Banks to Trump: Spare Affordable Housing Programs

 

Under construction on a parcel of land in Boston’s inner city that has been vacant for more than four decades is a $21 million, five-story apartment complex that will eventually house 40 low-income families or individuals.

Boston Private Bank is providing much of the financing, though Esther Schlorholtz, its director of community investment, said it could not do so without a fair amount of government support.

To cover the costs of building and operating the property and still keep rents affordable for tenants, the developer needed to obtain several layers of financing assistance that included two different types of tax credits and zero-interest loans or grants through two federal programs administered by the U.S. Department of Housing and Urban Development.

Those federal programs, Schlorholtz said in an email, “are key to making the entire financing work. They fill the project gap that no one else funds.”

But will those programs, which bankers and housing advocates say are crucial to helping solve the country’s chronic shortage of affordable housing, be around much longer?

The Trump administration’s budget for fiscal 2018 calls for slashing HUD’s budget by 13% from current levels, largely by eliminating the Community Development Block Grant program and the HOME Investment Partnerships Program.

Thomas FitzGibbon, a former executive with MB Financial in Chicago and now an independent consultant, said that to make projects affordable for both the developer and residents, banks need programs like HOME and block grants to close deals. He added that if the programs are eliminated or curtailed, some banks could have trouble meeting their Community Reinvestment Act obligations.

“Under CRA, one of the things banks are challenged to do is drive capital into capital-starved markets, and it can be hard to do that without some kind of government subsidy,” he said.

Benson “Buzz” Roberts, the president and CEO at the National Association of Affordable Housing Lenders, said that the programs have provided a strong return on their investments. Citing HUD’s own numbers, he said that every dollar of HOME funds invested in the development of low- and moderate-income housing since 1992 has brought in $4.26 of private investment. In all, it has helped developers build, fix up or acquire more than 1.2 million homes and apartments.

“That’s a lot of production,” he said. HOME “has had a tremendously positive effect on distressed communities, and it’s been very cost-effective.”