October 9, 2020

Affordable Housing in Detroit. How many Funds are there?

By Detroit Peoples

On Sept. 29th 2020 the City of Detroit Announced a new fund, “The Detroit Housing for the Future Fund”. This is not a new fund at all, but rather the presentation of the privately-funded portion of the Affordable Housing Leverage Fund, which was announced by the City in 2018.

The funding that has been committed by private entities and philanthropy as part of the 2018 Affordable Housing Leverage Fund is being repackaged and announced as if it is a new commitment to affordable housing. The same partners are committing the same funding, but with new press releases and press conferences that speak about the protections that the funding will provide for long time Black Detroiters and low-income Detroiters.

The majority of commitments are from banking institutions in the form of low-interest loan products rather than direct cash contributions. Neither fund will provide cash contributions to the Detroit Affordable Housing Development and Preservation Fund. Neither fund prioritizes input from impacted residents in its creation or operation.

Detroit Affordable Housing Leverage Fund- 2018

The Affordable Housing Leverage Fund (AHLF) is a partnership between Detroit LISC, the City of Detroit Housing & Revitalization Department (HRD), and the Michigan State Housing Development Authority (MSHDA) to provide affordable housing developers and owners with streamlined access to financial tools that are specifically designed to address housing challenges in Detroit neighborhoods.

AHLF encourages the preservation of regulated and naturally occurring affordable housing throughout the City of Detroit and the development of new mixed-income and affordable housing in targeted multi-family housing areas. AHLF is expected to deploy $250 million into the preservation of 10,000 units of existing affordable housing and the development of 2,000 units of new affordable housing.

AHLF is an umbrella for three coordinated funds that are deployed together through a common application and review process. 1) Detroit LISC manages the application and preliminary underwriting processes on behalf of the AHLF partnership and will manage the award and underwriting of low-interest loans, philanthropically-backed soft debt, and capital needs assessment grants ($125 million). 2) The City of Detroit will manage the award and underwriting of Federal and local sources of soft debt ($50 million), and 3) MSHDA will manage the award and underwriting of low-interest tax-exempt bond loans and gap financing ($75 million).

AHLF will primarily finance affordable multi-family rental housing; however for-sale and single family projects will be considered. AHLF will invest in housing that is affordable to households at or below 60% Area Median Income (with consideration of households up to 80% AMI for for-sale projects). Recognizing that housing cost burdens are a particularly acute challenge for Detroit residents at the lower end of the income spectrum, AHLF will seek to invest in a significant number of homes that are available to households below 50% and 30% of AMI as well as permanent supportive housing.

The $250 million Affordable Housing Leverage Fund (AHLF) aligns federal and state funds with corporate/philanthropic investment, was conceived by the City to significantly increase the preservation and production of quality, affordable housing in Detroit. The City is focused on two fronts: preserving the affordability and quality of the existing housing stock, and producing new housing that is priced affordably to people across a range of incomes. Both the preservation of the existing housing stock and the production of new housing support the City’s objective to provide residents with quality affordable housing options accessible to public transit, employment hubs, and other essential services. The goal of the AHLF is to preserve 10,000 units of existing affordable housing and produce 2,000 units of new affordable housing in the City of Detroit by 2023.

The AHLF is a partnership between the City, Local Initiatives Support Corporation (LISC), the Michigan State Housing Development Authority (MSHDA), and corporate and philanthropic investors. This public-private partnership is designed to increase the capacity of affordable housing providers to preserve and build affordable housing and to ensure that new development in Detroit’s neighborhoods is accessible to a wide diversity of residents. In addition to resources available through AHLF, the City will utilize tax abatements and will leverage public land to encourage affordable housing development and target supportive housing to address chronic homelessness. In short, AHLF is designed to provide the opportunity for Detroiters of all incomes to remain in Detroit

The City of Detroit’s Housing & Revitalization Department (HRD) is tasked with implementing the AHLF. Through a competitive process early in 2018, HRD selected the Local Initiatives Support Corporation (LISC) as fund manager for the philanthropic and low interest capital dollars raised for AHLF. Pursuant to its agreement with the City, LISC will also manage the AHLF NOFA application process. The City, through HRD, will serve as fund manager of the City soft money, maintaining its fiduciary responsibility over federally-provided sources such as the HOME and CDBG programs as well as the Detroit Affordable Housing Development and Preservation Fund created by the Inclusionary Housing Ordinance. The Michigan State Housing Development Authority (“MSHDA”) will serve as fund manager for low-interest state bond purchases, maintaining its fiduciary responsibility over all MSDHA bonds.

