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Foundations Join City's Effort on Affordable Housing Loans
By JENNIFER 8. LEE
Published: October 14, 2005
The Bloomberg administration and five large foundations have set up a $40 million fund that is expected to help finance 30,000 homes for low- and moderate-income people in the city over the next decade, the mayor's office said yesterday.
The creation of the fund, which is expected to be announced today by Mayor Michael R. Bloomberg, has drawn tentative commitments for more than $100 million in additional low-interest-rate loans from banks, according to city officials.
In total, city officials expect that $200 million will be available for loans to developers of affordable housing. To date, about $34.5 million of the $40 million has been committed, with $8 million coming directly from the city.
The program, known as the New York City Affordable Housing Acquisition Fund, is being established because the chief source of that kind of housing - 5,000 vacant lots claimed and sold by the city - has dried up.
"The question was, what is Act II?" said Florence A. Davis of the Starr Foundation, which made a $12.5 million grant to the fund.
The fund will create housing units on a level similar to the last few years of the vacant lot development program, said Shaun Donovan, the commissioner of the city's Department of Housing Preservation and Development. In addition, the financing will be used to buy a large number of rental apartments that will lose affordable housing protections.
In the red-hot real estate market, affordable housing developers have been at a disadvantage because they need time to line up financing, often from several sources. Developers said they would use the fund to make rapid short-term loans until more permanent financing is obtained.
"It's exciting that they've figured out a way to address this really substantial barrier to affordable housing development," said Hilary Botein, coordinator for Housing First!, a coalition that advocates investment in affordable housing in New York City.
Affordable housing developers also have difficulty securing loans from banks because of the high level of risk. The fund will act as an intermediary, absorbing much of the risk of default, and thus will obtain loans at only 1 percent above the benchmark rate that banks use to lend to one another overnight.
In addition to the money from the city and the Starr Foundation, the Rockefeller, MacArthur and Ford Foundations, along with the Open Society Institute, are providing loans at 1 percent interest for 10 years. The Rockefeller and MacArthur Foundations are each providing $5 million in loans and the Ford Foundation is providing $4 million.
"What is innovative is that it brings together in one facility for the first time some of the best and most creative financing strategies that have been used by Wall Street, by philanthropy and by government and community development entities," said Judith Rodin, the president of the Rockefeller Foundation.