Affordable Housing: Reaching New Heights While Meeting the Moment to Address Market Economic Uncertainties

LIIF strives daily to meet its mission that “everyone in the United States should benefit from living in a community of opportunity, equity and well-being.” That mission is what inspired our Lending team toward having a banner year in 2023, driving a record $292 million into historically excluded communities across the nation. Of that amount, 77% of the loans closed funded affordable housing projects. Our community development financial institution (CDFI) has been entrenched in under-resourced communities for decades, with LIIF’s North Star being quality, affordable housing as part of an ecosystem of support. Additionally, community facilities lending remains a strategic focus for LIIF in the child care, federally qualified health center (FQHC) and education sectors, equating to 23% of our FY23 closed loans.  

 In all our work, LIIF looks to level the playing field. We are re-examining our lending, creating an Impact-Risk-Profitability (IRP) framework that takes 23 dimensions of impact into account, such as the community being served and the fostering of power and agency. As a CDFI, we know that developers of color have often not had the opportunity for generational wealth to be passed down to them. Systemic inequities, such as redlining and discriminatory practices in small-business lending, have led to a paucity of such assets for these families. That means fewer assets to use as collateral or less money to put down for a loan at a traditional lender. To combat this issue, LIIF devises and implements capital solutions tailored to the communities we serve.  

For example, we created the Black Developer Capital Initiative (BDCI), a Special Purpose Credit Program (SPCP). BDCI is a below-market, unsecured loan product to provide catalytic capital to for-profit Black developers. The result of our first round of $20 million in funding was 10 Black developers receiving loans for 25 projects in five markets. With our lessons from the first round of funding, another $20 million is now ready to be deployed, as we extend the geography served.  
 
Programs such as BDCI accelerate our learning curve around racial equity lending, as we distill key aspects, challenges and lessons from the field. LIIF consistently looks to streamline our capital deployment for the production and preservation of affordable housing. There are market fluctuations. Governmental policy shifts. Changes in community need. 

We create loan products to meet the moment, leveraging the successes of the past — and always with an eye to the future.  

To address the affordable housing crisis, in 2020 Low Income Investment Fund (LIIF) entered into a partnership with Stewards of Affordable Housing for the Future (SAHF), which is a collaborative of 12 affordable housing nonprofits, and our affiliate National Affordable Housing Trust (NAHT), a Low-Income Housing Tax Credit (LIHTC) syndicator. This partnership serves as a nimble alliance, offering a highly coordinated source of both debt and equity to mission-aligned developers looking to advance equitable outcomes for residents and communities. Both SAHF and NAHT are renowned in the community development sector, for decades devising and implementing solutions to create equitable, opportunity-rich communities anchored by quality, safe affordable housing. 
 
Together, we leverage our individual expertise: Our synergy enables us to ideally structure capital stacks that work best for developers working in under-resourced communities across the nation. 

Our affordable housing strategies have been honed since LIIF’s inception in 1984. While that impact is most evident in our hubs of the Northeast, the Mid-Atlantic, the Southeast and Western regions, our racial equity lending has also supported communities in numerous places in between. Our national focus is on Black, Latino, and other people and communities of color, as we nimbly deploy capital to developers with systemic barriers to accessing loans or who cannot pencil out their deals at the higher interest rates and loan-to-value ratios available from traditional lenders.  

Northeast Region  
In New York City, the boroughs of the Bronx and Manhattan may seem vastly different, yet there are pockets of both featuring historically excluded communities. LIIF seeks to keep the ecosystem intact in such neighborhoods.  

In the South Bronx, part of New York’s 14th congressional district, the area is represented by Congressperson Alexandria Ocasio-Cortez. According to 2021 American Community Survey numbers, more than-one third of the 696,000 residents of this congressional district are foreign born, with 200 languages being heard on the bustling streets – one of the highest rates of immigrant populations in the nation. Half of residents identify as Latino, with neighborhoods teeming with the foods, music and arts of Puerto Rico, the Dominican Republic, Mexico and the like, all seeking opportunity in their adopted homeland. In June 2023, there was definite mission alignment to originate a loan for Banana Kelly Community Improvement Association Inc., a Bronx-based community development corporation, which was selected by the City in 2019 to substantially rehab four residential buildings operating as shelters for those experiencing being unhoused located in the South Bronx. These were formerly scattered-site temporary shelters owned by private landlords, with oversight from the Department of Homeless Services. During the de Blasio administration, the City began to convert these sites from shelters to affordable housing, owned and operated by affordable housing developers. Banana Kelly’s goal is to convert the shelters to permanent supportive housing (PSH) for current residents, successfully completing construction on the first two buildings (Phase I) in August 2023. Always forging partnerships to catalyze community development, LIIF worked hand in hand with the New York City Department of Housing Preservation and Development (HPD) to originate a ~$31.4 million construction loan to rehabilitate the final two buildings as part of Phase II; the funding included a $4.4 million LIIF construction and permanent loan, with the permanent loan to be placed with NYC Retirement Systems, plus a $26.9 million HPD subsidy. 

