LISC Housing Director Celia Smoot is often on the road, advising local governments, local housing authorities and nonprofit developers about how to use affordable housing financing tools. “In light of where we are with budget constraints and the growing need for affordable housing,” Smoot says, “we have to start working with municipalities and state governments around trying to create innovative strategies for how to produce and preserve more affordable housing.”
One of the obstacles she sees is that city personnel who manage the financial resources that support affordable housing are focused heavily on complying with the cumbersome rules surrounding public funding sources, leaving them little time and ability to figure out how to be innovative. Says Smoot, “You have to think about how your resource works as a lever and attracter of other resources.” That is where LISC and community development practitioners can help. LISC is working with local government in several cities to create and implement more comprehensive and innovative affordable housing strategies.
LIVE Denver: Housing working families
Denver’s population is growing at an astonishing rate, increasing an average of 1,000 people per month. New rental housing construction is booming, but the majority (80%) is affordable at the high end of the income spectrum. At the same time, there are thousands of rental vacancies in market-rate apartment homes close to downtown.
Discussion of such disparities among LISC Housing staff and some industry colleagues attending a housing conference resulted in a dinnertime brainstorm: “What if the city could use a private housing subsidy to mark down the cost of market-rate apartments, so working families could afford them?” The group at the dinner table began thinking in earnest about how such a rent subsidy would really work to address the need for workforce housing.
Less than a year later, LISC Housing and LISC’s affiliate National Equity Fund worked together to help the city of Denver create LIVE Denver (short for Lower Income Voucher Equity). As LISC Director of Housing Celia Smoot explained in a blog post, “It took some doing to make LIVE Denver a reality because nothing like it has ever been done before.” National Equity Fund's Vice President, Catalina Vilema, performed initial financial modeling and the city then brought in LISC to manage the fund.
Under the LIVE Denver model, the city matches people in need of housing with vacant apartment units. The city works with property owners to set reasonable market rents, then issues rent buy-down payment vouchers to prospective tenants. The funds for the buy-down payments come from a combination of several sources, including the city’s affordable housing fund, philanthropy and employers such as Saint Joseph’s Hospital. To be eligible, tenants must work full time, make between 40 and 80 percent of the area median income, and take advantage of one-on-one coaching and budgeting support to start building positive credit and saving for the future. The program even sets aside five percent of the monthly rent payments in an account on behalf of the renters to help kick-start those savings.
This approach promises to be a win for all involved: teachers, police officers and health care workers and their families would have housing stability; property owners would have more occupied, rent-producing units; employers would have a housing-stable workforce located close to employment centers; and the city government is better able to house an important population of middle-wage workers.
What makes it possible for a city government to think outside the box like this? According to Smoot, “With some of the really great [municipal] innovations, it’s usually a combination of two things: someone dynamic at the city level and external pressure. When LIVE Denver was born, there was a whole campaign about lack of [rental] affordability [and] they got dynamic leadership at the city that was willing to try something different with partners like LISC and NEF.” Smoot says significant public attention to the issue is what starts to move the needle for local governments. “It’s a level of focus and recognition that gets municipalities to realize that whatever they are doing now isn’t enough. There has to be enough attention to show they have to do something different and be open to some level of innovation.” Once a local government reaches that point, she says, they need to work with partners that already have innovative solutions and best practices to offer.
Smoot is seeing a similar dynamic in Charlotte, where LISC is putting together a $50 million equity fund for affordable housing with foundations, banks and the city: “It happened with dynamic city leadership, dynamic leadership at the Foundation for the Carolinas, and a huge public focus on the affordable housing crisis,” including Charlotte’s low-ranking in a national study on economic mobility. LISC’s fund for Charlotte is expected to kick off in first quarter 2019.
The true innovation of LIVE Denver, says Smoot, “is this idea that you give people a two-year breather. They’re not going to have pay more than 35 percent of their income to keep a roof over their head, they’re engaged in upskilling, and then you have savings account, and you have rental subsidy. That breather allows you to save and figure out the next solution, so you can move to next level. For a missing middle family, that can make all the difference.”
Read about LIVE Denver in Affordable Housing Finance magazine.
LISC Detroit: Providing a financial assist
When Detroit Mayor Mike Duggan took office in 2014, he took charge of a city that was dotted with vacant and abandoned houses and lots. Perhaps paradoxically, the city also faced a looming crisis in the supply of housing affordable to lower-income families. LISC Detroit jumped in to help the new administration identify workable solutions to the crisis. LISC worked with Mayor Duggan and his staff to develop a homeowner repair and rehab initiative, dubbed the Detroit 0% Interest Home Repair Loans Program, that would keep families in their homes and prevent further vacancies.
