The full article can be found here. 

By: Joe Gose

The struggle to provide an adequate amount of affordable housing to police officers, teachers, health-care workers and other low-to-middle-income workers has plagued communities for years.

Prior to the pandemic, 30 percent of U.S. households spent more than 30 percent of their income on housing, and nearly half of these cost-burdened households spent more than 50 percent of their income on housing, according to the Joint Center for Housing Studies of Harvard University.


A chronic shortfall of federal low-income housing tax credits along with lengthy and costly development timelines have contributed to the supply shortage. Meanwhile, conventional developers by and large have focused on building high-rent Class A and luxury projects to generate returns that justify lofty land and construction costs.

But value-add investors that renovate and raise rents at thousands of Class B and C apartment communities represent one of the biggest threats to the supply of workforce rental units, often referred to as naturally occurring affordable housing or “NOAH.” As a result, social impact funds have emerged to compete with value-add investors and preserve affordability for renters typically earning between 60 percent and 120 percent of area median income.

The funds have the ability to quickly strike deals and, in most cases, they generate annual returns of around 8 percent or higher over the long term. While that’s about half the return that investors in value-add funds expect to earn, it’s still competitive with core investment strategies, say proponents. What’s more, renter demand for workforce units is not correlated to economic conditions—a fundamental trait underscored by the pandemic.

“We’ve had three crises at once over the last year: a global pandemic, an economic crisis and a civil rights movement.,” said Bobby Turner, CEO of Santa Monica, Calif.-based Turner Impact Capital. “Any one of them alone would have been formidable but they have truly highlighted how impact investing can driver better risk-adjusted returns than other traditional investment strategies, if it is done well and done correctly.”

Turner Impact typically keeps rental rates affordable for residents earning from 60 percent to 100 percent of AMI, and other funds sponsored by the organization invest in charter schools and health-care facilities that support its tenants and surrounding communities. That approach drives renter satisfaction and helps maintain occupancy, Turner said. During the pandemic, it has collected 95 percent of its rental income across its portfolio, he added.

Turner Impact typically keeps rental rates affordable for residents earning from 60 percent to 100 percent of AMI, and other funds sponsored by the organization invest in charter schools and health care facilities that support its tenants and surrounding communities. That approach drives renter satisfaction and helps maintain occupancy, Turner said. During the pandemic, it has collected 95 percent of its rental income across its portfolio, he added.

OPPORTUNITIES IN PRESERVATION

To help preserve workforce housing in metro Washington, D.C. neighborhoods experiencing rapid rent increases, JBG Smith in 2018 launched the Washington Housing Initiative Impact Pool, a debt fund committed to NOAH preservation. The fund raised $114 million, and to date it has provided nearly $22 million in acquisition financing to preserve 1,151 affordable units.

In late 2020, the Impact Pool provided $6.7 million in subordinated debt to the non-profit Washington Housing Conservancy for the purchase of the Crystal House, an 825-unit property in Arlington, Va., near JBG Smith’s Amazon HQ2 development. Amazon, which has also made a commitment to affordable housing, provided the first mortgage. The deal features a 99-year covenant that requires 75 percent of units be available for residents earning 80 percent of AMI or less (about $90,000). Twenty percent of those are to be reserved for renters earning 50 percent of AMI or below.

“Preservation of the NOAH stock is important, but capital hasn’t been organized around it and people could not take a strike at it,” said AJ Jackson, executive vice president of social impact investing for Bethesda, Md.-based JBG Smith. “But these funds are the fastest and most effective way to preserve housing affordability because you can buy existing stock for somewhere between 50 percent and 75 percent of the cost of building new housing.”

NOAH Funds
The Austin Housing Conservancy purchased the 183-unit Melrose Trail in the city late last year. Photo courtesy of Austin Housing Conservancy Fund

High-net-worth individuals launched the Austin Housing Conservancy Fund in 2017 to address the growing housing burden on teachers, first responders, musicians and others amid the city’s booming economy and skyrocketing rental rates, said David Steinwedell, president and CEO of Affordability Central Texas, the fund’s sponsor. From 2012 to 2014 alone, some 7,000 NOAH units were taken off the market, according to the Austin Housing Conservancy.

The open-ended fund buys NOAH properties and stipulates that at least 51 percent of the units be reserved for renters earning 80 percent of AMI or less, he said. So far, Austin Housing has purchased four properties totaling 1,000 units for about $123 million. In its latest deal, the fund recapitalized a 183-unit complex, allowing the existing owner to retain some equity in return for preserving affordability.

Institutions and banks are now showing interest in the fund, as are corporations that are cognizant of how their success and growth in Austin is affecting affordability, Steinwedell said.

