benefit the community.

Breaking Down Barriers: Creative Financing Strategies

One of the biggest challenges in affordable housing development is the lack of available land and the high cost of acquiring it. However, through public-private partnerships, affordable housing advocates have found innovative ways to overcome these obstacles. As John Williams, president, CIO, and COO of Avanath Capital Management, explains, “Finding land to develop for affordable housing can feel like an insurmountable challenge to many stakeholders. Land can often be scarce in markets where affordability is low, not to mention too expensive to pencil for use as affordable housing.”

One avenue of opportunity lies in pursuing available parcels of city-owned land that could be improved by quality affordable housing. By exploring creative possibilities of land use within a municipality, affordable housing developers can unlock new development opportunities. For instance, through a partnership with the City of Detroit and several private firms, Avanath Capital is involved in the development of a 177-unit mixed-income residential property on formerly vacant city land.

Aligning Stakeholder Interests: A Win-Win Scenario

Public-private partnerships not only benefit the residents who gain access to affordable housing but also create a positive ripple effect on the surrounding communities. As Williams points out, “The presence of affordable housing can improve the quality of residential buildings, combat blight, and boost employment figures and tax revenues. For this reason, many municipalities will seek out partnerships with private development and ownership groups to drive the creation and preservation of affordable housing.”

These partnerships can also benefit businesses, both local and national, that have a vested interest in promoting affordable housing near their places of operation. The addition of affordable housing can help enhance the talent pool for these businesses while elevating the markets where they operate – tangible benefits that positively impact their success.

Forging Powerful Alliances

At HACC Housing, we’ve seen the transformative power of public-private partnerships firsthand. By forging alliances with city governments, private developers, and mission-aligned organizations, we’ve been able to unlock new avenues for affordable housing development and preservation.

For example, our team partnered with the City of Boston to convert a market-rate community into affordable housing, implementing affordability restrictions and achieving special rent protections for existing residents. In exchange, the city provided a grant for the project, and by collaborating with CBRE Capital and Fannie Mae on the financing, we were able to purchase the property and ensure its long-term affordability.

Similarly, our partnership with the Housing Authority of the City of Los Angeles (HACLA) and Kaiser Permanente, a major healthcare provider, allowed us to acquire the 669-unit Baldwin Village affordable housing community. By working with HACLA and leveraging their Innovative Partnerships Solicitation program, we were able to receive a real estate tax abatement that supported the conversion of 70% of the units to affordable housing for residents earning between 60-80% of the area median income, while the remaining units were designated as workforce housing.

The Ripple Effect of Affordable Housing

The impact of these public-private partnerships extends far beyond the residents who directly benefit from the affordable housing units. As the World Bank Group notes, “The presence of affordable housing can improve the quality of residential buildings, combat blight, and boost employment figures and tax revenues.” In other words, affordable housing doesn’t just provide a roof over someone’s head – it has the power to revitalize entire communities, create jobs, and generate economic growth.

A Vision for the Future: Scaling Up Affordable Housing Solutions

As we look to the future, the need for innovative and scalable affordable housing solutions only grows more pressing. With the National Multifamily Housing Council reporting that the United States will need to build 43 million new apartments by 2035 to meet demand, and the nation’s number of affordable housing units declining by 4.7 million from 2015 to 2020, the challenge is daunting, but not insurmountable.

By embracing public-private partnerships as a cornerstone of our affordable housing strategy, we can leverage the strengths and resources of both the public and private sectors to create a brighter, more equitable future for all. From securing land and financing to driving community revitalization, these collaborative efforts have the potential to transform lives and reshape the housing landscape in profound ways.

So, let’s keep forging ahead, rolling up our sleeves, and finding new ways to work together to tackle this critical issue. After all, when we combine our creativity, resources, and unwavering commitment to making a difference, there’s no limit to what we can achieve.

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