LISC then participated in a city preservation and recapitalization task force. The task force identified a clear need to preserve affordable housing, as affordability restrictions on thousands of units approach Year 15 status or otherwise expired. At the same time, the city is booming with new housing construction and the mayor has mandated that at least 20% of any new construction using city resources (including HOME funds, discounted land acquisition and tax incentives) be affordable to families at 80% of Area Median Income.
A few years later, the city developed a multifamily affordable housing strategy. Influenced by the task force’s work, a key component of the strategy is the creation of the $250 million Detroit Affordable Housing Leverage Fund. The Fund is composed of $50 million in city CDBG and HOME funds, $75 million in tax exempt bond financing, $50 million in philanthropic dollars and grants and $75 million in low-cost capital. Through a competitive process, the city selected LISC to manage the philanthropic and low-cost capital portions of the fund. LISC and the Fund partners are able to bring in capital at low interest, which means they will then be able to lend it out at interest rates lower than the market rate, explains LISC Regional Preservation Director Victor Abla, “so we are developing products that don’t exist in the marketplace.” In addition to the lower interest rates, LISC will be able to offer a mezzanine loan product that can offer a longer term than is usually available in the market.
LISC’s ability to bring its financial services to bear in the service of the city’s housing strategy is opening other doors as well. “As we work with the city, they are doing innovative things that weren’t done before” in Detroit, says Abla. The public/private Leverage Fund, he says, is just one example of a newfound willingness to try something different. Overall, he adds, the city has become more open to partnering with LISC and other nonprofits and community development financial institutions to achieve common goals.
LISC Philadelphia: Developing a 10-Year Plan for the city
Like Detroit, Philadelphia faces a crunch in affordable housing, as well as tremendous disparities in housing availability and quality between upper and lower-income residents, and also recently elected a mayor who is committed to addressing it. In the same 2016 election that brought Jim Kenney to the mayor’s office, Philadelphia voters also passed a ballot provision that called for the city to create a multi-year strategic Housing Plan with recommendations for maintaining and increasing affordable housing, workforce housing and market-rate housing.
As the city of Philadelphia reduced staff and budgets over the years, LISC saw a way to bolster the city’s capacity around housing issues. LISC Philadelphia used private grant funds to hire a Housing Program Officer who convened a multi-sector working group to preserve publicly assisted affordable rental housing. Over the course of six months, the working group reviewed national and local best practices, analyzed data, and create a set of action-oriented recommendations for nonprofits, property owners and city government.
The city representatives to the working group, impressed with the preservation process and recommendations, subsequently selected LISC Philadelphia through an RFP process to assist the city’s development of the ballot-mandated comprehensive housing plan. LISC Philadelphia spent six months in 2018 as the lead consultant in the planning process, working closely with research partner PennPraxis, city staff, and seven multi-sector task forces and working committees. The seven stakeholder groups had been formed by the city to address different aspects of housing, including homeownership, eviction and homelessness, affordable rental housing preservation, construction, and resources and financing. LISC worked with the chairs of each committee to help synthesize the recommendations and findings from all of the working groups in order to create a top-level series of recommendations.
LISC Philadelphia Executive Director Andrew Frishkoff explained that luxury and market-rate rental and ownership housing are both being produced in the Philadelphia market, sometimes at the expense of units that had previously served as naturally occurring affordable housing, “so it gets back to, how are we going to create a robust and resilient city?” To that end, the plan LISC helped develop calls for an equitable balance of housing types with different levels of affordability in all neighborhoods – high-end, middle-market and disinvested. “We need growth, but it has to be done in a balanced way,” says LISC Philadelphia Housing Program Officer Carolyn Placke, who led the planning process on behalf of LISC. “One of the things the Action Plan tries to do is demonstrate how the recommendations are interlocking, and are intended to complement each other so we can move toward balance.”
Referencing the array of housing activities and resources that are already at play in the city but often disconnected from one another, Frishkoff says, “This plan to some degree starts to pull all of these things together and create a guide path for them to work together.” Some of the planning working groups will likely stay intact through implementation, with city staff and nonprofits at the table together to make sure things move forward.
A key ingredient to the Philadelphia’s Housing Action Plan’s success has been strong relationships between LISC, the City and the research partner, PennPraxis. Placke explains, “This is a great example of how research and cross-sector stakeholder engagement can lead to solid, forward thinking policy.” See the draft Housing Action Plan, available on the city’s website.
Lessons from working with cities
LISC personnel offered some tips for other nonprofits on how to approach joint planning efforts with city government:
See our featured Housing resources on the LISC Institute “In Practice” pages.
Also see the Local Housing Solutions portal from New York University’s Furman Center for tips and tools on how to create and assess affordable housing strategies and promote equity and inclusiveness in housing.