Habitat for Humanity International
As a longtime Habitat St. Louis volunteer, board member, and past board president, Howard Smith has been a champion of affordable homeownership initiatives to expand opportunities for homeownership to low-income families for decades. Inspired by this work, Howard collaborated with US Bancorp Community Development Corporation (USBCDC) leaders Marc Hirschman (now principal of Twain Financial Partners) and Zack Boyers, current chief executive officer of USBCDC, in 2007 to create a New Markets Tax Credits model to support affordable for-sale housing development. Prior to this collaboration, NMTCs had never been used for affordable for-sale housing development. Instead their use had been limited to development of other real estate projects, such as charter schools, community facilities, and operating businesses.
Howard, Marc, and Zack approached Habitat for Humanity International (HFHI), offering USBCDC as the investor and Smith NMTC Associates, LLC as HFHI’s partner in a CDE (Community Development Entity), both financially and as the manager of the CDE. HFHI’s strong affiliate network of affordable housing developers, financial and homeownership counselors, and mortgage lenders using high touch loan servicing made HFHI a natural partner in Smith’s endeavors. HFHI accepted the proposal and the team jointly formed a CDE named HFHI-SA I, LLC.
Smith NMTC completed the CDE certification process and in 2007 prepared the CDE’s first successful NMTC Allocation application receiving $25M to be deployed in the GOZone, the Gulf Opportunity Zone (those areas hit hardest by Hurricanes Katrina and Rita). Smith also pioneered the multi-QALICB model in its first transaction, deploying all $25M to five Habitat affiliates, resulting in 251 new homes for the residents of Lafourche, Terrebonne, and St. Tammany Counties in Louisiana; Jackson and Harrison Counties in Mississippi; and Mobile County in Alabama. Smith also used Targeted Populations – thus committing its QALICBs to sell at least 60% of the homes built to individuals earning less than 80% AMI.
Smith wrote two additional applications for the HFHI-SA NMTC I, LLC CDE, receiving an additional $78M in allocation and providing funding to 27 affiliates in 19 states, completing projects that ultimately resulted in 1,461 affordable for-sale homes. By structuring the transactions to allow for multiple QALICBs, Smith NMTC reduced the burden of the transaction expenses and thereby maximized the net benefit retained by each borrower.
As manager of the CDE, Smith drafted all applications, facilitated and closed all transactions, and conducted all compliance for the seven-year compliance period. In 2019, the last HFHI-SA NMTC I, LLC transaction was unwound and exited.
Through its joint ownership and launch of the first CDE dedicated to for-sale housing projects, Smith NMTC Associates defined a national model for using NMTCs to increase homeownership opportunities within low-income communities. From the closing of the transaction, through the seven-year compliance period, and past the exit, the Smith NMTC accounting and compliance teams ensured proper funds management, documentation, and reporting for the QALICB and CDE, backed by a recapture risk guarantee from Smith NMTC.
For each round of allocation, HFHI facilitated the development of the project pipeline and retained responsibility for the final selection of projects to be funded.
After the deployment of the 2011 NMTC allocation, HFHI determined its needs would be best met by forming its own CDE. Smith NMTC continues to work directly with Habitat affiliates across the country as QALICBs in NMTC transactions supported by other CDEs.
AT A GLANCE
Tax Credit Investor: US Bank CDC