“I think people are seeing the NOAH strategy as a more secure investment when things go bad,” Steinwedell stated. “Our occupancy, tenant retention and collections have been above the market in the worst of times during this pandemic.”

In Twin Cities, some 1,300 NOAH units a year are losing their affordability due to value-add investment activity, according to Minnesota Housing, the state’s housing finance agency. To stem that loss, the Greater Minnesota Housing Fund created the NOAH Impact Fund in 2017 to provide equity to operators that buy and preserve workforce units. After deploying its capital to acquire more than 700 units in about two years, the organization launched a second fund, which is nearing $33 million in commitments, said John Errigo, acting manager of the NOAH Impact Fund.

The fund typically finances projects for 10 years and requires that owners reserve 75 percent of the units for renters earning 80 percent of AMI or less for 15 years. Because incomes are growing much slower than rental rates, however, the fund may lower the threshold to 60 percent of AMI, Errigo said. At the same time, the average price per NOAH unit in Twin Cities has increased to around $118,000, which is around $30,000 more than it was just a few years ago. That may require the fund to seek other capital sources, such as local government gap funding.

“That increase in prices certainly makes it challenging for buyers like the NOAH Impact Fund,” Errigo added. “Our secret sauce is that our lower cost of capital allowed us to compete on price without having to raise rents significantly, like value-add investors have to do. But as the price per unit goes up, the math doesn’t work as well.”

Thursday, May 6, 2021 by Chad Swiatecki

The original article can be found here. 

An investment fund focused on preserving working-class housing in Austin is nearing its first property acquisition of 2021, and moving ahead with its reactivation after the slowdown in 2020 caused by the Covid-19 pandemic.

The Austin Housing Conservancy Fund is expected to close on the purchase of another multifamily property in June or July, with hopes to add 1,000 units of housing to its portfolio by the end of the year. That would double its current lineup of workforce housing options throughout the city, which currently stands at 1,000 units and 1,500 residents who fall between 80 and 120 percent of annual median family income.

That class of housing doesn’t qualify for affordable housing subsidies or other assistance programs and is in danger of becoming scarce for the area’s middle-income hourly workers, public employees or young professionals at risk of being priced out of the area by rent increases. The housing conservancy was created by the nonprofit Affordable Central Texas to buy and hold multifamily properties, keep rents affordable and deliver moderate single-digit return rates for investors.

In December, the fund acquired the Melrose Trail apartment complex in North Austin. Unlike a traditional purchase, with that acquisition the fund brought in new capital and additional partners to help the existing owner refinance the property.

David Steinwedell, CEO of Affordable Central Texas, said Austin made it through the pandemic and the accompanying recession with no dip in demand or performance on its properties. He hopes the data showing strong tenant retention and rent payments should help more banks and other institutional investors looking to grow the social impact portion of their investment pool, with a target of attracting $15 million from new investors by the end of the year.

“Before the pandemic a lot of people looking at the fund would ask us what would happen if there was a downturn in the market. One of the things we talked about was providing stable housing with affordable rents, and in a downturn people are more likely to stay and pay their rent because they want to keep that housing, especially when it is close to good schools,” he said. “We have very little volatility and risk in the investment, and when the pandemic hit we got to live that and prove out that all the properties in the portfolio did better than the market in terms of occupancy, tenant retention, rent collections and all the other relevant measures you would use to prove out that investment.”

The softness in multifamily housing that did hit the Austin market was mostly felt by downtown high-income properties, Steinwedell said, with even that bit of slack mostly gone now.

In addition to more acquisitions, the housing conservancy is working on its first ground-up development, with more recapitalization deals likely to help reach the goal of owning 5,000 workforce housing units by 2023.

Steinwedell said one positive factor in the multifamily market in Austin is that there are enough projects planned and in development to keep rental prices from spiking as they have in the single-family home market over the past year.

Looking at the whole housing landscape for the Austin area, Steinwedell said the growing interest in social impact investing and the demand for affordable and middle-income housing will keep more supply coming, but might not be enough to have a significant impact on the city’s homelessness problem.

“Normally when you have a recession or something like what we just survived, prices fall, and that creates the opportunity for more affordability, but that didn’t happen in Austin and the need for what we’ve been doing has been magnified. From a capital perspective, Austin is attractive to a whole variety of investors,” he said.

“There’s always a need for more housing, and when there’s a limited supply you always seem to have people with various interests all fighting each other for a limited supply of money. You see that now with homelessness and no one can deny there’s a need for more money and more programs to make that work, but you need to do that by bringing in additional dollars, not trying to take money from one program and use it for another program. The real problem for the city and (county) commissioners is how to find tools and additional sources of capital so you’re not taking away from one need to serve another.”

