Jax could have first affordable housing fund in Florida

Jax could have first affordable housing fund in Florida (Courtesy of the Jacksonville Business Journal) — Jacksonville is about 40,000 units short when it comes to affordable housing, but a new solution is on the horizon — and it isn’t more grants or tax credits.

Duval County could become the first county in Florida to have an affordable housing fund, which would help bridge the financing gap developers face when building affordable units.

Chris Crothers of the Jessie Ball duPont Fund and James Coggin of Community Foundation presented the affordable housing fund framework last week to a special committee on affordable housing and homelessness, asking the city to put up $10 million for the fund.

The money would augment $30 million raised from private investors, including nonprofits and individuals.

The plan is to create a $40 million, 20-year fund that would add a more flexible tool to address the local affordable housing crisis. The fund would make loans, not grants.

“What we’re proposing is to create the funding that incentivizes developers to come to their community and build,” Crothers said. “One of the challenges we’ve had is the lack of patient flexible capital.”

Bridging the gap

When developers approach affordable housing, they often go to the state for low-income housing tax credits, which come in two forms. The 9% tax credits are highly competitive and run out every year, with about one deal in the county, Coggin told the Business Journal.

The 4% tax credits often go unused because of the lack of funds to bridge the amount still needed after tax credits.

That’s where the affordable housing fund comes in, closing the gap left.

It’s set up with two loan vehicles: $10 million bridge financing to help acquire properties for future development and $30 million gap financing to fund deals — working in concert with state tax credits, Jacksonville Housing Finance Authority bonds and private lending.

How is the fund different from grants?

Instead of individual foundations and corporations contributing to affordable housing through grants, they’ll collectively co-invest to make a greater impact through loans.

For example, as a private foundation, the duPont Fund is required to deploy about 5% of its net assets each year, typically in the form of grants or grant-related expenses.

“Five percent is good, but it’s not really enough to move the needle,” Crothers said.

Coggin noticed the same thing at Community Foundation. While doing grant making around affordable housing, even with a large budget, it wasn’t enough to fix issues of economic opportunity. They needed a tool to allow them to do work on a larger scale, which the fund would provide.

“We’ve seen a demand for this among philanthropic individuals who are interested in supporting this issue,” he said. “They can’t give large enough grants to build multimillion-dollar affordable housing developments, but there are folks with the capacity to make a pretty sizable loan.”

Unlike grants that are charity, money will come back when giving loans, allowing money to be reinvested into housing.

Collective investment with a $10 million loan from the city and $30 million from private investors — including nonprofits, banks and wealthy individuals — is projected to lead to $120 million in total development.

Who manages the fund?

The proposed fund administrator would be Self-Help Ventures Fund, a community development financial institution, or CDFI, that operates affordable housing funds in Durham, Wake County and Greensboro, North Carolina, with another in the works for Chapel Hill, North Carolina.

The duPont Fund has been trying to attract CDFIs to the city because of the need for flexible patient capital. CDFIs are lending institutions that provide more cost-effective capital for things like affordable housing in underserved communities.

As of January, VyStar Credit Union and 121 Credit Union — which merged in March — are the only CDFIs with their headquarters in Jacksonville. Other CDFIs, such as LISC, work here under the umbrella of a national organization.

While Self-Help Credit Union is based in North Carolina, it acquired Jax Metro Credit Union in 2017 and began expanding throughout the area in 2021.

Who will fund it?

The fund will be fueled by investors. Organizers say the city must catalyze investment with $10 million, which Mayor Donna Deegan pledged to include in the city’s 2025 budget during an April 10 press conference. The rest will come from anchor institutions like higher education and banks as well as wealthy individuals with an interest in affordable housing and corporations.

In Self-Help’s affordable housing funds in North Carolina, top investors include Duke University, Wells Fargo and Truist.

Crothers told the Business Journal they already have a soft commitment from a private bank that would get them to about half of what they’d need to raise.

Both the duPont Fund and Community Foundation have commitments on the table as well.

Will it work?

The idea of an affordable housing fund isn’t new. Florida has the State Apartment Incentive Loan program, which is a low-interest rate mortgage loan program.

“We are trying to attract that sort of private investment to be able to replicate what the state’s been doing for several years,” Crothers said.