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Atlanta Transaction Shows Value of Using NMTCs to Increase Homeownership
Brad Stanhope, Senior Editor, Novogradac
Novogradac Journal of Tax Credits (Volume XIII, Issue IV)
April 2022

New Markets Tax Credit Allocation Expands Access to Homeownership in Five States

Smith NMTC Associates, LLC announces the closing of its latest New Markets Tax Credit (NMTC) transaction to support the development of affordable for-sale homes with nonprofit developers in Georgia, Maryland, Minnesota, Texas, and Virginia. Smith NMTC’s partner CDE, Community Housing Capital, deployed $30M in NMTC allocation to 5 NeighborWorks America organizations. NeighborWorks America is a congressionally chartered and funded nonpartisan nonprofit that supports 250 strong, healthy and prepared network organizations that provide communities with affordable housing, financial counseling and coaching, training, and resident engagement and collaboration in the areas of health, employment and education. NWA member founded in 2000, Community Housing Capital (CHC) is a certified CDFI and CDE that lends capital for pre-development, development, and permanent financing to the 250 NeighborWorks America organizations (NWOs) throughout the country who develop affordable rental and for-sale housing for low-income persons and in low-income communities. Since 2000, CHC has originated 597 loans totaling $955 million to 145 separate NWOs.

CHC was awarded the NMTCs in September 2021 from its 2020 application prepared with Smith NMTC. This $30M allocation is the first NMTC award for CHC. The following organizations received allocation in this closing:  Avenue Community Development Corporation (Texas) - $5M, Columbus Housing Initiative (Georgia) d/b/a NeighborWorks Columbus - $6M, Dayton’s Bluff Neighborhood Housing Services (Minnesota) - $7M, Neighborhood Housing Services of Baltimore (Maryland) - $6M, Piedmont Housing Alliance (Virginia) - $6M. More than half of the total homes constructed will be sold to low-income purchasers.

“The magnitude of this allocation has created significant new opportunity for homeownership, offering low-income residents transformative access to equity growth in our nation’s strongest recorded real estate market,” shared Howard Smith, principal of Smith NMTC. “The escalating cost of housing and the narrowing access to the American Dream of homeownership has amplified the wealth gap in nearly every community in the U.S. With New Markets Tax Credits, our partners can bridge the economic gap by building and selling homes that are affordable to low-income buyers. Expanding access to homeownership goes beyond the wealth-building benefit for individual families; it also stabilizes communities with longer term residency and stronger tax bases.”

Avenue Community Development Corporation of Houston, Texas, will use a $5M allocation to build approximately 18 homes in the Northline community where there is a significant lack of housing stock, particularly at price points aligned with the $36,000 median household income. Approximately half of the new homes will be sold to low-income buyers who will receive pre-purchase financial counseling, homebuyer education, and ongoing support.

Dayton’s Bluff Neighborhood Housing Services on the East Side of Saint Paul, Minnesota, will use a $7M allocation for infrastructural preparation of 32 lots and the rehab and construction of 15 homes. Approximately 80 percent of the homes will be sold to low-income purchasers. The homes will be built in neighborhoods primarily occupied by minority residents where the quality of the housing stock has deteriorated significantly.

Neighborhood Housing Services (NHS) of Baltimore will use a $6M allocation to rehab approximately 27 single family rowhomes in West Baltimore, where a high vacancy rate has contributed to community distress. NHS prioritizes working with small, women, and minority-owned developers to amplify the impact of the community investment. At least 55 percent of the homes rehabbed with this allocation will be sold to low-income buyers.

Piedmont Housing Alliance of Charlottesville, Virginia, has operated since 1996 to offer homebuyer education, credit counseling, and fair housing advocacy, and to administer down-payment assistance programs. With a $6M allocation, Piedmont Housing Alliance will build and renovate approximately 17 homes in two separate communities. All of the homes will be sold to low-income buyers, many of whom are BIPOC homeowners.

NeighborWorks Columbus (also known as Columbus Housing Initiative) will leverage a $6M allocation to construct 20 single family homes in the Elliot’s Walk subdivision of South Columbus. These homes will be the first new inventory in 50 years designed and offered for homeownership; at least 60 percent of the homes will be sold to low-income buyers. In addition to the NMTC development, a separate developer has proposed revitalization efforts to add townhomes, rental homes, and upscale housing to Elliot’s Walk.

On the impact of these allocations, Cathy Williams, President and CEO of NeighborWorks Columbus shared, “It isn’t often that we, as a second city, have the opportunity to deploy tools like NMTC. We are, more often than not, overshadowed by the big markets.  On behalf of my community, thank you for allowing us to be a part of this. We will use this tool to transform a long-neglected area of our community and assist families otherwise shut out from homeownership.”

$20.5M in NMTC Allocations Will Add Nearly 90 Homes to Metro Atlanta

Smith NMTC Associates, LLC announces the closing of two New Markets Tax Credit (NMTC) transactions totaling $20.5M with Atlanta Neighborhood Development Partnership, Inc. (ANDP) to build and sell approximately 87 homes in metro Atlanta communities. This funding adds to previous NMTC transactions with ANDP, initiated in 2017 and 2018. The latest transactions involve the Community Development Entities (CDEs) Enterprise Community Partners, Inc. (ESIC New Markets Partners LP) and The Reinvestment Fund, Inc., both of which are partnering with Smith NMTC for the first time on affordable homeownership initiatives. ANDP serves the ten-county metro Atlanta area with financing and development of affordable housing that promotes racial equity and healthy communities. In the 2017 and 2018 transactions with Smith NMTC, ANDP received allocations of $10M in each year to renovate and construct a total of 133 homes.

According to Howard Smith, principal of Smith NMTC, “Introducing new transaction partners – Enterprise and Reinvestment Fund – as CDEs to our NMTC homeownership model expands the horizon for homeownership opportunity in the Atlanta region and with other organizations nationwide. We are thrilled to facilitate the construction of homes affordable for diverse, underserved buyers who can leverage their newfound equity to build wealth, benefiting both their next generations and their communities.”

With an allocation of $10.5M in New Markets Tax Credits from Enterprise, ANDP will renovate and build approximately 44 single-family homes for sale in the Westside and Southside neighborhoods where economic distress has been exacerbated by the Covid-19 pandemic. In the Westside English Avenue neighborhood, ANDP expects to complete 20 renovations or rebuilds in partnership with the Westside Future Fund. All of the homes will be within short distances to public transit and the downtown job center and sold to buyers earning below 120 percent AMI. In Atlanta’s Southwest neighborhoods, ANDP will build and rehab approximately 24 single-family homes, addressing decades of community disinvestment by replacing blighted properties with quality, affordable new homes.

The $10M NMTC allocation from Reinvestment Fund will enable ANDP to renovate and build approximately 43 scattered-site homes throughout metro Atlanta, including 12 or more townhomes in the severely distressed Browns Mill neighborhood. All homes will be constructed to meet ANDP’s energy efficiency standards, minimizing environmental impact and generating long-term utilities and maintenance savings. Additional down payment assistance will be available on four or five homes, reducing the purchase price offered to buyers at or below 80 percent AMI.

More than 80 homes created from these combined allocations will provide homeownership opportunity to primarily African American low- and moderate-income buyers, specifically addressing the impacts of gentrification, race-based disinvestment, and the economic and social effects of Covid-19. These homes will encourage stability and wealth creation by restoring equity to residents in areas disproportionately affected by economic recession, residual effects of the foreclosure crisis, and local employment loss.

Latest Transaction with HPN Creates Over 120 Affordable For-Sale Homes in Three States

Smith NMTC Associates, LLC announces its most recent closing of a $28M New Markets Tax Credit (NMTC) transaction with The Housing Partnership Network, Inc. (HPN). A Community Development Financial Institution (CDFI) since 1992 and a certified Community Development Entity since 2007, HPN provides loans to its members – 100 of the highest performing affordable housing and community development nonprofits in the country. Since 2015, Smith has partnered with HPN on seven transactions totaling $120M of NMTC allocation resulting over 675 homes in 9 states. U.S. Bancorp Community Development Corporation served as the tax credit investor on all 7 transactions and has been a partner with Smith NMTC in its NMTC housing model since 2008. Through this most recent transaction, four nonprofit affordable housing developers will develop over 120 homes in low income communities that have suffered disinvestment and will provide homeownership opportunities to low income buyers in these communities.  The borrowers are Champlain Housing Trust, Inc. (VT), come dream come build (TX), Homewise, Inc. (NM), and Housing Channel (TX).

Smith NMTC Executive Vice President Donna Smith shares, “The last year has emphasized the importance of homeownership as a tool to help address significant racial equity issues in our country.  The significant level of funding provided through this HPN transaction has expanded the capacity of nonprofit for-sale housing developers to create new homeownership opportunities, especially for BIPOC families. Through the wealth-building power of homeownership, families and communities alike look forward to stronger futures and renewed stability for the benefit of the next generation. With our partners nationwide, we are committed to revitalizing distressed and underserved neighborhoods by increasing the availability of affordable homes for sale.”

Champlain Housing Trust, Inc (CHT) supports residents and communities in northwest Vermont by developing permanently affordable homes and stewarding the largest community land trust in the U.S. Through its Shared Equity Program, CHT has created homeownership opportunities for more than 1,220 families since its founding in 1984. The latest HPN-Smith NMTC transaction allocated $8M in NMTCs to build 20 condominiums in the city of Winooski, an area with the most racially and ethnically diverse population in VT, to address growing concerns of gentrification. CHT provides significant down payment assistance in exchange for its buyers’ agreement to a future resale value that captures equity appreciation while also keeping the home affordable for the next purchaser. CHT will proactively market these homes to the BIPOC community.

come dream come build  (CDCB) was founded in 1974 to provide safe and affordable housing to residents of the Rio Grande Valley in Brownsville, Texas, one of the poorest cities in the U.S. As one of the largest nonprofit developers of single family housing in Texas, CDCB will use a $7M NMTC allocation, to build 23 homes in the Palo Alto Groves subdivision, a predominantly Latino community, all of which will be sold to low income buyers, and 26 homes in the Brownsville area, which will also be available to low income buyers, all of whom will benefit from proximity to jobs and community services. CDCB is a multifaceted affordable housing organization devoted to utilizing collaborative partnerships to create sustainable communities across the Rio Grande Valley through quality education, model financing, efficient home design, and additional supports for their homebuyer families.  CDCB received a $5M allocation from HPN in 2017 which enabled it to build 42 affordable homes in Brownsville and the surrounding area.

Housing Channel is a North Texas nonprofit developer with a 30 year history of revitalizing neighborhoods and providing quality affordable housing with the goal of providing wealth creation opportunities through homeownership, creating educated and empowered homeowners, to lift neighborhoods and strengthen communities. With a $6M NMTC allocation from HPN, Housing Channel will add 12 townhomes to Irving Commons in the Heritage Crossing District and 9 homes in the Fort Worth area, with a project mission of promoting racial equity. Housing Channel works with strategic partners to provide an array of housing development activities, including administering down payment and closing cost assistance programs, providing homeowner counseling and administering acquisition, rehabilitation, and resale programs. Housing Channel employs an integrated, holistic strategy that provides critical assistance to current and potential homeowners in all stages of ownership.  Housing Channel received a $5M allocation from HPN in 2017 and developed 27 homes.

New Mexico-based Homewise, Inc. has operated since 1986 to provide homeownership opportunities and to support the long-term financial stability of its clients. Homewise empowers its customers with knowledge and financial skills, provides them with affordable homes and lending products, and supports them as partners both before and after the home purchase. Two projects will receive support from the $7M allocation provided by the most recent HPN transaction. The scattered site Homewise Albuquerque Revitalization Initiative will create 16 affordable homes for sale, at least half of which will be available to low-income buyers. An additional 16 townhomes will be built in the downtown Albuquerque Silver Townhomes project, with 20 percent or more offered for sale to low-income buyers. Through each project, Homewise will provide financial counseling, homebuyer education, and affordable lending. In previous HPN funding, Homewise received a total of $13M to construct 53 affordable homes for transformative impact in a blighted area of Santa Fe.

$9M Allocation Will Add 40 Homes to Marion County Neighborhoods

Smith NMTC Associates, LLC closed on a $9M New Markets Tax Credit (NMTC) transaction with Indianapolis Neighborhood Housing Partnership, Inc. (INHP) to build approximately 40 homes in the distressed communities of Marion County. The deal closed in mid-January and continues the work initiated in 2017 with an earlier NMTC allocation of $5M. Both transactions were structured and closed in partnership with the tax credit investor, U.S. Bancorp Community Development Corporation and the Community Development Entity, The Housing Partnership Network.

