Developers of affordable housing and permanent supportive housing units for unhoused people could soon receive financial assistance from a new Austin Community Foundation fund intended to fill gaps in the financing for those subsidized projects.
Last week, the foundation announced it had raised $15 million for its Housing Accelerator Loan Fund, which will provide low-interest loans that developers will typically pay back in under five years as their projects fill up and revenue from housing vouchers and other aid programs become available. The fund already has provided funds to two projects: $2 million for the Cady Lofts permanent supportive housing development, and $2.5 million for an undisclosed Foundation Communities project on South Lamar Boulevard.
Mike Nellis, CEO of Austin Community Foundation, said the organization plans to deploy the entire $15 million quickly to assist a long line of experienced developers and newer players in the affordable housing economy. Nellis said the loans will be used for pre-development operations, land acquisition costs and interim gap financing for projects that can have more than a half-dozen funding sources that come available in phases.
“The idea was really to understand the landscape of affordable housing, in particular affordable housing financing, and really understand where the gaps are,” he said, noting the fund has been in the works for roughly two years. “All of the developers we talked to concluded that they needed really fast, very flexible, very cheap loan capital that they could access over and over again to really either get their projects unstuck or to move them forward towards the finish line.”
With some loans paced for repayment in two years or less, the organization has projected that the $15 million could leverage $280 million toward the construction of 850 units in the first five years of operation if paired with applicable housing funds from the city of Austin. Nellis said the goal is to add another $10 million in capital to the fund from philanthropic organizations interested in adding affordable housing throughout the city.
Across the nation, developers interested in creating affordable and permanent supportive housing have said the many requirements and complicated timetables attached to government funding programs make it difficult to operate quickly and take advantage of opportunities to acquire land affordably.
Nellis agreed with that assessment and added that private financing is often too expensive to make the projects financially feasible.
“We weren’t trying to replace traditional bank construction lending, but the way these projects come together, there is typically some kind of a gap,” he said. “We wanted to be the group that could fill that. The other motivator here was speed, which is if you are a developer in the nonprofit space, you typically don’t have fast access to capital. You’re competing with the private sector for land acquisition, and we really wanted to be in a place where we could provide nonprofit developers with very fast, very quick capital that they could use for land acquisition.”
Sally Gaskin, president of SGI Ventures, which is developing the Cady Lofts project, said the low interest rate will save about $100,000 in borrowing costs and help move toward completion much quicker than applying for additional municipal money.
“Having that low-barrier loan coming from a mission-driven impact fund is just huge,” she said. “We’ve got a longer construction period than most properties do, but by having that low-interest loan, that’s also a low barrier … there’s underwriting, but the fund understands what the mission is, and that these are gap funds that bridge our equity and the traditional bank financing that we have to have for construction financing.”
Photo: Rendering of Cady Lofts
The Austin Monitor’s work is made possible by donations from the community. Though our reporting covers donors from time to time, we are careful to keep business and editorial efforts separate while maintaining transparency. A complete list of donors is available here, and our code of ethics is explained here.
And we’re honored you look to us for serious, in-depth news. You know a strong community needs local and dedicated watchdog reporting. We’re here for you and that won’t change. Now will you take the powerful next step and support our nonprofit news organization?
affordable housing: This general term refers to housing that is affordable to Austinites, with or without subsidy.
Foundation Communities: Austin-based nonprofit focused on affordable housing issues and construction.