A few miles away, The Christopher is a 207-unit, studio and single-room occupancy (SRO) supportive housing development located in in the now-gentrified Manhattan neighborhood of Chelsea. The 1904 property was formerly known as the McBurney YMCA and provided affordable accommodations for single working men, low-income individuals and merchant seamen. Breaking Ground, a nonprofit housing developer and social services provider, acquired the property in 2001 and rehabilitated it into permanent supportive housing for low-income or persons living with HIV/AIDS who were experiencing being unhoused. Additionally, The Christopher also houses The Foyer, a housing-based career development program targeting youth and 18- to 24-year-old adults who are aging out of foster care or who have experienced being unhoused. LIIF originated a Breaking Ground $14.1 million construction and permanent loan, with the permanent loan to be placed with NYC Retirement Systems; the funding will finance rehabilitation of building systems, the façade and the roof, plus elevator modernization. 
 
Mid-Atlantic Region 
As Washingtonians were priced out of the exclusive far-northwest enclave of our nation’s capital, they started looking to adjacent neighborhoods. This led to the popularity of Columbia Heights, with its proximity to Downtown and, as its name suggests, a gently rising slope that could offer spectacular views of the Capitol and the Washington Monument. As multi-story condo complexes sprang up and glittering 14th Street seemingly saw the opening of yet another high-end eatery every month, gentrification translated to the displacement of Black and Latino residents. It should be noted that the area around 14th and U streets was long the vibrant cultural hub of African American life in the District, with over 200 Black-owned businesses once lining the commercial corridors of this segregated part of the city. Additionally, the northern section of Columbia Heights for decades has been home to a strong Latino community, mostly Salvadoreños who fled the civil war, economic uncertainties and street violence endemic to many parts of Central America. 
 
To combat this trend of displacement, in June 2023 LIIF closed on an $8 million acquisition financing loan for Kenyon House Apartments, a 49-unit, mid-rise apartment building. This first mortgage was via the Keeping Homes Affordable (KHA) initiative and was coupled with a $2.1 million DC Housing Preservation Fund second mortgage. The bundled loan supports our efforts around the preservation of affordable housing, protecting 10 Latino vulnerable households who have lived at the property for between 11 and 27 years.  

KHA is an innovative, $50 million national affordable housing preservation financing initiative. A collaboration of lead lender LIIF and mission-aligned partners, the initiative showcases the synergy of the strong partnerships we strive to build. The fund’s goal is to provide acquisition financing for nonprofit and mission-driven for-profit developers to acquire and preserve affordable multifamily projects. KHA’s three key impact areas are: facilitating the preservation and recapitalization of existing affordable multifamily housing; driving the acquisition of multifamily affordable housing properties by mission-aligned operators to encourage long-term stewardship and attentive ownership; and making strategic physical improvements and renovations to the properties that will benefit both owners and tenants. 

The primarily low-income residents of Kenyon House Apartments can now remain in place, as there is a 20-year-use restriction covering 50% of the units and with incomes and rents restricted at or below 80% of the Area Median Income (AMI). The developer plans to fill vacant units with low-income households who have Section 8 vouchers, plus will team with a nonprofit to provide comprehensive services to strengthen residents’ financial well-being.  

Southeast Region 
LIIF’s work has been scaling in the Southeast, with lending emanating from our hub in Atlanta. An example of our preservation of affordable housing is the 70-unit Jarmese Apartments, built in 1962 and located in the South Union neighborhood of Houston. This complex is defined as Naturally Occurring Affordable Housing (NOAH), as over 75% of its residents are using tenant-based housing vouchers. LIIF’s accessible KHA financing allowed Fifth Ward Community Redevelopment Corporation, a Houston-based nonprofit housing provider, to acquire the property and develop a long-term financing solution to maintain the development’s affordability for its residents. The property had been renovated in 2015-2017 with updated electrical and plumbing systems, as well as in-unit maintenance and the installation of a communal laundry room. An ecosystem of support is in place for residents, there even being a community health clinic nearby. Additionally, housing counselors will provide financial resources to residents. With the rapid gentrification of fast-growing Houston, LIIF’s loan will enable Fifth Ward to protect the existing residents from displacement due to increasing housing costs. 