Smith NMTC structured the transaction and will support INHP with financial and compliance consulting services. INHP offers education and resources, including financial counseling, to low- and moderate-income prospective homebuyers in Indianapolis, helping them overcome barriers to homeownership. For more than 30 years, INHP has invested in community development activities that benefit Indianapolis neighborhoods and residents by increasing affordable and sustainable housing opportunities. With $9M in New Markets Tax Credits, this project will address need in seven highly distressed communities where specific tracts have been identified to address blight and abandonment. At least 20 percent of the homes will be sold to buyers earning less than 80 percent of the area median income (AMI). The remaining inventory will be available to buyers earning up to 120 percent AMI.

According to Howard Smith, principal of Smith NMTC, “One of many effects of the pandemic has been an increase in the cost of construction materials. The resulting increase in homebuilding costs has made it even more difficult for developers to offer homes for sale at prices affordable for low-income buyers.” Explaining the impact of tax credit financing, he offered, “New Markets Tax Credits enable organizations like INHP to finance the construction of new homes and make them available at price points that are affordable for buyers in specific communities. Through this allocation, INHP will significantly increase the number of affordable homes in Marion County and create new homebuying opportunity for low- and moderate-income residents.”

Tax Credit Allocation Brings Dozens of Affordable For-Sale Homes to Low-Income Residents in Georgia and Kentucky

Smith NMTC Associates, LLC announces the closing of its most recent New Markets Tax Credit (NMTC) transaction to support the development of affordable for-sale homes in Columbus, Georgia, and Louisville, Kentucky. The Housing Partnership Network, a Community Development Entity, provided $13 million of its allocation of New Markets Tax Credits from its $50 million award in the 2019 application funding round. U.S. Bancorp Community Development Corporation served as the Investor. NeighborWorks Columbus, a Georgia nonprofit enterprise, plans to construct and rehabilitate 32 homes with an allocation of $7 million. The Housing Partnership, Inc., a Kentucky nonprofit real estate developer, will substantially renovate approximately 60 homes with a $6 million allocation. The majority of homes made available through these projects will be sold to individuals earning below 80 percent of area median income (AMI).

“The pandemic has magnified housing inequality in our country. Never has our mission to expand access to affordable homeownership and its benefits been so critical,” said Howard Smith, principal of Smith NMTC. “Both NeighborWorks Columbus and Housing Partnership, Inc. are leaders in expanding housing opportunity in their communities. These deals continue the impact that has been transformative for low-income individuals nationwide, uplifting families and neighborhoods through the stability of homeownership.”

For more than 20 years, NeighborWorks Columbus in Columbus, Georgia, has provided comprehensive housing services to low- and moderate-income residents in Georgia and Alabama. Since its launch, the organization has built 230 homes and created 1,952 homeowners. With this $7 million allocation, NeighborWorks Columbus will create nearly three dozen affordable for-sale homes in a neighborhood along the 4^th Avenue Corridor.  Though the poverty rates in the area are  as high as 41 percent, the location is desirable as it has easy access to transit, employment hubs, food sources, and health and vocational services.

The Housing Partnership, Inc., based in Louisville, Kentucky, creates and promotes access to affordable housing for the benefit of families and communities. HPI will leverage the $6 million NMTC allocation of this deal in the Beyond 9^th Initiative that aims to reduce blight and increase homeownership opportunity in the traditionally African American West End in Louisville. HPI will use the funds to renovate 60 homes located in high poverty neighborhoods and sell them to individuals earning below 80 percent of the area median income (AMI).

Recent Transaction Creates Affordable For-Sale Homeownership Opportunities in Highly Distressed Neighborhoods

Smith NMTC Associates, LLC announces the closing of its latest New Markets Tax Credit (NMTC) transaction to support the development of affordable for-sale homes with Habitat for Humanity affiliates in Tennessee, Missouri, and Arizona. The deal was structured and closed in partnership with the tax credit investor, U.S. Bancorp Community Development Corporation, and the Community Development Entity, Harbor Bankshares Corporation, who provided a $6.2M NMTC allocation. Habitat for Humanity affiliates in Memphis, Nashville, St. Louis, and Tuscon will each utilize $1,552,296 in NMTC financing to construct new affordable, single-family homes in distressed communities. All of the homes in each state will be sold to individuals earning below 80 percent of area median income (AMI).

“With this latest allocation, we are proud to continue our longstanding partnership with U.S. Bank and Habitat for Humanity affiliates,” shared Howard Smith, principal of Smith NMTC. “Since 2008, we have worked with these partners to expand homeownership access in communities lacking affordable homeownership opportunities. Each of these Habitat organizations has a legacy of impact in their communities and in restoring the possibility of homeownership to low-income families.”

With $6.2M in New Markets Tax Credits and additional financing, this deal will add 46 new affordable single-family homes across the three states, all in tracts where poverty and unemployment rates far exceed national averages. Smith NMTC structured the transaction and will continue to support each partner, providing financial and compliance consulting services during a seven-year compliance period. Habitat for Humanity affiliates work in partnership with low-income families to build decent, affordable homes. Through the sweat equity of partner families who invest hundreds of labor hours, homes are built and sold at affordable rates, often at no profit to the developer and without any interest charged to the buyer. Habitat affiliates offer additional support through mortgage financing and down payment assistance and through homebuyer education and financial counseling. There are more than 1,100 active Habitat for Humanity chapters in the United States.

Recent Deals Push Smith NMTC Transaction Total Over Half Billion Dollars

With three recently closed transactions to support community development projects in Florida, New Jersey, and North Carolina, Smith NMTC Associates, LLC has surpassed $500M in tax credit investments. Additional projects in development for 2020 include the Delmar DivINe initiative in St. Louis and proposals in Georgia, Maryland, New Jersey, Texas, and Virginia.

Smith NMTC is a Missouri-based consulting enterprise that offers special expertise in complex transactions to facilitate community development projects nationwide. The company has worked with nonprofits, investors, and developers in 30 states and the District of Columbia to fund and develop for-sale housing, early childhood centers, credit unions, commercial buildings, and community centers.

Leveraging New Markets Tax Credits (NMTCs) and other financing tools to impact low-income communities, Smith NMTC structures investments to fund initiatives that are conceived for the specific needs of a given community and its residents. With a unique model that its founders, Howard and Donna Smith, developed in 2006 in response to the Gulf Opportunity Zone housing crisis following Hurricanes Katrina and Rita, many of Smith NMTC’s projects focus on expanding the supply of affordable for-sale homes in order to increase homeownership access for low- and moderate-income residents.

According to Donna Smith, “We believe in the power of homeownership to change the personal fortunes of American families and to restore long-term economic equity to our communities. Achieving this benchmark of $500M in investment inspires us to continue building partnerships that transform distressed communities and restore opportunity.”

While most NMTCs are used for business development projects, Smith has pioneered their use for projects that increase the inventory of for-sale affordable homes, regenerating a wealth-building and financial stability opportunity for new buyers. Nearly 4,000 homes have been created through this specialized transaction model.

For years the City of Pittsburgh has taken advantage of the federal New Markets Tax Credit Program to spur commercial development in low-income neighborhoods. Now it’s using the tax credits to create and provide more affordable housing.

Last week, Pittsburgh officials celebrated the creation of the first 26 residential units that were built or renovated through the use of $7 million in tax credits. The 26 homes are located in East Liberty, Garfield and Larimer, and 18 of them will be sold to families with incomes at or below 80% of the area’s median income, according to the Urban Redevelopment Authority of Pittsburgh (URA (https://www.ura.org).

The New Markets Tax Credit Program was created by Congress in 2000 to aid development in economically distressed communities. Since 2011, Pittsburgh has received $188 million in tax credits, which has primarily been used for commercial development. But officials say they see the tax credit program as a way to help provide affordable housing, a key area of need in the city. As part of the new program, all the low-income homebuyers will receive pre-purchase counseling, homebuyer education and support to help them succeed.

In remarks after touring one of the homes in Garfield, URA Deputy Director Diamonte Walker said the project is not a one-time deal.

“The New Markets Tax Credit is a wonderful tool and what we are doing is adding to this notion of making homeownership available in high-growth areas — we have to address this at scale,” Walker said. “We need to not look at this as a flash in the pan. The goal is to build upon this … to make it scalable, to create opportunities for more people.”

Mayor Bill Peduto reiterated that sentiment during Thursday’s tour.

“This is a great model that the city and URA hope to replicate with other community-based organizations citywide, as we search for new methods to boost affordable, for-sale housing opportunities for all,” said Peduto.

Partners for the project include the City of Pittsburgh, Pittsburgh Urban Initiatives, East Liberty Development, Inc., U.S. Bank and Open Hand Ministries.

“This is certainly not the URA in isolation,” Walker said. “Without partners, we certainly couldn’t do this.”

Pittsburgh Urban Initiatives is an arm of the URA and administers the tax credit program. Among the projects that have been funded through the program are the SHOP ‘n SAVE grocery store in the Hill District, the Women’s Center & Shelter of Greater Pittsburgh, Schoolhouse Electric & Supply Co, East Liberty expansion and the East End Cooperative Ministry’s Community House.

U.S. Bank donated $15,000 to Open Hand Ministries for its Circles program, which prepares area families for homeownership.

“U.S. Bank believes everyone deserves an opportunity to achieve financial stability, and access to a home that’s safe and affordable is a critical part of that,” says Jennifer Westerbeck, vice president with U.S. Bancorp Community Development Corporation, the tax credit and community development subsidiary of U.S. Bank. “We’re proud to play a role in making these affordable homes available to area residents. They will change the lives of the families who live in them and help build a thriving neighborhood.”

Pittsburgh Finds a New Use for Tax Credits: Affordable Housing

U.S. Bank donates $15,000 to Open Hand Ministries for its Circles^® program, which prepares families for homeownership.

PITTSBURGH, PA (February 20, 2020)  Mayor William Peduto was joined today by Councilman Reverend Ricky Burgess, the Urban Redevelopment Authority of Pittsburgh (URA), Pittsburgh Urban Initiatives (PUI), East Liberty Development, Inc. (ELDI), U.S. Bank, Open Hand Ministries (OHM), and other key stakeholders to celebrate the completion of the first affordable for-sale residential project funded with New Markets Tax Credits (NMTC) in the City of Pittsburgh.

Ceremonies took place inside one of the newly constructed homes, located at 208 N. Fairmount Street in the Garfield neighborhood.

"This is a great model that the City and URA hope to replicate with other community-based organizations citywide, as we search for new methods to boost affordable, for-sale housing opportunities for all," Mayor William Peduto said.

The URA, Dollar Bank, Local Initiatives Support Corporation (LISC), Neighborhood Allies, and PUI with U.S. Bank as the investor, closed on the $7 million NMTC project with ELDI as the lead developer and support from Smith NMTC Associates, LLC in July 2019. The $7 million in NMTC helped to fill the funding gap in the renovation of 20 homes and the construction of six new homes throughout the East Liberty, Larimer and Garfield communities.

Of those 26 homes, 18 will be sold to families with incomes at or below 80% Area Median Income (AMI). All of the low-income homeowners will receive pre-purchase counseling, homebuyer education and support to help make them successful.

PUI has been working with ELDI for the past two years to bring this project to fruition.

“This really is a celebration. A celebration of our banking partners and our government partners working together to build affordable homeownership opportunities in the East End of Pittsburgh. A celebration of the creativity and determination of the URA to bring all of their tools together to address the need for affordable homeownership in neighborhoods where property values are increasing,” said Maelene Myers. “As the Executive Director of ELDI and a member of the PUI Advisory Committee, I am particularly excited to see how these tools fit together for the benefit of lower income families building homes and raising families in the East End.”

During the event, U.S. Bank presented a check for $15,000 to OHM for its work using the nationally recognized Circles^® model as a part of its Family Care process, which helps prepare families for homeownership. OHM rehabilitated the property at 208 N. Fairmont Street and worked with the family that will reside in the home.

“U.S. Bank believes everyone deserves an opportunity to achieve financial stability, and access to a home that’s safe and affordable is a critical part of that. We’re proud to play a role in making these affordable homes available to area residents. They will change the lives of the families who live in them and help build a thriving neighborhood,” said Jennifer Westerbeck, vice president with U.S. Bancorp Community Development Corporation, the tax credit and community development subsidiary of U.S. Bank.

“We also applaud Open Hand Ministries and the work they’re doing to support those who will call these houses home, by preparing them for future homeownership and ensuring they have the foundation needed for long-term success. It’s a reminder that when the private and public sectors work together, we can help remove disparities, give everyone the chance to achieve financial stability and have a lasting impact in our communities.”

PUI hopes to continue to utilize this model across the City with other CDCs as another tool in the effort to provide affordable for-sale housing.