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.

The full article can be found here.

By: Audrey McGlinchy

Austin has returned to her former self: a city where rent prices know no direction but up, up and up.

“It’s like our city has all of a sudden just woken up and is coming back full speed ahead,” Cindi Reed, vice president of sales and development at Apartmentdata.com, told KUT.

In April, the average monthly rent in Austin hit $1,335, according to data from Apartmentdata.com. That represents the highest monthly rent price in nearly two years and a roughly 6% increase in average rent from the start of the year.

 

It’s a sign that the respite some renters felt last year has faded.

During the pandemic, the price to rent an apartment in the city began dropping for the first time in at least a decade. Rents in Austin bottomed out in November 2020, when the average rent fell to $1,249 a month.

Experts pointed to the city’s declining occupancy rate, which indicates that a larger percentage of rental units are empty. They suggested people hit hardest financially by the pandemic were moving in with family or friends, and those who fared fine were opting to become homeowners.

With more supply, renters had room to negotiate and to hunt for lower prices.

But the rent relief was not felt evenly. Prices dropped most significantly in higher-end apartments, referred to by those in the industry as Class A apartments.

It is rents for these same apartments, which are newer and offer amenities like a gym and a pool, that have rebounded most quickly. In October, the average monthly rent for a luxury apartment dropped to $1,549, the lowest it’s been in nearly two years. But in just six months, average rent prices for these high-end apartments have risen 10%.

Reed said because the cost of buying a home in Austin has soared over the past, some people who could afford to buy have decided to keep renting.

“We have such a deficit in residential homes to buy,” Reed said. “You just can’t find a home to buy. They just can’t build them fast enough nor can they get the materials to build them.”

The full article can be found here.
One of the world’s largest property owners has made its first foray into the world of impact investing by backing a new fund.

Oxford Properties, the real estate investment fund of Canadian pension fund OMERS, which manages $64B of property assets, is one of the investors that has backed the first closing of the Dream Impact Fund, managed by Canadian fund manager Dream UnlimitedPERE reported.

Oxford has previously invested in sustainable real estate and worked with its partners to have a social impact, but this is its first investment in assets specifically targeted at having a positive impact on society. It is among the real estate investors like Nuveen and Franklin Templeton that are in the vanguard in the growing field of real estate impact investment.

The Dream Impact Fund raised $109M in its first close and Dream Unlimited hopes to double that before it closes to new equity. It is an open-ended fund, meaning investors can sell out or new investors buy in over time, a relatively rare structure for impact funds, which tend to be closed ended.

The fund will invest in affordable housing, “inclusive communities” and resource efficiency in Canada. Oxford has typically debuted new investment strategies in its home North American markets before rolling them out more widely. The fund has a gross target rate of return of 12% to 14%, and Dream said it would soon publish a framework for how it would measure the social impact the fund made.

By: Lisa Brown

Click here for the full article. 

The recent closing of the Enterprise Housing Partners Fund XXXIV (EHP 34) is a nearly $200 million multi-investor Low-Income Housing Tax Credit fund, according to Enterprise Housing Credit Investments. The fund comprises seven investors and will support the creation of 1,794 affordable homes across 14 properties in 10 states. EHP 34 is the first of four multi-investor funds planned by EHCI this year.

EHP 34 investors include major national and regional banks, most of which are repeat investors with Enterprise. The 14 properties in the fund are located in California, Connecticut, Florida, Maryland, Massachusetts, New Mexico, New York, Oregon, Texas and Washington.

Two properties of EHP 34 are Agrihood in Santa Clara, CA and The Montage, an affordable housing development to be built in San Antonio. The Montage will comprise five three-story buildings offering 216 new homes, serving residents at or below 60 percent of AMI.

Kittle Property Group is partnering with the Housing Authority of Bexar County to develop this property. Both developments are expected to completed and available for residents in spring 2023.

The original article can be found here.

Monday, April 6, 2020 by Chad Swiatecki

The nonprofit group Affordable Central Texas is looking to raise $125,000 to assist residents in the three apartment complexes owned by the Austin Housing Conservancy Fund, which was created to preserve workforce housing in the Austin area.

 

The ACT Together Fund will be available to approximately 750 of the 1,200 residents in those three complexes based on income data and need due to job losses and other impacts of the Covid-19 pandemic.

 

David Steinwedell, CEO of Affordable Central Texas, said the goal is to help residents from falling behind on rent and other expenses while waiting for local, state and federal relief programs to take shape. He said the $125,000 will likely allow for two or three months of assistance.

