New Private Foundation Partnerships Seek to Build and Retain Affordable Housing
Reasonable people with good intentions can have rational arguments about nearly all aspects of affordable housing. One thing that nearly everyone can agree on, though, is that there just aren’t enough affordable housing units out there to meet demand. The National Low Income Housing Coalition reports that the U.S. has a shortage of 7.3 million rental homes affordable and available to renters with extremely low incomes – that is, incomes at or below either the federal poverty guideline or 30% of their area median income, whichever is greater.
It has been clear for decades that the deficit in affordable housing cannot be resolved solely with public funding programs. The resolution to the affordable housing crisis will require a multitude of options. One source of funding is private philanthropy, which is bolstering both new construction and housing preservation.
Once such example of this has come from the Hillman Foundation in Pittsburgh, PA. In December, the charitable foundation announced $11.2 million in grants to help address the issue in that city and the county it calls home. And just this week, the same foundation announced that it partnered with The Heinz Endowments and UPMC for You, a Medicaid managed care plan, to create a new private loan fund to help mission-minded developers acquire existing multifamily housing units and retain them as affordable units for neighborhood residents.
The institution indicated its first goal is “to preserve and protect” affordable housing in Allegheny County. According to an announcement, the grants will go to a host of 10 different organizations working on varying affordable housing needs. The funding is expected to be dedicated to providing aid for low-interest loan programs, financing new mission-driven housing development, providing homebuyer education classes for low- to moderate-income Black and Hispanic homebuyers, as well as supporting efforts to repair and preserve affordable housing units.
David K. Roger, president of the Henry L. Hillman Foundation, said, “Availability of affordable housing is one of the largest and most complex challenges facing Pittsburgh and the region. In Allegheny County, sale prices for homes over the past five years have exceeded inflation and rents have increased by 20% in Pittsburgh over the past year.
“These funding commitments,” he continued, “have been targeted to contribute to the toolkit that empowers the region to address those challenges. Fostering healthy neighborhoods is a strategic priority of the Henry L. Hillman Foundation, and one of the most direct ways to do so is through access to safe, stable and affordable housing.”
Hillman’s announcement cited various research to work to explain the extent of the challenge. That includes a 2016 study by the City of Pittsburgh’s Affordable Housing Task Force indicating a shortage 17,000 units for residents at up to 50 percent of the city’s median income. More recent market reports of the rental market noted by Hillman note that Pittsburgh had the second fastest-rising asking rents nationally, skyrocketing 20% between September 2021 and September 2022.
Programs benefiting from the grants include:
- Bridgeway Capital to create or preserve 475 units in Hazelwood, Squirrel Hill, East Liberty and Central Northside.
- Rising Tide Partners to purchase naturally occurring affordable housing and renovations to be used as affordable rentals or to move renters to homeownership.
- NeighborWorks for a personalized homebuyer education program to support qualified low- to moderate-income
- Black or Hispanic home buyers in purchasing available for-sale properties via HUD-certified one-on-one counseling.
- Urban League of Greater Pittsburgh for mortgage and rental assistance and counseling services, and a comprehensive housing strategy focused on low-to-moderate-income Black families.
- City of Bridges Community Land Trust for the implementation of a new plan to serve multiple neighborhoods in the
- City of Pittsburgh and Allegheny County through the preservation of existing affordable housing and development of new units.
- LEVEL: Equity Building for housing preservation, rehabilitation, and affordable homeownership, as well as technical assistance and guidance to individuals currently on LEVEL’s waiting list for rehabilitated, affordable homeownership in McKees Rocks.
- Rebuilding Together Pittsburgh to provide $3 million worth of home repairs to at least 100 homeowners in 2023 and unlock additional public funding for a new Whole Home Repair program through additional case management and technical assistance.
- Schenley Heights Collaborative for the rehabilitation of four vacant, blighted houses in the Upper Hill District, in partnership with the Urban Redevelopment Authority’s Pittsburgh Housing Development Corp.
The more recent announcement states that the Henry L. Hillman foundation, The Heinz Endowments, and UPMC for You will be working with Cinnaire Lending, the Preserve Affordability Pittsburgh (PAP) to create a loan pool with the intention of preserving 1,200 units of affordable housing in Pittsburgh neighborhoods throughout the next decade by lending capital to developers focused on creating or retaining affordable properties.
The initial PAP loan pool is $11 million with specific loan amounts dependent on individual developer proposals. The program is the result of nearly two years of planning and will offer loans to developers who include affordable housing in proposed projects at less cost than developers would encounter if pursuing loans through traditional lending paths.
The PAP loan pool will center on mixed-use residential buildings with a minimum of 20 affordable housing units, as well as family and senior housing with a minimum of 20 affordable units that are in close proximity to schools, grocery stores and mass transportation.
With the rise in inflation and construction costs in the United States, preserving and/or renovating existing multifamily affordable housing is often more cost-effective for affordability-minded developers than building new housing units. However, the Pittsburgh metro area’s competitive real estate market often makes acquiring these units financially unfeasible. Potential buyers or renters from within the community are often priced out of the market rate for “flipped” properties, which can result in eviction or displacement.
The Hillman Foundation’s investment in affordable housing shows how philanthropy can bring not only needed investment in housing, but also creative and innovative solutions to the housing shortages that plague the industry. While money is certainly part of the solution, targeted grant-making to organizations that know the local housing landscape offers what’s possibly a more precise and effective path to that solution.