About Pittsburgh Urban Initiatives, LLC (PUI)

PUI is an LLC affiliated with the Urban Redevelopment Authority of Pittsburgh and the City of Pittsburgh’s Community Development Entity. The initiative was created in order to apply for and facilitate New Markets Tax Credit (NMTC) deployment for projects in the city and invest in low-income neighborhoods. PUI’s mission is to strategically invest in office, retail, mixed-use, and community facility developments designed to rehabilitate abandoned and blighted sites to build stronger communities. In total, PUI has received $188 million in NMTC allocation to use in the City of Pittsburgh. 

About the Urban Redevelopment Authority of Pittsburgh (URA)
The URA is the City of Pittsburgh's economic development agency, supporting the City’s economic development goals, which are designed to create a city of inclusive opportunity for residents, stakeholders, and communities. The URA is committed to creating more housing that is affordable to the average Pittsburgher; encouraging more entrepreneurship and small business development; promoting inclusive growth and quality job creation; expanding neighborhood and main streets revitalization efforts; and developing a talented workforce that is equipped with the skills of the future.

Organizations Collaborate to Create 27 New Affordable Homes

Smith NMTC Associates, LLC announces the closing of its latest New Markets Tax Credit (NMTC) transaction to support the development of affordable for-sale homes in Charlotte, North Carolina. The deal was structured and closed in partnership with US Bancorp Community Development Corporation, who provided the $3.3M NMTC allocation, and Habitat for Humanity of Charlotte.

Established in 1983, Habitat for Humanity of Charlotte works throughout the city of Charlotte to infuse homeownership opportunity into transitional neighborhoods. The organization has served more than 2,000 local families through new homes, rehabilitation of existing housing stock, home repair, and expanded financial literacy options.

“Habitat for Humanity of Charlotte has an incredible legacy of community impact,” according to Howard Smith, principal of Smith NMTC. “It’s an honor to work closely with such a great organization to add to the affordable housing inventory for residents in this community. Home by home, we are restoring the dream of ownership to new buyers whose lives and financial futures will benefit from this collaboration.”

With an allocation of $3.3M in New Markets Tax Credits and additional financing, this project will add 27 new affordable single-family homes in tracts where poverty rates are as high as 72 percent. Smith NMTC structured the transaction, leveraging New Markets Tax Credits for the construction of more than two dozen affordable homes, all of which will benefit homebuyers who earn less than 80 percent of area median income.

Strategic Partnership Adds 14 New Affordable Homes to Help Revitalize Neighborhood

Smith NMTC Associates, LLC announces the closing of its latest New Markets Tax Credit (NMTC) transaction to support the development of affordable for-sale homes in a 12-block neighborhood of Paterson, New Jersey. The deal was structured and closed in partnership with US Bancorp Community Development Corporation, who provided the $5.2M NMTC allocation, and Paterson Habitat for Humanity.

With the $5.2M New Markets Tax Credit and additional financing, this project will add more than a dozen new homes to an area where poverty is as high as 50 percent. All of the new homes will be sold to buyers who earn less than 80 percent of area median income.

According to Howard Smith, principal of Smith NMTC, “We are thrilled to help make new homes available to families in the Paterson community. Creating affordable homes that Paterson residents can purchase and make their own strengthens the financial futures of these buyers and strengthens the future of the community itself.”

Paterson Habitat for Humanity has been building homes in the 1^st and 4^th Wards of Paterson, New Jersey, since 1985, working to revitalize distressed communities and build appeal and opportunity for residents. Smith NMTC structured the transaction, leveraging New Markets Tax Credits for the of new affordable for-sale homes. In addition to being affordable, the homes are all Energy Star Certified, promoting sustainability for the community and an energy cost-savings for residents.

Homeownership Within Reach, a newly-formed coalition, has launched efforts in several states to promote policies that encourage the development of affordable for-sale housing through a tax-credit financing structure. Tax credit programs exist at the federal level and within many states to incentivize private investment in projects and communities that are qualified by specific program priorities, including historic property preservation and the development of affordable rental housing. Currently, there is no state tax credit specifically designed to stimulate the development of for-sale affordable homes.

Based on a model that uses federal New Markets Tax Credits to expand the supply of affordable for-sale homes, legislation proposed by Homeownership Within Reach introduces affordable homeownership tax credits through state policies. Under the proposal, state-budgeted tax credits are awarded to qualified applicants known as Community Development Entities (CDEs) who leverage them with private investors to offset the cost of developing and rehabilitating housing in under-served communities, expanding the supply of affordable for-sale homes and ensuring that the inventory is preserved for low- and moderate-income buyers.

The proposal and coalition have been developed and launched by Smith NMTC Associates, a St. Louis-based enterprise that works nationwide to revitalize distressed communities. Sharing his motivation for launching the coalition, Smith NMTC principal and Homeownership Within Reach co-founder Howard Smith explains, “Through our work with nonprofit and development partners in economically downtrodden communities, we see a tremendous need not only for affordable housing, but for sustainable opportunities for families to build wealth over time and reinvest it in their own neighborhoods and, most importantly, in their futures.”

Members of the Homeownership Within Reach coalition include consultants and nonprofits from multiple states, including Georgia, Indiana, Missouri, New Mexico, and Texas.

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Homeownership Within Reach is a nationwide coalition that advances state-level policies to expand homeownership opportunity through the creation and allocation of affordable homeownership tax credits.

Smith NMTC Associates, LLC announces the closing of its latest New Markets Tax Credit (NMTC) transaction to support the development of affordable for-sale homes in Pinellas County, Florida. The deal was structured and closed in partnership with Hancock Whitney Bank, who provided the $6M NMTC allocation, and Habitat Pinellas (Habitat for Humanity of Pinellas and West Pasco Counties). Established in 1985 as a nonprofit affiliate of Habitat for Humanity International, Habitat Pinellas develops and sells single-family homes and provides housing counseling services, homebuyer education, and down-payment assistance to its low-income buyers. Hancock Whitney offers comprehensive banking services throughout the Gulf South. Smith NMTC structured the transaction, leveraging New Markets Tax Credits for the construction and rehabilitation of affordable homes in St. Petersburg, Clearwater, Pinellas Park, and Holiday, Florida.

“Habitat Pinellas has a legacy of impact uplifting families through housing opportunities,” according to Howard Smith, principal of Smith NMTC. “It’s an honor to work closely with such a great organization to add to the affordable housing inventory in these communities and to restore the dream of ownership to the new homebuyers who will benefit from this project.”

With a $6M NMTC allocation from Hancock Whitney Bank and additional financing, this project will add 42 new affordable single-family homes across nine highly distressed census tracts where poverty rates are as high as 51 percent. All homes will be sold to individuals earning less than 75 percent of area median income.

Smith NMTC Associates, LLC is a St. Louis-based business that works with nonprofits, investors, and other organizations to leverage tax-credit financing to cultivate private investment in distressed communities. Through its unique affordable for-sale housing model leveraging New Markets Tax Credits, Smith NMTC has worked with partners in 30 states to generate over 3,800 new and rehabbed affordable homes for sale in qualified low-income communities.

City leaders say east Arlington is getting the update many have wanted for years. The changes are taking place in part because of a non-profit creating affordable housing in a busy part of the city with one of Arlington’s oldest neighborhoods.

The area was originally developed in the 1950s as a community for General Motors Employees. Councilmember Ignacio Nunez says much of that rich history is cloaked in aging and distressed properties.

“East Arlington had been, I would say, partially ignored. But that part of Arlington is really improving because of the efforts of a lot of different people,” Nunez said.

The BelAir on Abram housing development, located just a block away from the Arlington plant, will feature nearly 50 single-family townhomes on a 4-acre lot. It’s a place for working people, says Donna VanNess, president of Fort Worth-based non-profit Housing Channel.

“You know our first-year teachers, you know our pharmacy techs. People in our workforce need a place to help their families grow,” VanNess said.

With so many buyers priced out in the North Texas, VanNess says hopeful BelAir homeowners will have access to private and federal grants: anywhere from $7,500 to $35,000 to assist with a down payment.

“We have units that can fit any budget and any income level,” VanNess said.

The first 16 homes are up now, with the rest scheduled to open by early 2021.

In addition to living space, VanNess says future residents will be feet away from green space, an outdoor stage and various retail options.

The best part: It’s all just a mile from Globe Life Park and the Arlington Entertainment District.

“This opportunity is rare and something that we were going to take full advantage of,” Nunez said. “I’m just excited that it’s coming into our district.”

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Making the most of a 2,500-square-foot lot takes creativity. A lot of creativity.

However, Jim Cheeks, owner of RedBrick Homes and a listing agent with PalmerHouse Properties in Atlanta, was up for the challenge. This 800-square-foot home contains two bedrooms and two bathrooms on Smith Street in Pittsburgh, just south of downtown.

“I’ve been building a number of smaller-sized homes with the goal to create a more affordable product,” Cheeks told Curbed Atlanta in an email. “We also are striving to do it in a way that does not make it look like a substandard product. In fact, I’ve not only created a very affordable product but also one that is high-quality and, I believe, great design.”

The base of the home was purchased from architect Charles Sax of Portland, Oregon-based architectural firm ADUDesigns.com. Cheeks’s father, a local architect, designed the construction drawings, while Cheeks says he tweaked the design by adding a half bath downstairs and the glass garage door off the living room.

The property owner is Atlanta Neighborhood Development Partnership Inc., a nonprofit affordable housing organization. The group works with federal programs, local jurisdictions, and the private sector to help meet the affordable housing need in the city and region, George Burgan, senior director for communications and technology for ANDP, told Curbed via email.

The organization reached out to its private sector partners to explore ways to achieve its goals by building smaller and decided to team up with Cheeks. “With 909 Smith [Street], we had an opportunity to look at achieving affordability in a smaller infill footprint,” Burgan said.

The construction was financed as a part of ANDP’s New Market Tax Credits allocation.

“We’ve been fortunate to secure $40 million in two rounds of New Market Tax Credit funding through the Housing Partnership Network and Smith NMTC Associates,” Burgan said.

“This relatively new approach to the use of NMTC—single-family affordable housing redevelopment—has proven very helpful,” he added. “In two years we’ve doubled our annual production from 45 home renovations a year to nearly 100.”

Additional homes could be on the way, at least from Cheeks. In addition to the Smith Street listing, which is available for $179,900, he has another home in English Avenue that’s about 75 percent complete.

He also plans to break ground on a duplex version in Grant Park.

“We’re in permitting for another Grant Park home but this would be an Accessory Dwelling Unit with a traditional-sized duplex,” Cheeks said.

Visit the Curbed Atlanta site.

The prospect of a national affordable “for-sale” housing tax credit model could eradicate the housing crisis for America’s low- and moderate-income families. The author of  this article explains.

Affordable housing is extremely scarce in the United States, and increasingly, sustainable homeownership is out of reach for most low- and moderate-income families. But the crisis goes beyond potential homeowners. When Americans do not have access to affordable housing, businesses, workers, families, local economies and communities suffer as well. How can society address these problems? Developers are already incentivized to create affordable rental housing through Low Income Housing Tax Credits (“LIHTC”). But there is no tax credit specifically designed for affordable “for-sale” housing. New Markets Tax Credits (“NMTCs”) can be used for affordable for-sale housing projects in low-income communities, but the program is currently only funded through 2019 and is not widely used for affordable homeownership projects. But a new state affordable housing tax credit that can be twinned with the existing NMTC program to support affordable for-sale housing development could help increase the rate of
sustainable homeownership. Increasing access to homeownership for low- to moderate-income homebuyers would create significant benefits to the homeowners, their  families and their communities. Lenders who provide multi-layer funding for these affordable, for-sale housing development projects, including access to capital for the end-user homebuyer, through a CDFI for example, could offer a total package. This approach could help address the endless need for affordable housing.

America’s Affordable Housing Crisis
The affordable housing crisis in America has intensified in recent years. Rising rents, declining subsidies and the shift of homeownership to older, wealthier Americans are all contributing factors. Additionally, there is insufficient affordable housing stock—either for rent or for sale—for low- to moderate-income individuals and families. According to the National Low Income Housing Coalition (“NLIHC”), in order to meet current population needs, America’s housing stock is deficient by 7.7 million units.

Prior to the recession, approximately 1.1 million new homes were constructed in America every year. Since then, although the American population continues to grow, new home construction has declined dramatically. According to the U.S. Census Bureau, completed new, single-home construction topped out at 818,100 units in 2008. In 2017, just 795,300 new single-family units were built.1 Further, there are fewer homes on the market now than in any year since 1982. Contributing factors include higher material costs, less available land for development, a shortage of construction workers and neighbors opposed to new construction. In addition, private equity groups acquired large inventories of housing through foreclosure during the Great Recession. Many groups tend to rent these homes for as much as possible while providing as little as required
for amenities. These factors create significant challenges for affordable housing developers.

