Home Funders' resources are loaned at very low interest rates to projects that set aside at least 20% of the units for ELI families—double the state mandate—and provide long-term affordability and use restrictions. Home Funders offers flexible 2-3% loans that are available for all phases of a project - acquisition, predevelopment and bridge loans, as well as permanent financing. Home Funders also creates an incentive for non-profit developers to access operating subsidies (i.e. Section 8 and Massachusetts Rental Voucher Program(MRVP)), which can be project-based for use in mixed income projects.

Home Funders created a Limited Liability Corporation (LLC) through which PRIs and grants are pooled in order to share risk. The funds are then committed to two experienced housing finance intermediaries for actual lending. The Community Economic Development Assistance Corporation (CEDAC) and the Massachusetts Housing Partnership (MHP) serve the many non-profit housing developers in the community that are interested in reaching ELI families. Through the LLC, Home Funders' loans are made available to these two intermediaries at a 1% interest rate in order to promote a deep level of affordability. As a result, Home Funders loan funds are easily accessed and combined with available public resources. Home Funders' loans typically represent 5-10% of total project costs.

CEDAC provides technical assistance and early predevelopment and acquisition loans, while MHP provides long-term permanent financing. Because access to initial, higher risk affordable housing development funds is particularly important, Home Funders allows CEDAC to commit up to $1.5 million to any single project that meets Home Funders' eligibility requirements. The LLC's funds revolve through CEDAC's shorter term lending. As a result, CEDAC's $9.15 million commitment from Home Funders resulted in a total of $28.4 million in lending by the third quarter of 2011.

CEDAC's and MHP's roles complement one another, and both have excellent track records underwriting affordable housing projects and managing portfolios. The agencies market Home Funders' resources to potential developers, provide detailed review and underwriting of projects, and ensure that public sector resources are available to cover total development costs. These additional sources typically include Low Income Housing Tax Credits, federal HOME funds, state bond programs and local public funding sources.

Because Home Funders' funds are lent at a very low interest rate, its loans have allowed projects to maintain site control during the recent low-income tax credit market collapse or when legal opposition has caused major delays. The ability of CEDAC to extend repayment of short-term loans in the face of serious development delays has proven critical to non-profit borrowers. At the same time, MHP's 20-year loans are used like equity to fill critical gaps in capital funding.

Home Funders' loans can be used to help finance new construction, foreclosed properties that are redeveloped to include units for extremely low income (ELI) families as well as for the preservation of "expiring use" rental units.

Advocacy for Operating Subsidy and Other Public Resources

Home Funders also raises grant funding to support public education and advocacy to ensure adequate local, state and federal resources for extremely low-income housing. By bringing new money to the table, Home Funders has been in a unique position to influence public policy in the area of housing and homelessness. Home Funders has worked with public sector colleagues to leverage Home Funders' funding to increase government's commitment of operating subsidies that are instrumental in the creation of affordable units, building on the newly accepted principle that "housing first" is less expensive in the long run than emergency shelter.

With the continuing pressure on the rental market, the scarcity of Section 8 subsidies and reductions in the MRVP program, more families with incomes below 30% AMI are not able to access housing they can afford. In 2009, 77% of Massachusetts extremely low income households paid more than 50% of their income for housing costs; 24% of these households were families with children. As a result, increased funding and utilization of rental subsidies, especially those that are project-based, has remained an ongoing Home Funders' priority.

In the city of Boston, Home Funders has successfully advocated with the Department of Neighborhood Development (DND) to attach project-based Section 8's to Home Funders' projects in the city. At the state level, Home Funders and Citizens Housing and Planning Association (CHAPA) have continued to advocate for increased state MRVP rental subsidies. While the current state fiscal crisis has made it difficult to increase funding for any state programs, advocacy has been effective in preserving these subsidies.

Click here for a diagram describing the Home Funders Model.