This work exemplifies LIIF’s partnership in the Growing Diverse Housing Developers (GDHD) program (overview video). This $40 million initiative, funded by the Wells Fargo Foundation, is a partnership of LIIF, Capital Impact Partners, Raza Development Fund and Reinvestment Fund. GDHD works with premier housing development firms, led by BIPOC owners, to create racially equitable, affordable housing solutions. Developers receive grants and technical assistance from the four CDFIs. 

 
Western Region  
The Coachella Valley is hot, in more ways than one. In the mid-20th century, Hollywood stars headed to their second homes in the Palm Springs area for weekends filled with relaxation or reverie. Decades on, the nine small- to mid-sized cities that comprise the Coachella Valley each exhibit their own personality, but the main differentiators are median household income, demographics and age. Take Palm Springs itself, popular with retirees seeking 300+ days of sunshine in a slower-paced desert lifestyle. The city now has a 56.1 median age compared to 38.8 in the U.S., and its hefty median income level dwarfs that of the municipalities of the eastern valley, where the bulk of the backbone-of-the-economy workers reside, with most identifying as Latino.  
 
That’s why LIIF is driving capital into the Coachella Valley in support of affordable housing. In 2023, our CDFI provided a construction loan to West Hollywood Community Housing Corporation (WHCHC), based two hours away in Los Angeles. Now, construction can commence for 71-unit Aloe Palm Canyon Apartments, a Palm Springs affordable housing development for low-income residents ages 62 and up. The project will decrease the rent burden in a community where 50% of the population is Latino, restricting 25 of the 71 units for seniors who were formerly experiencing being unhoused. Also, the complex will employ the Housing First model, which gives residents agency, voice and power in shaping the supportive service-delivery model.  

This loan epitomizes the spirit of the We Lift: The Coachella Valley’s Housing Catalyst Fund, a partnership with nonprofit Lift to Rise (LTR), Rural Community Assistance Corporation (RCAC), the County of Riverside, and a cadre of Coachella Valley agencies and housing advocates. For this funding, LTR participated with $5 million and LIIF has $5 million on-balance from our revolving loan fund. This is a 30-month loan with a blended interest rate, completing a trifecta of lending products for the Aloe Palm Canyon development, as LIIF originally provided an acquisition loan and, later, a predevelopment loan. Both of those loans have already been repaid by WHCHC.  

Shifting the financial market, moving projects from fields of dirt to floors and doors, and providing quality affordable housing to a much-needed population is the goal of LIIF’s placed-based work.  

Our work in the Coachella Valley is just one piece of our legacy of success in the California housing market. One standout is the strong outcomes of the Golden State Acquisition Fund (GSAF). In just 10 years, the fund has led to 10,000 affordable homes via 100 projects statewide. LIIF acts as administrative agent, fund manager and an originator for this partnership with the California Department of Housing and Community Development (HCD) and a collaborative of eight total CDFIs. With money revolved in a 3-1 ratio, there has been $292 million deployed for the acquisition of affordable housing sites, both preservation and new construction (video). 

To support not just LIIF but the entire CDFI sector, our organization continued its strong policy efforts over the last year. Working solo or in coalition, our goal is to ensure that CDFIs not only have the lending tools they need, but that the federal capital sources in any CDFI’s toolkit are readily available and can be nimbly deployed in the historically excluded communities we serve, as showcased by the case studies above. We are always at the ready when asked to sign on to, or submit our own, comment letters. Such requested feedback runs the gamut from Community Reinvestment Act (CRA) and New Markets Tax Credit (NMTC) to CDFI Bond Guarantee Program and Capital Magnet Fund.  

While 2023 was a banner year for our affordable housing lending, LIIF continues to aim ever higher. We are uniquely positioned as a national CDFI having built long-term industry trust and strong partnerships. This is complemented by a Board and staff with industry know-how, offering the financing tools to best support Black, Latino, and other people and communities of color. 
 
LIIF has a storied history of lending that supports the productionand preservation of affordable housing – and we look forward to writing our next chapter.