While rents and home prices vary dramatically from city to city, America’s housing is simply unaffordable for low- to moderate-income buyers. In America’s largest cities,
home prices cost as much as 10 times the resident annual median income. In some urban areas, homeowners pay more than 30 percent of monthly income on rent or a mortgage, a figure that has doubled in the last 50 years, according to the NLIHC. Although homeowner incomes have increased 50 percent since 1960, home prices have skyrocketed by 112 percent, according to a recent report by the Joint Center for Housing Studies of Harvard University.

Renters are worse off than homeowners, making the need for affordable, for-sale housing even more critical. Since 1990, more than 2.5 million apartments renting for less  than $800 per month have been demolished and upgraded into luxury condominiums or converted into hotels and offices. Rents have increased 61 percent since 1960 while renters’ median incomes have risen just five percent. Rental prices in disadvantaged neighborhoods are rising 50 percent faster than in wealthier neighborhoods.

The Human Cost
For millions of Americans, the lack of affordable housing has deep, negative, and enduring consequences. When a disproportionate amount of income is spent on rent,  there is less to contribute to savings, pensions or other forms of equity. This reality eliminates the ability to accumulate wealth, erodes the capacity to weather economic downturn and limits the power to climb the economic ladder.

When renters are squeezed out of their communities, they have nowhere to go due to the shortage of affordable housing. Investors, out for a profit, renovate the  properties and sell them at a higher price to wealthier buyers or turn them into high-end expensive rentals. Low- to moderate-income individuals and families cannot find decent affordable housing near their workplaces. Reduced public transportation access further limits access to workplaces, increases commute times and cost, and places additional hardships on the families.

The affordable housing crisis has increased inequality as well. While the affects are dramatic on all low- to moderate-income individuals and families, some are especially  impacted. Black Americans are 30 percent less likely than whites to own a home. Hispanics and Asians are not far behind at 26.1 percent and 16.5 percent respectively.

An inability to own safe, decent and affordable homes jeopardizes educational performance and economic mobility. For low- to moderate-income homebuyers, an  affordable mortgage payment is frequently less than monthly rent for an often-substandard residence. As a result, homeowners have more dollars to spend on health care, food and other important expenses, lifting families out of the cycle of poverty. When families cannot afford appropriate shelter, the family unit can be shattered, increasing the likelihood of homelessness, unsafe situations, post-traumatic stress disorder and stunted mental and emotional development. These conditions have long-lasting  effects on the family and future generations to come.

Benefits of Affordable Homeownership
In addition to financial benefits, sustainable homeownership brings significant benefits to individuals, families and communities, according to a study by the National Association of Realtors. Because they have an economic investment in their properties, homeowners are more likely to be involved in their communities. They spend more time and money on maintaining their residences, are more politically active and are more involved in volunteer organizations and church groups than renters. Residential stability strengthens social ties to neighbors, which can influence positive behavior and promote a safe and orderly environment. Homeowners encounter significantly  lower instances of crime. Further, a stable neighborhood, especially one with extensive social ties, is also likely to reduce crime rates.

Renters move five times more frequently than homeowners, and the mobility rate for those living below the poverty line is almost twice as high as those living above the poverty line. Homeowners bring stability to neighborhoods because they invest in their homes, communities and neighborhoods.

By reducing involuntary resident mobility and accomplishing sustainable ownership, school performance is improved. According to the NLIHC, low-income children who grow up in stable, affordable homes are more likely to stay in school, attend post-secondary school and earn more as adults than their counterparts who grow up without stable, affordable housing.

People who live in a stable home environment experience improved physical and psychological benefits over their renting counterparts. Newer homeowners report higher life satisfaction, increased self-esteem and an improved sense of control over their lives. When tax bases are enhanced by homeownership, communities are able to provide
targeted health and social services such as adult education, financial literacy programs, health and wellness programs, child care and after-school programs. Research also shows that homeownership increases engaged parenting and lessens the impact of financial strain on familial relationships. Moreover, children of homeowners are more likely to participate in organized activities and have less screen time when compared with renters.

The development of sustainable homeownership can boost local economic activity through temporary construction-related employment and ongoing jobs driven by  consumer purchases. Access to sustainable homeownership improves an employer’s ability to attract and retain employees and remain competitive in the global economy.

The Need for Legislation 
The numbers of low- to moderate-income families are soaring, and current development of new affordable, for-sale home construction cannot meet the need. The bottom line is that there is not sufficient inventory for these homebuyers. The only way to bridge the gap is for America to fund, build and create a sustainable homeownership model.

Policies and qualified mortgage requirements have made it impossible for low-income families to obtain a mortgage. Developers lack the funding to forge new markets and build and sell affordable for-sale homes. Additionally, lenders, cities and lawmakers are overly cautious in supplying the required resources to help fund these efforts.

The Proposed Model Based On a Proven Program
Since 2008, developers and investors have utilized the New Markets Tax Credit (“NMTC”) program to help lift neighborhoods out of poverty. This program is part of the U.S.
Department of Treasury’s Community Development Financial Institutions (“CDFI”) Fund, which empowers economically distressed communities nationwide. NMTCs encourage sustained investments in these communities over a seven-year period.

Since money began flowing into the program in 2003, NMTCs have proven to be a resilient and reliable capital resource for low-income communities, borrowers and their investors. As of the end of fiscal year 2016, the NMTC program has generated $8 of private investment for every $1 of federal funding. It has also helped create 178 million square feet of manufacturing, office and retail space in these communities, having financed more than 5,400 businesses. NMTCs have also funded a wide range of projects to provide for many vital community needs, from housing and health care facilities to grocery stores and child care centers.

While NMTCs have proven effective in the development of for-sale housing on a smaller scale, the program is not widely utilized. In some cases, additional subsidy is needed. Of the $54 billion already deployed in NMTC, only a small fraction has been used for affordable for-sale housing. Additionally, of the 17 states that have state NMTC programs, only a few can be accessed for housing development.

If state lawmakers were to create a new affordable for-sale housing tax credit program modeled after the homebuilding models used with the successful national NMTC statute, they could accelerate sustainable homeownership for low- to moderate-income individuals and families in their regions.

A state-based tax credit program would  piggyback onto the federal NMTC statute to help developers build affordable, market-rate value for-sale homes in new submarkets. The credit is flexible and the monetary benefit can be utilized to shore up value, pass on savings to homeowners, build capacity, establish loan loss reserves and/or ensure continued affordability in targeted areas. Linked to the federal NMTC statute, the for-sale model would incorporate requirements and regulations aligned with the federal statute. The alignment with an established program reduces the resources a state would need to administer the program.

Limiting tax credits to only the development of affordable for-sale housing, the statute would reward developers who create affordable homeownership opportunities. It would also further incentivize lenders by providing both land acquisition and development (LAD) lending and consumer end-loan financing.

Also, the program would be connected to CDFIs and nonprofit lender-developers that employ HUD pre- and post-purchase financial counseling and education for  homebuyers in addition to “high-touch” loan servicing. Successful nonprofit affordable for-sale housing developers and lenders already employ these high-support, consumer-focused programs to ensure the financial sustainability of homeowners and their communities. Providing each homeowner with individualized and continuing
contact-to-contact service has been proven to dramatically increase the success rate of sustained homeownership in projects that have used NMTCs to develop and sell homes to low- to moderate-income homebuyers. Providing these essential support systems to new homeowners reduces lender and state sponsor risk, either real or  perceived.

Embrace the NMTC Model
Owning a home embodies the American Dream. Sustainable homeownership supports the accumulation of family wealth and is the foundation for compelling social,  economic, health and community outcomes. A lack of affordable for-sale housing adversely affects business, economies and families. In part, the housing crisis is a result of policies and regulations and their sometimes unintentional negative effects. As the number of low-income families grows and the availability of affordable housing declines, governments need to step in to address the problem.

Current national programs have been limited primarily to the development of rental, transient housing. For-sale housing tax incentives will help alleviate developer risk and encourage new builds. Successful projects incentivize other investors. Through a ripple effect, families, communities, and economies will benefit. To make affordable for-sale housing tax credits a reality, Americans need to encourage lobbyists and legislators to create and adopt state and federal statues designed to pull low- to moderate-income families up and out of poverty and into a position to accumulate family wealth and protection.

The Case for a National Affordable “For-Sale” Housing Tax Credit

A Home of His Own: How New Markets  Tax Credits Helped a Marine Veteran Secure Affordable Housing
In 2017 Housing Partnership Network, a national network of non-profit housing developers, awarded the Atlanta Neighborhood Development Partnership (“ANDP”) a $10 million NMTC funding allocation as a sub-allocatee for acquisition and redevelopment of single family homes in neighborhoods struggling to recover from high levels of negative equity. The project’s funding was generated through the New Markets Tax Credits (“NMTC”) program by utilizing a multi-borrower model to combine several  Qualified Active Low Income Community Businesses (“QALICBs”) and NMTC borrowers in one transaction.

About the Project
Since 1991, ANDP has promoted, created and preserved affordable housing throughout metropolitan Atlanta. The organization’s target area struggles with negative  homeowner equity. According to Zillow data, in late 2016 south metro Atlanta had an average negative equity rate of 26 percent. This challenge is common throughout  Atlanta’s southern and suburban neighborhoods. ANDP developed a single-family scattered site approach to address the widespread issue.

According to a report commissioned by one of ANDP’s jurisdictional partners, ANDP evaluated the impact of 164 homes renovated in DeKalb County, Georgia.5 The report found that for every $1 spent on renovation, neighboring homes in impacted neighborhoods saw a valuation increase of nearly $16. In this program, the organization was able to demonstrate how it was able to increase values for surrounding properties by $141 million with an investment of $8.9 million. Recognizing the impact of such work, ANDP sought out a unique approach to NMTCs for the acquisition and rehabilitation of single-family homes. With a $10 million allocation, ANDP acquired, renovated and sold 68 single-family homes to low- to moderate-income buyers in some of Atlanta’s most disadvantaged communities.

While most of the homes were scattered throughout the area, 10 of the homes were located in one of the hardest hit zip codes in America—30310. This southwest Atlanta
neighborhood is often referred to as groundzero for the foreclosure crisis. In the first quarter of 2017, the zip code had a negative equity rate of 49 percent. That means  that nearly one in two homeowners were underwater with little hope for improvement. Thanks to the work of ANDP, its partners and other community groups, a dramatic turnaround is underway. In fact, as of the fourth quarter of 2017, the negative equity rate had dropped from 49 percent to 13 percent.

ANDP recently announced an initiative to invest $20 million of existing and new capital by December 2021 to lift homeownership rates, restore family wealth, increase neighborhood stability and improve resident health and wellness outcomes in Georgia’s South DeKalb County. The initiative will result in at least 100 newly renovated homes in the South DeKalb area by December 2021.

A Place to Call Home
One DeKalb resident, a former U.S. Marine, is among those who has benefitted from the work of ANDP and its funding partners. A native Atlantan, Eddie purchased a home  through ANDP’s Veterans Program, which offers affordable home-purchase options for qualifying veterans, active duty military, reserve and guard members as well as Gold Star families. The program provides newly renovated homes at affordable prices, paired with homebuyer assistance of up to $7,500.

As a first-time homeowner, Eddie pays meticulous attention to his new home. When he is not working at his job in medical billing, he and his fiancé, Alyssa, enjoy yardwork and caring for his two rescue dogs. He is grateful for the help provided by ANDP. “Not only was ANDP able to help me with my closing costs, my monthly mortgage payment is $200 less than I was previously paying for rent.”

While moving forward in his own life, Eddie never forgets to give back to those in need, especially other veterans. Eddie and his extended family operate a group home for
veterans who are overcoming substance abuse. “Those who have served their country have often found the readjustment to civilian life difficult. We’re trying to do our part to make life a little better for those who have struggled with this readjustment.”

Eddie’s home is one of nearly 200 vacant, foreclosure-impacted homes that ANDP has renovated and repopulated in DeKalb County, and one of more than 500 renovated homes in the metro region.

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The Indianapolis Neighborhood Housing Partnership is fulfilling its goal of catalyzing change in Indianapolis neighborhoods.

Earlier this year, the 30-year-old nonprofit brought Marion County a new way to fund single-family housing and neighborhood revitalization. Today, INHP has deployed more than $4.5 million to create 29 affordable homes in three Indianapolis neighborhoods, some of which haven’t experienced new home construction in decades.

Seven of the new homes have been purchased already. With an average price tag of approximately $144,000, the homes address the shortage of affordable housing for low- to moderate-income people. House styles vary, including a mix of rehabbed and new construction homes, and are located within the Crown Hill, Riverside and St. Clair Place neighborhoods.

