In push to develop local economies, homeownership needs a boost

In late 2016, the Housing Partnership Network (HPN) received $40 Million from the highly competitive New Markets Tax Credit (NMTC) Program through the Community Development Financial Institutions Fund, housed under the U.S. Treasury Department, to invest in revitalizing neighborhoods overrun with vacant and foreclosed properties. In a program known for its awardees’ focus on community, commercial and manufacturing facilities, HPN’s approach is less common. Developed in close partnership with Smith NMTC Associates, LLC, it aims to bring to light the importance of homeownership in reviving the economies of struggling communities, also known as new or weak markets, throughout the US.

Over the next 1-2 years, a group of HPN’s nonprofit members, all regionally-focused leaders in affordable housing development, will rehab or build, sell, and finance the sale of nearly 300 homes to families in weak markets, and provide those home buyers with financial education and support. HPN’s New Markets Tax Credit investments will enable low-income homebuyers (many of whom cannot access mortgage lending or affordable quality homes) to become homeowners, improve distressed neighborhoods, and create and retain nearly 1,000 permanent jobs and up to 700 living-wage construction jobs.

Leaders at HPN and its member organizations believe this kind of sustainable homeownership project is the key to achieving the objectives of the New Markets program, and the Community Renewal and Jobs Creation Acts the program was borne out of.

“Over the years, the focus of New Markets Tax Credit awards has gone to capital “C” Community Development projects – building and supporting anchor businesses and community centers that create jobs during construction, and then throughout the life of those businesses,” said Tom Bledsoe, CEO of HPN. “HPN and the Smiths recognized an enormous gap in that kind of problem solving, and that was in building the community itself, the people working the jobs and building their local economies one purchase at a time. The best way to sustain those community members is through homeownership. That’s why we’re investing in our members as entrepreneurial businesses that are driving impact in communities by delivering affordable homes that provide stable housing and community revitalization.”

Smith NMTC Associates has structured and facilitated dozens of transactions utilizing more than $445 million in New Markets Tax Credits and other financing tools for the benefit of low-income communities nationwide. They introduced their model for using the credits to build single family homes to Habitat for Humanity in 2006, and since then have helped facilitated the development of 3,165 affordable single family homes in 30 states. This is their first partnership with HPN and its members.

“The homeownership model in the New Markets Tax Credit Program is a needed to complement the other economic development work being done in our communities,” Donna Smith, principal of Smith NMTC Associates, said. “We saw the tremendous impact Habitat for Humanity affiliates' homeownership developments had on distressed communities’ ability to thrive. We’re very excited to see the increased scale the members of HPN will be able to achieve as a network of regional developers and lenders.”

John O’Callaghan, CEO of Atlanta Neighborhood Development Partnership, saw the opportunity to leverage NMTC dollars as a path to proving a new way of revitalizing communities. “Now that the doors have been opened with New Markets, the plan is to transform neighborhoods through single family homeownership and prove it can be done at increased scale. Success will help ANDP, HPN members and other effective nonprofits to leverage and expand capital to transform more neighborhoods and help more families succeed.

How will HPN’s New Markets Tax Credit Program work?

HPN, in addition to leading a collaborative of 100 mission-driven developers, lenders and service providers breaking down barriers in the industry, is also a Community Development Financial Institution with proven success in leveraging private capital and offering loan products designed specifically for the affordable housing market.

Using the New Markets Tax Credits – sold to investors in exchange for equity – HPN will leverage additional debt to provide flexible, low-cost capital for the development of affordable single family housing. HPN and its members are uniquely positioned to use New Markets Tax Credits for this purpose thanks to a track record of producing both social and financial returns with similar affordable housing development projects. 

The NMTC program allows HPN to offer a loan product to HPN’s participating members which has better than market rates and flexibility. With increased access to equity at lower rates and greater flexibility, members that are nonprofit affordable housing developers will be able to build more single family properties, and those that are nonprofit lenders will be able to offer more accessible mortgages and homeownership support services to low-income home buyers.

The New Markets Tax Credit Program (NMTC Program) helps economically distressed communities attract private investment capital. This federal tax credit helps to fill project financing gaps by enabling investors to make larger investments than would otherwise be possible. Communities benefit from the jobs associated with these investments, as well as greater access to public facilities, goods, and services such as manufacturing, food, retail, housing, health, technology, energy, education, and childcare. For every $1 invested by the federal government, the NMTC Program generates over $8 of private investment.