 

“If someone is having problems paying rent then they’re probably also needing help paying their utility bill, car payment, and there’s a variety of things that are going to be a challenge for them,” he said. “We formed the program to raise capital through the nonprofit and use that to meet the variety of needs that our residents might have.”

 

Affordable Central Texas was formed with the mission of acquiring apartment communities where rents would be maintained at a level affordable to those earning approximately 80 percent of the Austin area’s median family income. That middle ground between subsidized affordable housing for lower incomes and high-end properties is seen as endangered as Austin’s real estate market continues to grow and the demand for housing pushes rents higher.

 

Steinwedell said he supports the city’s recent move to stop eviction proceedings for 60 days, but cautioned that property owners would quickly become unable to make utility payments or pay maintenance staff for a complex if there were widespread rent forgiveness or a rent strike by residents.

 

“If we don’t receive rent then we can’t pay our mortgage or pay our utility bills or pay the five to seven staff we have at each one of our properties. So when you do one thing it has a waterfall effect relative to providing a stable home for all of our residents,” he said. “This is affecting everybody and I think there’s a realization that we’ve got to all be creative in terms of how do you work with people. It could be if there’s someone who’s lost their job and hasn’t gotten their unemployment going yet or the extra $600 per week, then let’s defer the rent until those payments come in and get you on a payment plan. There’s a whole variety of things people are willing to do in this environment because they know everyone is being affected in one way or another.”

 

While Affordable Central Texas is looking to have thousands of units under ownership in the coming years, the pandemic has already put a stop to one acquisition because the group can’t perform a full site visit to do proper diligence. Steinwedell said two other deals in the preliminary stages have been put on hold, and that financial institutions have put a stop to most lending and investments because of uncertainty in the markets overall.

 

The news that there may be assistance for Affordable Central Texas residents was welcome to Craig Edgley, a high school math teacher at the Texas School for the Blind and Visually Impaired who lives at the Bridge at Terracina complex.

 

Edgley is still teaching students online, but his wife’s job at a daycare center has been put on pause over the last few weeks, meaning less income for them and their two children. He wasn’t aware whether he’d qualify for assistance from the fund, but praised the intention of Affordable Central Texas to keep housing available in the city for teachers and other middle-income workers.

 

“Once it got bought out they let us know they were making changes and I’m loving it because they’re going in the direction of being more for the people than the profit,” he said. “I definitely think that landlords should be more understanding of the people. Because if you’re good to the people when they’re down then we’re going to be good to you when things are good and we’ll get our rent paid on time. Especially when we’re going through this crazy epidemic no one was expecting, they need to be more accepting with late rent or missing rent.”

Photo courtesy of Google Maps.

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.

The full article can be found here.

AUSTIN (KXAN) — The nonprofit organization Affordable Central Texas announced Wednesday that Texas Capital Bank will be the first bank to fully invest in the Austin Conservancy Fund, according to a press release from the office of Mayor Steve Adler.

The Austin Conservancy Fund is an open-ended social impact equity fund aimed at making sure properties meet the Community Reinvestment Act requirements. By purchasing multifamily properties, the fund will theoretically maintain affordable rental rates in the city. Its goal is to preserve workforce housing apartment buildings, prevent them from being gentrified and protect existing tenants so they won’t be displaced.

“The magic of Austin is in its people. Keeping the city affordable for teachers, artists, first responders, restaurant workers and other working people is crucial to preserving what everyone loves about being here,” said Mayor Adler. “With this investment, Texas Capital Bank has shown leadership that we hope will inspire others to support the Austin Housing Conservancy Fund and its work to preserve affordable housing for the moderate-income workers who make this city special.”

The ACF launched in 2018 with the purchase of three multifamily properties totaling 792 units and 1,200 residents, per Mayor Adler’s press release. The 10-year goal of the fund is to preserve over 10,000 rental properties for 15,000 Austin residents.

“Today we are proud to announce we are growing by adding Affordable Central Texas and the Austin Affordable Housing Conservancy Fund to our family of community partners,” said Kerry Hall, Executive Director of Regional Banking for Texas Capital Bank. “In alignment with the City of Austin and the Austin Affordable Housing Conservancy Fund’s strategic goal of ensuring that people who work in Austin can live in Austin, Texas Capital Bank is proud to announce a $500,000 institutional investment into the Affordable Housing Conservancy Fund.”

While Texas Capital Bank is the first bank to become an investor in the ACF, in September Wells Fargo and the U.S Conference of Mayors made a $150,000 donation to the fund.