As an innovator and champion for affordable housing development, INHP is one of a few entities across the U.S. that used the federal New Markets Tax Credit (NMTC) program* to help provide the financing needed to construct affordable homes.

The NMTC program is one of the ways INHP is fulfilling its vision to create safe, decent affordable housing and turn neighborhood liabilities—abandoned properties that are detrimental to a street, block, or neighborhood—into assets. The effort also helps realize Indianapolis Mayor Joe Hogsett’s goal to transform 2,000 abandoned houses throughout the city into viable community assets.

To learn more about how INHP is championing affordable housing and quality of life in Indianapolis, visit INHP.org/mission-and-impact.

*Through a competitive process, the federal government awards tax credit allocations to community development entities. INHP received its NMTC financing from the Housing Partnership Network (HPN), the community development entity of which INHP is a member. Smith NMTC Associates served as consultant, leveraging their strategy – to use NMTCs as a source of funding for affordable single family homeownership.

There are two big winners in a new markets tax credit (NMTC) equity-financed development in Santa Fe, N.M.: the families who bought affordable, energy-efficient homes and the rest of the neighborhood.

“We want to strengthen the neighborhood and that’s what’s really cool,” said Mike Loftin, CEO at Homewise Inc., a New Mexico-based organization devoted to affordable homeownership. “People are embracing this. They can live here, settle down and make it better.”

Homewise received a $5 million NMTC allocation from the Housing Partnership Network (HPN) to rehabilitate an area in a severely distressed census tract in Santa Fe by building and selling about 20 single-family homes as part of the El Camino Crossing development. Other financing sources are being used to develop El Camino Crossing into a mixed-use residential and commercial community that will transform a vacant parcel in a disinvested neighborhood into 64 homes and 23,000 square feet of commercial space.

The results are impressive in an area with unemployment at more than double the national average and median family income that’s less than 40 percent of the region’s median income.

Finding NMTCs
The El Camino Crossing land was purchased and gained civic approval for housing before the post-Great Recession housing crunch. That’s when Homewise purchased the bank-owned property and got creative.

“For me and a lot of people, the conventional wisdom was you can’t use new markets tax credits for this,” said Loftin. “But Housing Partnership Network got an allocation and wanted to do these kinds of deals.”

HPN received a $40 million allocation in the combined 2015/2016 NMTC round and issued $5 million to this development. HPN learned the vagaries of the NMTC program and using it for affordable homeownership from Smith NMTC Associates, who created an affordable homeownership NMTC model for nonprofit developers in 2007.

“HPN was introduced to the Smiths and their model for using NMTCs by our member, Atlanta Neighborhood Development Corporation,” said Katie Rodriguez, vice president of lending and investment at HPN. “We soon realized that NMTCs could be an extremely valuable tool to our 30-plus members doing single-family, for-sale development and began working together to submit an application for allocation.”

Getting board approval for Homewise required education. “I had to explain this to the board and we spent the whole weekend trying to make it simple,” Loftin said. “What I told the board was that this was a lot of work for one project, but we can repeat it. … It’s kind of an outlier and it’s great to see more people get in.”

John Sciarretti, a partner in Novogradac & Company LLP’s Dover, Ohio, office who worked as a consultant on the transaction, said this is a special deal. “This shows
the flexibility of the New Markets Tax Credit program,” Sciarretti said. “This project provides an alternative path to affordable housing, which is a crucial aspect to community development in Santa Fe. I give credit to the Housing Partnership Network and Homewise for making this happen.”

Unusual Use of Credits
While not unique, the use of NMTCs for housing is unusual.

“I thought the new markets tax credit was too complicated and couldn’t do this,” Loftin said. “I thought the brain damage wasn’t worth it, but it’s a more powerful tool than I understood. Once you understand the ‘what’ of it, you can do it. The challenge is how you do it. It’s helpful if you’re patient and not on your own. It was really good to do it with Housing Partnership Network and learn together. They were incredibly helpful.”

Tax credit investor U.S. Bancorp Community Development Corporation (USBCDC) was comfortable with the investment. “It’s an unusual structure for new markets tax credits to be in a multiparty fund for housing development, but it’s not unusual for us at USBCDC,” said Bill Carson, vice president and director of CDFI business development at USBCDC, the NMTC equity investor. “We’ve done a number.”

Donna Smith, executive vice president at Smith NMTC Associates, is very comfortable with the use. “These are the only types of projects we do,” said Smith. “HPN specifcally decided to expand its assistance to its members who work in the homeownership/single family space and this is a perfect tool for them to use for that.”

Smith said NMTCs have worked in housing since 2008. Since then, Smith Associates has worked with 14 CDEs, providing allocations for about $350 million in housing.

How it Works 
Homewise uses NMTC equity to help offset the price for homeowners and builds in a safety valve.

“The new markets tax credit really helps with [low-income residents buying homes],” Loftin said. “We now  have a subsidy to allow us to sell at lower prices. We figure that if  we have someone earning below 80 percent [of the AMI] buy the home, we charge what they can afford. Then we fgure the market price and put in a lien. Because of the new markets tax credits, we can do that and carry a zero percent deferred loan that they only pay back when they sell the house. That means there’s no incentive to flip it.”

The structure works because it cuts the costs and counts on the combination of homeowners paying down equity and rising home prices to fill the gap. “It’s a very powerful structure,” Carson said. “It offsets the construction costs, offsets the mortgage and provides needed capital. Often in models to build affordable housing, you have to sacrifice quality or sacrifice size or sacrifice the mortgage rate. This gives us the best of all possible worlds by wrapping it up in NMTC funds.”

USBCDC’s Carson likes the approach. “This structure takes in the high cost of developing for-sale homes in a community desperate for it,” Carson said. “It puts it in the hands of not only the homeowner, but a nonprofit that needs it.”

El Camino Crossing Development
The 64-home development will include the 20 single-family detached homes in this transaction, another 20 single-family detached homes and 24 attached single-family  homes.

The 20 homes in the NMTC deal are single-story buildings. Each has one to four bedrooms and one or two bathrooms and sizes range from 524 square feet to 1,481 square feet. Another five homes will be built during the compliance period in the qualified census tracts. Homewise plans to sell at least 20 percent of the homes to low-income people.

“We could improve the affordability because of the tax credits,” Loftin said. “And the houses are really great. Every home has standard solar and every home is quality. It’s a pretty cool project and people love it.”

After the 20 affordable homes and the 20 market rate homes, the mixed-use property will be developed–40,000 square feet. It will include two story condominiums, with work space on the bottom, housing on the top. Also included is mixed-use space, which is not part of the NMTC deal. It will feature two restaurants and 20 more condominiums.

“People love that they can walk down the street and buy dinner,” Loftin said. “They love the mixed-use and walkability of it.”

Financing
USBCDC invested $1.7 million in NMTC equity. “This is our first investment with Homewise,” Carson said. “Before this, our only involvement with them was a charitable contribution in 2016. We had a strong relationship with the Smiths, building homes with Habitat for Humanity and a multi-QALICB transaction with Housing Partnership Network.”

Reproducible Idea
Homewise plans to do this again. “Our goal is to line up projects in NMTC-eligible tracts and get a pipeline,” Loftin said. He said Santa Fe and Albuquerque are potential sites.

“This is repeatable and has been replicated since 2008 more than 14 times,” said Smith. “Smith works with HPN to replicate it and to keep fees down and to maximize net benefits to the project.”

HPN plans to extend its reach, too. “With our most recent allocation [$30 million in February], we hope to even more broadly extend our reach to members as they can see what was achieved in projects funded to date,” said Rodriguez.

Success is visible.

“The most rewarding part of this program is seeing how this financing tool can provide real impact at the neighborhood and community level,” said Rodriguez.

“We have seen it allow our members to scale or complete projects that otherwise would not have been feasible, or much more challenging to complete.”

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In the new markets tax credit (NMTC) world, size is significant: Smaller deals are more difficult.

“[Cost] is the issue,” said Donna Smith, executive vice president of Smith NMTC Associates. “From the borrower’s point of view, the static costs of doing a small [qualifed low-income community investment] QLICI of $2 million or less is the same as the cost of doing a $10 million transaction. … But with a $10 million QLICI, the net benefit to the  [qualified active low-income community business] QALICB– the portion of the tax credit equity it receives–is substantially higher, and therefore, can offset those static costs.”

However, for many in the NMTC industry, the combination of the Community Development Financial Institutions Fund’s (CDFI Fund’s) emphasis on smaller deals and an  organizational mission makes smaller transactions attractive.

“The CDFI Fund is pushing for innovative QLICIs,” said Brynn Sanders, vice president of fund management at New Markets Support Company, part of the Local Initiatives Support Corporation. “They put that [the innovative issue] in the application to get people to stop doing the easiest ones. The industry was turning into something that builds $20 million community facilities, but the [NMTC] program was designed to go into small communities. The majority of business growth is in small businesses, not in large real estate.”

The CDFI Fund rewards small deals and they are a significant focus among NMTC practitioners.

Defining ‘Small Deal’

Beginning with the 2012 NMTC program allocation round, the CDFI Fund added preferential scoring for six different innovative investments, including QLICIs under $2 million. That gave official sanctioning to what makes a small deal. “I would say most people will look at the CDFI Fund defnition,” Smith said. “Doing small QLICIs gets you  extra points for innovation and a lot of people promise that in their applications.”

Sanders agreed. “Before that, we would have said less than $5 million, but now we usually mean under $2 million,” Sanders said. Patrick Vahey, president of Greenline Ventures in Denver, said his organization goes with the $2 million standard, but not just because of the CDFI Fund definition. Vahey said that Greenline has historically
viewed transactions above $2 million as generally not being “small business” and that many small businesses are underserved by the NMTC program.

Cutting Costs

While the economies of scale favor larger transactions – after all, many NMTC-related fees are static, so they constitute a much larger percentage of a small QLICI-practitioners have found ways to spread the costs and increase the availability for smaller investments.

Smith previewed the modern approach when Smith NMTC  Associates worked with Habitat for Humanity during the Gulf Opportunity Zone (GO Zone) days a decade ago, splitting a $25 million NMTC allocation among projects with five QALICBs. QLICIs ranged from $13 million to less than $1 million.

“What we did at that time is what we still do–with some complexities,” Smith said. That approach involves combining several QALICBs (typically, Smith said, five or six) in one transaction and grouping each as a single transaction–qualified equity investments and one QLICI for each QALICB, to silo the risks. “You minimize the risk to investors, too,” Smith said. “You take the fees and static costs and divide them among the QALICBs.”

Smith cited an example in which a $4 million allocation has $300,000 in closing costs. If you divide that among fve QALICBs, that’s just $60,000 per QALICB, rather than one QALICB bearing the entire $300,000.

Others use similar approaches. Greenline Ventures recently launched a small business loan fund to focus exclusively on originating smaller-dollar ($2 million and below), short-term QLICIS to non-real estate QALICBs. The closing costs of the $20 million fund were paid out of the gross tax credit equity proceeds and the multi-asset fund structure enables numerous QLICIs over the course of the seven-year compliance period without having to incur any additional NMTC-related closing costs. Due to that, the QALICB is able to receive a substantially below market-rate loan without having to pay any of the upfront NMTC-related expenses.

“That’s what makes it work,” Vahey said. “The vast majority of closing costs in NMTC transactions involve the formation/documentation of the fund, CDE [community  development entity], leverage lender, etc. as well as the various legal opinions. In a ‘blind pool’ structure, we absorb all these costs at one fund-level closing and are then able to originate numerous QLICIs without having to incur any of the typical NMTC costs. It involves more work on our end to manage compliance, but it substantially reduces the cost of closing QLICIs.

“We can provide loans most banks can’t do,” Vahey said. “There are not a lot of places for small businesses to go to get capital between $200,000 and $2 million.”

Partners, Simplification Crucial

Sanders said partners are key. “The biggest hurdle I see is that people partner with the wrong parties,” Sanders said. “I know what investors and funds are best. I know
it’s easier, for instance, to work with a small bank than a large one. I’ve found attorneys who know small business lending and how to keep costs low. It takes a lot of work to push costs down. We just closed on a $2 million project and there was only $4,000 in closing costs.”

Simplifcation is also crucial, according to Tracey Gunn Lowell, vice president of U.S. Bancorp Community Development Corporation. “A lot of times, it’s hard to do four or five distinct deals,” Lowell said. “We try to make sure to the extent possible that there are fewer leverage sources, that deals are done in a box as far as eligibility criteria and that there aren’t a bunch of exceptions.”