Detroit Future Fund- 2020

Detroit Housing for the Future Fund (DHFF), a public-private partnership aimed at directing $75 million in private capital to affordable housing in Detroit. The Detroit Housing for the Future Fund launches with an initial capitalization of $48 million, anchored by a $15 million commitment from JPMorgan Chase and a $10 million guarantee from The Kresge Foundation.

The DHFF aims to address housing instability in the city by filling the funding gap that limits developers’ ability to preserve and create much-needed affordable housing. Developers often have difficulty bridging the funding gap between redevelopment costs and the income they will receive from tenants. This fund will provide developers and owners of affordable housing with streamlined access to financial tools that are specifically designed to address housing challenges in Detroit neighborhoods. The fund will finance housing for residents with income at or below 60% of the area median income or AMI.

This Fund represents the privately funded portion of the larger affordable housing initiative announced as part of the City’s Affordable Multifamily Housing Strategy in 2018.  The City of Detroit made a $50 million commitment as part of the initiative and has committed $12.2 million to date into the development of 424 units of affordable housing.

Partners Include: JPMorgan Chase announced a commitment of $15 million to the fund, including $12.5 million in low-cost loans and a $2.5 million philanthropic investment. An additional $15.5 million in low-interest lending has been committed by Flagstar Bank, Citizens Bank, and First Independence Bank. The Kresge Foundation has committed a loan guarantee of $10 million. Previously announced commitments totaling $17.5 million were made by Blue Cross Blue Shield of Michigan, Fifth Third Bank, Flagstar Bank, TCF/Chemical Bank, Ford Motor Co., Penske Corp. and Huntington Bank.

FUND DETAILS

Affordable Housing Leverage Fund (AHLF)

  1. Year of Introduction: 2018
  2. Purpose: A public-private partnership designed to increase the capacity of affordable housing providers to preserve and build affordable housing and to ensure that new development in Detroit’s neighborhoods is accessible to a wide diversity of residents.
  3. Partners/Contributors:
    1. JPMorgan Chase
    2. Blue Cross Blue Shield of Michigan
    3. Fifth Third Foundation
    4. Huntington Bank
    5. Ford Motor Corp.
    6. Penske Corp.
    7. TCF/Chemical Bank
    8. Flagstar Bank
    9. American Axle
  4. Fund Manager: LISC
  5. Fundraising Goal: $250 Million
  6. Community Input (non-developer): None

Detroit Housing For the Future Fund (DHFF)

  1. Year of Introduction: 2020
  2. Purpose:  A public-private partnership designed to address housing instability in the city by filling the funding gap that limits developers’ ability to preserve and create much-needed affordable housing.
  3. Partners:
    1. JPMorgan Chase
    2. Blue Cross Blue Shield of Michigan
    3. Citizens Bank
    4. First Independence Bank
    5. Fifth Third Bank
    6. Huntington Bank
    7. Ford Motor Corp.
    8. Penske Corp.
    9. TCF/Chemical Bank
    10. Flagstar Bank
    11. Kresge Foundation
  4. Fund Manager: LISC
  5. Fundraising Goal: $75 Million
  6. Community Input (non-developer): None

Sources:

  1. https://news.tcfbank.com/news/news-details/2018/City-and-corporate-partners-announce-record-35-million-commitment-to-Detroit-neighborhoods/default.aspx
  2. https://detroitmi.gov/news/city-and-business-partners-announce-historic-35m-corporate-commitment-detroit-neighborhoods#:~:text=The%20seven%20partners%20are%20AAM,areas%20and%20affordable%20housing%20citywide.