Where Small Deals Happen

Among the beneficiaries of smaller NMTC transactions are non-metro areas and underserved states. “I would say there is overlap between the non-metro and underserved states,” Smith said. “There is some correlation there. It absolutely is harder to do new markets tax credits in non-metro areas because they lack the population mass to make things happen. And there is a desperate need in those communities.”

Finding the need isn’t easy. “The hard thing is finding them,” Sanders said. “Large real estate developers know the new markets tax credit exists, but small manufacturing businesses in rural areas don’t know about the program. You have to do networking. … It’s a struggle if people don’t know about it.”

Sanders cited two current transactions for NMSC in Minnesota featuring small manufacturers as examples of the program working. “They’re doing expansions and they’re not huge companies,” Sanders said. “One needed $1.2 million, the other needed $1.8 million.”

However, smaller NMTC transactions aren’t limited to underserved states and non-metro areas. Smith said nonprofits and startups are likely to participate in small NMTC transactions. “I think I see it with nonprofts a lot,” Smith said. “That’s the reason it’s a struggle. They have to ask what they get out of it. We developed a model to help nonprofits use smaller QLICIs to meet their real estate development needs because the loan funds we’ve discussed usually fund operating businesses.”

That is Greenline Ventures’ approach. “It’s all [loans to] operating businesses in NMTC-qualifed areas,” Vahey said. “We also aim to have 100 percent in higher distress areas.”

Smith said combining QALICBs is more often based on sharing mission or focus, rather than sharing space. She cited nonprofit housing groups and national organizations with multiple affiliates or members as examples.

Lowell cited some specific types of businesses that benefit from smaller NMTC deals. “I think there’s a range of types,” Lowell said. “There are certain organizations that focus on nonprofits and they have big deals, but they have smaller ones. It’s generally the smaller capacity businesses, things like grocery stores and smaller businesses.”

CDFI Fund Plan Working?

Thanks to the problem-solving on the front lines, the CDFI Fund’s strategy of incentivizing smaller NMTC deals appears to be successful.

“I absolutely think so. CDEs aren’t as familiar with it, so it’s pushing people out of their comfort zones,” Sanders said. “You have to find the right attorneys, investors, lenders. You have to have the right deal team.”

Vahey said the demand still far outstrips the supply. “We turn down the vast majority of deals based on credit/underwriting purposes,” Vahey said. “We look for sustainable businesses with good strategies and management teams to gain comfort with the credit risk of loans to smaller businesses. It’s a balancing act between maximizing community impact while maintaining credit quality. The supply of new markets tax credit allocation is in the billions and the demand for financing by small businesses is in the trillions.”

Lowell revealed a hidden benefit–the advantages required to do smaller deals are applicable elsewhere. “It has kind of helped us to continue to think about how to be  flexible, to find effectiveness and streamline without getting expensive,” Lowell said. “The industry had been going to larger deals because it’s easier to absorb the cost, but I also think some of the things we find [in smaller transactions] could be applied to larger transactions, too.”

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The New Markets Tax Credits (“NMTC”) federal incentive program can stimulate lasting growth and progress in low-income communities (“LICs”). Yet, these tax credits also come with stringent and complicated reporting requirements that can burden or even exclude potential borrowers, particularly understaffed smaller organizations such as nonprofits. NMTCs incentivize investors to fund projects in LICs with long-term investments that can have a real impact on the community. But borrowers do not always receive the support they need to navigate the complexities of NMTC regulations and reporting requirements. This confusion can lead to recapture risk for Community Development Entities (“CDEs”) and investors or prevent promising projects from ever coming to fruition.

Many NMTC borrowers receive some support—up until closing day. As soon as closing occurs, they find themselves surrounded by empty chairs with no advisers to guide  them through the next seven years of compliance requirements, data tracking, and reporting. To save time, staffing and headaches for borrowers, investors, and CDEs, a consultant can serve as a support system entering the negotiations as the borrower’s advocate and financial adviser. That consultant then remains with the borrower from the start of the transaction, through closing and until the compliance period is over and the deal is unwound. A smart investment in this type of consultancy can offer peace of mind to all parties, keep a deal on track for the full seven years and avoid recapture risk.

NMTC Program Overview
Congress passed the NMTC bill in 2000 to incentivize investors to provide long-term investments in LICs to help lift those neighborhoods out of poverty. The NMTC program is part of the U.S. Department of Treasury’s Community Development Financial Institutions (“CDFI”) Fund, which empowers economically distressed communities nationwide. To apply for and receive allocations of NMTCs, an entity can apply to be a CDE in one of two ways. The entity can apply to be a CDE directly, or if it is a CDFI already, the entity can apply for CDE certification without having to go through the official certification application process.

NMTCs encourage sustained investments over a seven-year period. The investor receives a 39 percent tax credit throughout the seven years: five percent for the first three years, then six percent for the remaining four years. Investors make their full investment on day one when the transaction closes and receive the tax credits over the seven-year period. Once they invest, they cannot pull out that investment until at least that seven-year period is over.

Investors are motivated to ensure borrowers have what they need to be successful in their ventures to prevent any risk of recapture. Even though the investors typically pass on the recapture risk to the borrower, a borrower is not always in a financial position to bear that risk—leaving the investor exposed. This risk of recapture incentivizes both the investor and the borrower to ensure the borrower remains successful and compliant. Investors are also incentivized by the return on their investment, not only from the tax credits taken against income, but also by not having to pay dollar for dollar for the credit over the seven-year period. For example, on a $10 million investment, investors receive a credit of $3.9 million, but they may only pay $3.2 million for that credit depending on the market at that time.
So far, the program has seen success.

Since money began flowing into the program in 2003, CDFIs have proven to be a resilient and reliable capital resource for LICs, borrowers and their investors. As of the end of fiscal year 2015, the NMTC program has generated $8 of private investment for every $1 of federal funding. NMTCs have helped create 164 million square feet of  manufacturing, office and retail space in these communities, having financed more than 4,800 businesses. NMTCs have also funded a wide range of projects to
provide for many vital community needs, from housing and health care facilities to grocery stores and child care centers.

NMTC’s Advantages and Disadvantages
For the investor, the key advantage of the NMTC is the 39 percent tax credit doled out incrementally over the seven-year period. Institutional investors may also qualify for a
Community Reinvestment Act (“CRA”) credit for certain types of investments—a double bang for their buck. Borrowers can benefit from being able to structure their  investment to achieve a more affordable rate on their loans compared to what they might otherwise receive on the market. Sometimes borrowers will be able to qualify for loans they previously couldn’t qualify for at all because of the particular areas in which they aimed to invest, or the less flexible loan offerings available without NMTC subsidy.

The primary advantage for LICs is the physical and economic revitalization of struggling areas in their community. This may occur through the creation of new jobs and  businesses, social and commercial services, affordable housing, health care, transit systems, charter schools, grocery stores and other vital forms of infrastructure the LIC may lack prior to the investment.

Disadvantages are limited but primarily entail the typical suite of regulations that surround federal programs. In this case, complex regulations deliver a “double whammy” of both tax regulations and regulations set by the CDFI program itself. Those complex regulations can act as a barrier to nonprofits and other smaller community organizations that might be understaffed or under-resourced to handle the necessary data tracking, paperwork and accounting. That complexity often requires assistance from a team of experts, such as attorneys, accountants and consultants, the costs for which can add up to an unsustainable amount for smaller organizations. In short, the costs and complexities involved can impede, if not prevent, nonprofits and smaller organizations from participating in the NMTC program.

For investors, the primary disadvantages are avoiding a recapture and tying up funds in one investment for a minimum of seven years. Investors require the borrower to guarantee the NMTC recapture risk, which includes the tax credit amount plus interest and penalties.

Complex Reporting Requirements
NMTCs involve advanced, atypical accounting requirements that are specific to this program and its regulations. If a borrower’s accountants are not familiar with NMTCs, this can cause confusion and additional time and expense. Instead, borrowers need someone who can guide their auditors through the NMTC requirements and explain why it is important to characterize or handle certain elements in a specified way. Any mischaracterized or mishandled element of financial reporting could potentially lead to a recapture risk.

CDEs must file an annual report on every one of their NMTC funded projects with the CDFI Fund. This report covers all projects the CDE has funded throughout its existence, and information on each project must be updated annually throughout the seven-year compliance period. The CDFI collects this data and information to analyze the effectiveness of the program.

To obtain that data and information, the CDE must down-stream questions to the borrower(s) on each project. Because these questions can be highly detailed, community
developers/borrowers on that project may not track or have processes in place to track the data sought. Examples of this data include the numbers and types of jobs created and retained at a facility; the number of construction jobs created; whether the jobs pay a living wage; the income levels of the people the facility serves on a regular basis, etc. Developing methods to track these details for the seven years of compliance could be cumbersome and often require specialized systems to capture this data.

Additionally, CDEs often require the borrower to provide a compliance certificate on either a quarterly or semiannual basis. The document quotes various regulations, asking whether the borrower complies with each. Many borrowers, especially first-time NMTC borrowers, do not understand what the CDE is asking or whether they are in compliance. Having outside advisers is critical because they can explain what all of the regulations mean and how they work, which helps ensure that the borrower has complied with all requirements.

Similarly, the CDE may require the borrower to submit quarterly or semiannual financial statements. But if the borrower has not had someone knowledgeable about NMTCs review those financial statements to ensure accuracy and compliance with NMTC requirements, borrowers could run into a problem with the CDE and investor.

Where Borrowers Need Help
Consider this real-world example: One client, a NMTC borrower, described how he was impressed with the assistance and shepherding that several individuals had  provided him as they were preparing for the closing of his deal. But the day after closing, the client said it was like “falling into a black hole,” as that entire support system had disappeared. He had no one to help him understand the ongoing reporting requirements going forward, and was seeking guidance.

This unfortunately is an all-too-common problem. NMTC borrowers’ consultants are involved only up until the closing, or the consultants are the CDE’s consultants involved
on the backend to assist the CDE with accounting and reporting, not the borrower. This is true even though the borrower pays for those services.

Instead, borrowers can better benefit from having consultants who will begin working directly with them at the beginning of the transaction and continue providing  assistance beyond the closing. These consultants should be experts in NMTC regulations, accounting, compliance and reporting requirements. The best scenario is for the consultant to stay onboard through the end of the seven-year compliance period and the wind-up of the transaction.

While it may be in a CDE’s best interest to ensure borrowers have this type of support system available, many do not have a large enough staff or bandwidth to provide that assistance themselves. They may step in at times, but usually only when a borrower is struggling and there is risk of default or other recapture event. If they do not hear any
complaints from the borrower, the CDE may not even realize there is an issue.

By being in constant communication with the borrower throughout this process, the consultants can identify potential problems and help the borrower work through them to find a resolution and avoid any potential recapture event. This support system works to ensure financials are accurate and NMTC-compliant, and consultants can complete any compliance questionnaires or other necessary documentation so the borrower need only review and sign it.

Conceptual Impact of NMTC Support Systems
Providing this support and assistance to borrowers may be an innovative approach that could mitigate the risk of recapture, especially for smaller organizations like  nonprofits. That in turn provides comfort to the investor and CDE and frees up their time to devote to what they do best: investments, due diligence, etc.

If borrowers have this type of NMTC back office on their side, they can also save significant time, effort and regulatory headaches by relying on their support team of consultants. This type of support system also makes NMTC funding available to more borrowers. Otherwise, for many borrowers, the complexities of the regulations and reporting requirements involved may outweigh any potential benefit due to the burden on their staff.

Good consultants will take time from the outset to sit down with borrowers, their staff and their board of directors to explain what it means to be part of the NMTC program and how that might impact their books and operations for the seven-year period. This gives the borrowers the opportunity to evaluate the program’s benefits and burdens realistically.

Best Practices to Support Borrowers
Borrowers can work with a consultant to ensure they have processes in place to track and report any impact factors or data they need to provide to their CDE for financial or compliance reports. The investor or CDE may also consider hiring such a consultant for the borrower.

From the beginning, borrowers can review the loan documents with their consultants before closing to ensure that any operational process requirements contained in the loan documents align with the processes the borrower already has in place. The borrower may become aware of and make any changes necessary to comply. Obtaining a recapture risk guarantee is also key for the borrower, investor and CDE alike. A consultant who provides that guarantee brings tremendous value to the transaction and project.

Because nonprofits can have a great deal of staff turnover, they may see the best results by not only having their consultants educate them and their board before the transaction closes, but also having the consultants available throughout the compliance period so that new staff and board members can be educated as needed. This is especially important if the new employee or board member will be involved in the NMTC accounting or reporting duties.

Don’t Leave NMTC Borrowers Behind
Bottom line: when hiring a consultant for the borrower it is critical that either the borrower or its investor or CDE select a consultant who thoroughly understands complex NMTC regulations and reporting requirements. That might range from providing education and reviewing loan documents to ensuring the borrower is aware of any regulatory impacts on operations and financials.

Investors provided about $38 billion in direct NMTC investments to fund businesses between 2003 and 2014, and those NMTC investments resulted in nearly $75 billion in total capital to LIC businesses and revitalization projects. From 2003 to 2012, NMTC investments also created about 750,000 jobs, each of which cost the federal government
less than $20,000.4 These kinds of numbers can and will continue to increase if borrowers have the right support team of consultants advocating for them from beginning to the end of the NMTC transaction. Investors and CDEs may be hesitant to provide or finance these support systems for their borrowers. But the return on investment and relief that their tax credits are safe from recapture may be sufficient motivation going forward.

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A burned-out convenience store that was the epicenter of 2014 racial protests and riots in Ferguson, Mo., will become a community-focused “empowerment center,” thanks to the infusion of new markets tax credit (NMTC) equity.

The Urban League of Metropolitan St. Louis broke ground in August 2015 on the new Ferguson Empowerment Center at the site of the former QuikTrip convenience store and gas station that burned during racial unrest in 2014 and became the site for days of protests. The $5.8 million center will house multiple nonprofit organizations, provide employment assistance and training, financial literacy and asset building, counseling services and entrepreneurship training.

“The location of the project is really ground zero for the Ferguson unrest,” said Dan Blocher, vice president of NMTC investor U.S. Bank Community Development  Corporation (USBCDC). “And these are great services from the Urban League."

Michael McMillan, president and CEO of the Urban League’s St. Louis chapter, said the location was critical. “It was extremely important–just as important symbolically as it was programmatically,” he said. “It was the first building burned and was on the national news, looking like [it was] a documentary from the 1960s.”

Michael Kressig, a partner in Novogradac’s St. Louis office who worked with the Urban League on the deal, said the transaction is a model of what the NMTC program offers. “The tax credits help take this symbol of frustration and anger and turn it into something that provides opportunities and hope,” Kressig said. “The entire community benefits.”

Construction is expected to finish in early 2017.

A Symbol of Unrest
The convenience store in Ferguson, a northern suburb of St. Louis, became iconic after the Aug. 9, 2014, slaying of Michael Brown by Darren Wilson, a white Ferguson police officer. Some witnesses said Brown, a black, unarmed 18-year-old, had his hands in the air, while others disagreed. Wilson was later not indicted by a St. Louis County grand jury and the U.S. Department of Justice did not file charges, although the Justice Department found that the police department engaged in racial misconduct against
Ferguson residents. The day after the shooting, there was a false rumor that QuikTrip’s employees had called police to report Brown as a shoplifter. Protesters looted and then burned the gas station and store. Almost immediately, the site became a makeshift public square, with gatherings and nightly conflict between the police and protesters. It was where Ferguson Police Chief Thomas Jackson released the name of Wilson as the shooter. Peaceful protests and civil disorder continued over
longstanding racial tensions between the majority-black population and majority-white city government and police. By Aug. 19, QuikTrip offcials erected a chainlink fence around the property and began dismantling the store and gas station. McMillan said the concept of the empowerment center came in the midst of the unrest. “One of the things we heard was that young people felt like their voices weren’t being heard, that they weren’t at the table when the decisions were being made,” McMillan said. “Their
assessment was accurate. We started asking young people what we could do to help and No. 1 was jobs.”

So the Urban League created its Save Our Sons workforce training program for African-Americans and other men in Ferguson and the surrounding North St. Louis County area. “We wanted to help in the rebirth of Ferguson and not let it become abandoned and neglected,” McMillan said. “That’s when we came up with the idea of the empowerment center at the QuikTrip site.”

McMillan said QuikTrip’s corporate leadership was “very, very generous” in its response, choosing to purchase the site from a franchisee, remediate it (since it was also a gas station) and donate it to the Urban League, along with making a significant donation to the capital campaign.

Enter NMTCs
The Urban League’s vision for the center began in 2015 and it was slated to be one story, cost $4 million and use a $4 million NMTC allocation from Heartland Regional
Investment Fund LLC (HRIF).

“The development had been in process for some time. We were approached by Howard Smith of Smith NMTC Associates [on behalf of the Urban League to discuss providing an allocation] in March of this year,” said Jeffrey Frankel, assistant vice president of new markets tax credits at St. Louis Economic Development Partnership, which includes HRIF. “We wanted to make an impact in the North St. Louis County area and [this NMTC allocation] made sense.”

As the Urban League continued its capital campaign, it entered into collaboration with The Salvation Army, which entered as a fnancial and programmatic partner, investing its $1.4 million capital to add a second floor to the building, a condominium it will ultimately own.

“North St. Louis County is an area that deserves more programs and services to help those in need,” said Lt. Col. Dan Jennings, the Salvation Army Midland Divisional Commander. “With our partnership, The Salvation Army and the Urban League will provide help with after-school tutoring, financial assistance for rent and utilities, emotional and spiritual care for individuals re-entering society after incarceration and the Salvation Army Pathway of Hope program to help families break free of poverty.”

The involvement of The Salvation Army changed the economics and HRIF agreed to increase its allocation to $6 million. “It’s wonderful to be in partnership with the Urban
League and it’s clearly important that agencies, organizations and others show a spirit of cooperation,” said Gary Busiek, division social service director for The
Salvation Army’s Midland Division. “We can combine to bring services to bear in an impactful way.”

The growth of the capital campaign and the influx of NMTC funds increased the planned size from 4,000 square feet to 8,000, 12,000 and finally 13,500 square feet. “The tax credits sealed the deal so we could build a facility as large as it could be built,” McMillan said. “If it wasn’t for tax credits, we wouldn’t be in a position with as large a facility as others.” The location and purpose were signifcant.

“Anyone who  reads the newspaper or read about the death of Michael Brown was aware of the riots,” said Donna Smith, executive vice president of Smith NMTC Associates. “The QuikTrip that burned was an iconic image of unrest, the Black Lives Matter movement and tackling racism.”

“This opportunity aligned well with HRIF’s mission,” said Frankel. “This wouldn’t have come to fruition if it wasn’t for the additional boost of the new markets tax credits. It’s a very powerful ‘but-for’ project.”

The development is expected to create 18 permanent positions and 65 construction jobs–plus training to help residents land other jobs. Financing The NMTCs and capital campaign were the key financial tools, as USBCDC invested $2 million in NMTC equity and McMillan raised another $4 million in donations and contributions. “We’re proud to be in this development,” Blocher said. “We’re in St. Louis and this really speaks to some of the bank’s core values and initiatives. This is defnitely of interest to us.”

The development also made history: It is the first time that the 106-year-old Urban League and the 150-year-old Salvation Army have partnered on building ownership.
Nonprofits Coming The Save Our Sons program will operate out of the center, as will The Salvation Army. Other programs will be offered by the Lutheran Missouri Synod, Better Family Life, the University of Missouri Extension and Provident Inc.

“It was an important deal for us,” said Stacie Chang, project manager for USBCDC on the transaction. “It’s meaningful that there will be six nonprofits under one roof. And the site is accessible from public transit [,making it more convenient]. Everyone will be affected somehow.”

Many of the nonprofits already have a presence in the community, but the empowerment center will allow them to work more closely together in an accessible location.
“The best thing is the organizational partnership,” said Busiek. “We have agreed to come alongside each other.”

Iconic Location, Model Deal
For participants, this is a landmark. “We think all new markets tax credits developments are beneficial and catalytic,” Blocher said. “But this can really be a catalyst for change and an opportunity for a better future.”

He isn’t alone.

“This is a perfect example of a project that sometimes isn’t highlighted because it doesn’t create a hundred jobs at the start,” Smith said. “But it provides skill-building and job-training services to a community that needs it, which is at least as important as creating up-front jobs. It’s going to reach thousands of people annually with empowerment, job skills, interview skills, empowerment skills. It’s going to help the community.”

McMillan looks forward to years of accomplishment.

“Success for us is a facility that’s fully functional and operational from sunup to sundown, with the six of us in the building serving tens of thousands of residents with empowerment programs,” McMillan said. “The reaction has been incredibly positive and supportive.”

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Different Model Opens Access to NMTC Financing for Smaller Projects

Through the creation of a different structuring model, Smith NMTC Associates, LLC (SNMTC) is making it possible for smaller projects to gain access to new markets tax credit (NMTC) financing by reducing initial and ongoing transaction costs. This “open capitalization” model can be used to fund qualified low-income community investments (QLICIs) as small as $500,000, rather than the usual industry minimum of $5 million.

SNMTC's founders, Donna and Howard Smith, have used this model in multiple transactions providing over 50 Habitat for Humanity affiliates with additional funding to build affordable for-sale homes. But the same model can be adapted for other types of NMTC projects and qualified active low-income community businesses (QALICBs).

SNMTC refined its model over a series of 22 transactions funding $278 million in NMTC projects in partnership with U.S. Bancorp Community Development Corporation, Novogradac & Company LLP, Polsinelli Shughart, Husch Blackwell, and Elkins PC. Seven of these transactions ($103 million) used a NMTC allocation from a community
development entity (CDE) of which SNMTC is part owner. Twelve other CDEs provided allocations for the remaining 15 transactions ($175 million). SNMTC sources and  facilitates all transactions and acts as the guarantor of the QALICB recapture risk to the investor and as the “back office” for the QALICBs to help them with the seven years of compliance required by the NMTC program. These roles are often the key ingredient allowing smaller QALICBs with minimal staff and resources to participate in NMTC transactions.

Details of Model
The open capitalization model combines multiple, smaller QALICBs in one transaction, allowing them to share closing costs and ongoing expenses rather than bear these costs alone. Typical costs for an NMTC transaction include: CDE fees, CDE audit and tax fees, investment fund fees, leverage lender costs, closing costs (includes attorney fees), and loan servicing fees throughout the seven-year compliance period. Together, these costs typically exceed $1 million in any single transaction, regardless of its size. By contrast, using the model, SNMTC has reduced the transaction costs borne by any one QALICB from more than $1 million to just under $90,000 – a savings of over 90%.

For example, SNMTC combined 12 QALICBs and 12 QLICIs in a single $28 million NMTC deal. Using the model, the QLICIs were closed in three separate tranches on a  successive basis over a six-month period, using just one leverage lender, one investment fund, and one sub-CDE. In each tranche, the leverage lender operating agreement was amended and restated to admit new Habitat affiliates whose resulting diluted interests were proportionate in size to their interest in the aggregated QLICIs. The  leverage lender counsel is the manager with the authority to accept the “put” or exercise the “call” from or to the investment fund at the end of the compliance period.
The investment fund and sub-CDE operating agreements were drafted to accept additional capitalization through amendment and restatement. The schedules were  aggregated so that the successive tranches reflected the total funding of fees, reserves, and benefits. Using the open capitalization model resulted in each QALICB bearing  roughly $90,000 in total costs, rather than $1 million in costs if they had participated in an individual NMTC transaction.

Using this model, SNMTC, in partnership with USBCDC and 12 other CDEs, has provided $278 million of financing in support of the construction, financing, and sale of Habitat homes across the nation. This translates into 3,049 homes for needy families while revitalizing low-income communities in 30 states and creating almost 5,000 construction jobs and creating/retaining over 2,000  permanent jobs.

Applicable Model
This open capitalization model can be applied to other NMTC transactions and other QALICBs. It would work best with QALICBs that share similar business models, or QALICBs located in the same development or the same geographic area because these QALICBs will jointly own the leverage lender. As members of the leverage lender, they will need to agree before the deal closes on how the put/call option will be exercised to wind up the deal at the end of the compliance period. QALICBs that share similar business models or are otherwise committed to development in the same area will more readily adapt to a joint leverage lender ownership model. All participating
QALICBs will achieve significant savings using this model. QALICBs with similar business models can achieve additional savings on legal fees because the documentation can  be streamlined and replicated for those QALICBs, regardless of where they are located (similar to the Habitat affiliates). QALICBs with different business models in the  same area will also see legal cost savings because only one state’s laws are involved. To maximize the cost savings, the closings should occur within a 12-month period to  eliminate extra costs caused by the different schedules in amortization, loan servicing, and put/call option periods.

Smaller projects (QLICIs as small as $500,000) can now use NMTCs to help fund their projects through use of the open capitalization model. It may take a little more work to find the right partner QALICBs, but the savings achieved make it worth the effort. With lower transaction costs, more QALICBs can access capital, and more low-income communities and their residents will benefit.

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In the 2012 New Markets Tax Credit (NMTC) Application, the Community Development Financial Institutions (CDFI) Fund asked applicants to describe how they would use an NMTC allocation to make innovative investments, citing as one example, providing qualified low-income community investments (QLICIs) of $2 million or less to qualified active low-income community businesses (QALICBs). QLICIs of $2 million or less are not commonly provided because the closing and ongoing costs often exceed the net benefit to the QALICB.

To deploy $42 million of NMTC allocation in 21 QLICIs of just under $2 million each, while keeping the net benefi t to the QALICBs high, Smith NMTC Associates LLC recently partnered with U.S. Bancorp Community Development corporation (USBCDC), CEI Capital Management LLC (CCML), Novogradac & Company LLP, Polsinelli Shughart, Husch Blackwell, Elkins PC and Johnson & McCaa LLC to close the 21 QLICIs in a series of two transactions, with two tranches each, over a five month period from April to August 2012. Smith, USBCDC, Novogradac, Polsinelli, Husch and Elkins had already worked together to deploy over $270 million in NMTC allocation using the multi-QALICB model (described below) that reduces the per QALICB cost, thereby increasing their net benefi t by combining multiple QALICBs in a single transaction with individual qualified equity investments (QEIs) and qualified low-income community investments (QLICIs) per QALICB. To further increase efficiencies, Smith and its partners used a multi-tranche approach layered on top of the multi-QALICB model to deploy the $42 million in CCML’s allocation over a series of two transactions with two tranches in each, for a total of four closings with fi ve or six QALICBs participating in each closing (multi-tranche/multi-QALICB model). The resulting high efficiencies translated into greater benefits for the QALICBs, even for QLICIs of less than $2 million.

Multi-QALICB Model

The multi-QALICB model was developed to enable Habitat for Humanity affiliates to benefit from the NMTC program, keeping their costs low and their benefits high. Habitat for Humanity affiliates vary greatly in size and sophistication. This model made it possible for a Habitat affiliate that only builds a few for-sale affordable homes a year to benefit significantly from the NMTC program, thus expanding NMTC access beyond those larger scale Habitat affiliates that build more than 100 homes per year.

Beginning in 2008, Smith used this multi-QALICB model to combine several QALICBs into one transaction, using separate QEIs and QLICIs for each QALICB to isolate the risk. In this model, the QALICBs self-fund the leverage lender by monetizing the value of their construction in progress through a one-day loan, thereby eliminating the need for a conventional lender. The QALICBs are the joint owners of the leverage lender – with each owning a proportionate share of the entity based on their contribution to it. The QALICBs in this model also make use of the portion of the business (POB) rule and keep separate books and records for the NMTC transaction.

For example, in a 2009 multi-QALICB transaction, six Habitat affiliates shared one leverage lender, investment fund and sub-CDE, rather than having six of each entity. Splitting all costs six ways resulted in substantial savings for everything from closing costs to CDE audit/tax costs, to investment fund costs, to leverage lender audit costs and even loan servicing costs. The closing costs were further reduced by some of the features of the multi-QALICB model itself. For example, because the QALICBs had similar business models and structures, they shared the same attorneys, further reducing legal costs. Closing costs were further reduced at the front end by collecting and reviewing all due diligence before involving any attorneys and using streamlined documentation that has been refi ned over the course of deploying $270 million in NMTC transactions. The savings using the multi-QALICB model with six QALICBs (compared to a single QALICB transaction) resulted in a per QALICB savings of almost $700,000. As shown below, the per QALICB cost for each of the six affi liates using the multi-QALICB model averaged just over $223,000 per QALICB, while a single QALICB incurred more than $900,000 in costs.

MULTI-TRANCHE/MULTI-QALICB MODEL

While it is clear that the multi-QALICB model can result in substantial cost savings to the QALICB, the Smith team believed even greater savings could be achieved by closing a single transaction over two or more tranches, so that more than six QALICBs could share costs, further increasing each QALICB’s net benefit. Achieving the maximum savings possible was critical to making QLICIs under $2 million work for both the QALICB (in terms of maximizing return) and for the CDE (in terms of managing risk). The multi-tranche/multi-QALICB model maximizes a QALICB’s return because it allows 10 or more QALICBs to participate in a transaction by closing the transaction in two tranches of five or six QALICBs per each tranche. Limiting the number of QALICBs that participate in each tranche to six maintains the efficiencies of the model by keeping the number of QALICBs per closing to a manageable number.

A single transaction can be closed in two or more tranches because under the multi-tranche/multi-QALICB model, the leverage lender documents are drafted to allow expansion to include additional members and the investment fund and sub-CDE operating agreements are drafted to anticipate and accept additional capitalizations through amendment and restatement. Novogradac aggregates the schedules so that the successive tranches reflected the aggregated funding of fees, reserves and benefits.

Cost Savings

Using this model, CEI Capital Management LLC deployed $42 million in total QEIs in a five month period in 21 QLICIs of just under $2 million each to 21 Habitat for Humanity affiliates located in 16 states. There were two transactions of two tranches each for a total of four closings which resulted in savings of more than $789,000 per QALICB compared to a single QALICB closing and $88,000 compared to the multi-QALICB model alone. The cost savings were realized in the same areas discussed above for the multi-QALICB model. The only difference is the savings were greater because the costs were split among 21, rather than six, QALICBs.

Managing Risk

QALICBs that need smaller QLICIs of $2 million or less can be thought of as higher risk, because these QALICBs are perceived to be less sophisticated than larger QALICBs in handling the NMTC compliance requirements and/or ill-equipped (in terms of staffing) to deal with the extra burdens of NMTC compliance. When a CDE has to manage multiple QALICBs, all of whom are perceived to have this greater level of risk, the burden of making multiple QLICIs under $2 million seems to outweigh its benefits.
However, a CDE is better able to manage this risk through the multi-tranche/multi-QALICB model (as well as through the multi-QALICB model alone) because Smith provides financial counseling and other services to each QALICB before, during and after each closing (and throughout the seven-year compliance period). Before the closing, Smith educates the QALICB’s board, staff and finance committees on the NMTC program, the multi-tranche/multi-QALICB model and the compliance requirements. During the closing process, Smith continues to work with the QALICB to collect and review due diligence requests and identify and resolve any due diligence issues before the attorneys get involved. Also, during the closing process, Smith’s finance department works closely with the QALICB’s finance staff and outside auditors to explain the pending NMTC transaction and the effect of keeping POB books on both the POB books themselves as well as the QALICB’s books. After closing, Smith’s finance department provides actual POB opening entries and sample entries for typical transactions a QALICB would see and need to book. On the compliance end, Smith’s staff regularly works with the QALICB to assist in collecting information required by the CDE for reporting purposes. This ongoing education of and communication is especially important with smaller QALICBs that are most in need of QLICIs of $2 million or less. Ongoing education and communication with smaller, less sophisticated QALICBs is the key to effectively managing the risk of smaller QLICIs.

Building on the success of the multi-tranche/multi-QALICB model, even more QALICBs can be funded with QLICIs under $2 million. Pursuing innovative investments with NMTC allocation cannot only answer the CDFI’s call for innovation, but also bring much needed financing to areas of the greatest need.

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Because new markets tax credit (NMTC) projects of varying size have similar transaction costs, financing qualified low-income community investments (QLICIs) smaller than $5 million can often be inefficient. By the time the transaction has closed and the fees have been paid, very little benefit remains for the qualified active low-income community business (QALICB). For that reason, many CDEs require a minimum of $5 million or more when choosing a potential QALICB.

To address small business financing needs, Smith NMTC Associates, in partnership with U.S. Bancorp Community Development Corporation (USBCDC), Novogradac & Company LLP, Polsinelli Shughart, Husch Blackwell and Elkins PC, and Kutak Rock LLP developed an “open capitalization” structure to deliver smaller sized QLICIs more quickly and efficiently. As part owner and manager of a community development entity (CDE) with and for Habitat for Humanity International, Smith NMTC recently used this structure to deploy $28 million of NMTC allocation in three transactions, which funded 12 QALICBs through 12 separate QLICIs. The QLICIs ranged in size from $1 million to $4.8 million and the QALICBs that benefited were Habitat for Humanity affiliates across the country.

The open capitalization model combines multiple, smaller QALICBs in one transaction. Cost savings result through several mechanisms. First, by allowing multiple QALICBs to join in one transaction, closing costs and other fees can be spread across multiple project loans and shared by multiple QALICBs. Because the QALICBs are bundled in one transaction, only one investment fund is required, resulting in further cost savings. Second, the QALICBs share the same attorneys. Those attorneys use documentation that has been refined and streamlined over the course of funding more than $200 million in transactions. Additionally under the open capitalization model, all due diligence is collected at the front end and the forecast is generated before the calls with attorneys even begin. CDEs and investors often are reluctant to fund smaller QLICIs because smaller QALICBs are perceived to have a lower level of sophistication, and this can raise compliance concerns. The open capitalization model also addresses that concern by moving the heaviest burden from the QALICB to the guarantor. The guarantor along with a skilled staff of attorneys and a certified public accountant manages the QALICB recapture risk, leaving the borrower to do what it does best: pursue its not-for-profit mission. As the borrower’s “back office” and compliance agent, the guarantor manages the complexity of programmatic compliance and makes sure that the program does not outweigh its benefits. The model also requires that ongoing compliance fees be reserved up front, thus eliminating any risk that the smaller QALICB would be unable to cover its ongoing compliance expenses. For example, in the transaction mentioned earlier, Smith guaranteed the recapture risk for the Habitat affiliates (the QALICBs) and Habitat for Humanity International; by doing so, it became invested in the reporting,
compliance and performance obligations of the Habitat affiliate. As a result, Smith becomes the Habitat NMTC back-office pay agent.

Because Smith provides the guaranty and financial counseling and other services (FCOS) to the QALICB, the tax credit investor - in this case USBCDC - is provided continuing comfort throughout the life of the transaction and the other CDEs involved in the transaction receive reporting assistance. The FCOS are critical for success because the QALICBs under this model use the portion of the business rule (POB) to participate in the NMTC transactions. To make the structure work, QALICBs’ finance personnel
are counseled and each POB ledger entry reviewed to maintain consistent financial reporting that comports with NMTC regulations. Smith also works with the QALICBs before each transaction to explain the model and compliance requirements to their boards, staff and finance committees.

Using this model, the team considered  aggregating 12 Habitat QALICBs and their QLICIs into a single transaction to save costs. However, combining 12 QALICBs in a single transaction was untenable. So, ultimately, the team decided to use one leverage lender, one investment fund and one sub-CDE, while closing the QLICIs in three separate tranches of Habitat affiliates on a successive basis over a six-month period. In each tranche the leverage lender operating agreement was amended and restated to admit
new Habitat affiliates whose resulting diluted interests were pari passu to the aggregated QLICIs. Counsel for the leverage lender is the manager and has the authority to accept the “put” or exercise the “call” from or to the investment fund at the end of the compliance period. The investment fund operating agreement and sub-CDE operating agreement were drafted to anticipate and accept additional capitalization through amendment and restatement. Novogradac & Company aggregated the schedules so that
the successive tranches reflected the aggregate funding of fees, reserves and benefits.

This structure results in substantial ongoing cost savings. With one leverage lender, one investment fund and one sub-CDE, the number of tax returns filed annually is reduced. There is one investment fund asset management fee and one sub-CDE asset management fee. Transaction costs were cut by a third over what they would have been had three separate transactions occurred, rather than three tranches of one transaction.

By transacting 12 QLICIs through the same leverage lender, investment fund and sub-CDE, transaction costs were also spread over more QALICBs, resulting in a total compliance period cost per QALICB of $34,592. In this particular example, if the same transaction (with the same exact costs) were to occur with one QALICB, the total compliance costs would be $285,823. The difference is attributable to additional auditing costs for more QALICBs. This represents a savings of $250,000. The transaction costs for the open capitalization structure averaged $50,698 per QALICB. The same fees for a similar transaction with a single QALICB can easily exceed $350,000 (or more) - a savings of $300,000. This suggests that total savings per QLICI can exceed $500,000 per transaction through this structure. And, not only did the structure save costs,
but it allowed for smaller QLICIs to be made: the average QLICI size in this open capitalization structure was $2,279,456. Removing the outlying high and low QLICIs, the average QLICI size was $1,841,394 (averaging 10 QLICIs)!

Aggregating smaller QLICIs in a single transaction ultimately provides impact where it is needed most – to smaller QALICBs that individually may not be able to benefit from an NMTC transaction. Using this model, Smith, in conjunction with USBCDC and seven other CDEs, has provided more than $200 million of financing in support of the construction, financing and sale of Habitat homes across the nation. This translates into 2,227 homes being built for needy families while revitalizing low-income communities in more than 25 states and creating more than 3,000 construction and nearly 1,000 permanent jobs.

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