By
Robert O'Malley
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of Burlington Waterfront Apartments in Burlington, Vermont.
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Peter Walsh knows first- hand how difficult it is for people of
modest means to find good affordable housing.
Senior vice president/retail
lending and community relations at Bank Rhode Island, Mr. Walsh says
the issue really struck home for him when he was trying to help a
young friend find housing after his mother died in a car accident.
The boy had nowhere to live and Mr. Walsh was trying to help.
He says he looked everywhere but was unable to find the teenager
a decent apartment at an affordable rate. Although he eventually
found him housing, he had to take some unusual steps to do so.
As a volunteer member of a high school improvement team, Mr. Walsh
has been able to observe close up the negative effects that poor
quality housing has on the performance of young people in school.
Mr. Walsh’s concern for housing and his efforts to address
the issue in his work isn’t unusual among today’s bankers.
Although community work has often been an ingredient of successful
banking, today’s bankers seem especially sensitive to the housing
needs of their communities. As an example, Mr. Walsh says he recently
bumped into several colleagues from member Bank of America volunteering
at the construction site of a Habitat for Humanity house.
Support for affordable housing is an essential part of his bank’s
business, says Calvin K. Price, vice president for community development
and CRA officer at member Liberty Bank in Connecticut. “Affordable
housing is not an afterthought — it’s not an add-on.”
In Rhode Island, a household with an income of $50,000 a year can’t
afford to buy a house anywhere in the state, notes Mr. Walsh. “I
think banks understand the importance of workplace housing.”
While “banks have realized for years that affordable-housing
development is good business,” says Pam Feingold, senior vice
president at member Wainwright Bank & Trust Company, bankers’ participation
in housing activities is also an outgrowth of the desire to be involved
in their communities.
“I think most of our employees are here because of the bank’s
social agenda,” says Pat Capalbo, vice president/community
development lending at Wainwright Bank & Trust Company, which
has made its community commitment key to its mission.
“We all feel we are part of our communities,” says Arne Hammarlund,
vice president/socially responsible banking at Chittenden Bank in
Vermont. “We
want to be good corporate citizens.”
Since the founding of the Federal Home Loan Bank of Boston’s
(the Bank) Affordable Housing Program (AHP) 15 years ago, the rising
price of land, construction materials, transportation, and labor
have made the development of affordable housing more costly.
Over the last 15 years the cost of an affordable development has
nearly doubled, says Ms. Feingold. “Nowadays, in order to cover
their costs and put these deals together, most of these developments
in-clude some market-rate housing,” she says.
“Developers have to become more creative to fund these projects,” adds
Mr. Hammarlund, “because they’re trying to find multiple
sources of funding.”
As the cost and complexity of affordable initiatives has increased,
the level of expertise of many nonprofit developers has also been
on the rise. Mr. Hammarlund says the job of financing affordable
developments in his community has, in some ways, become easier because
of the highly developed skills of nonprofits such as the Brattleboro
Area Community Land Trust and the Burlington Community Land Trust.
These organizations are trailblazers in meeting community housing
needs, he says.
“The level of their financial literacy when putting together complicated
projects is amazing,” he says. “Their success has enabled the nonprofits
to survive. It’s good to be surrounded by so many experts.”
The nonprofits have also become more skillful in their dealings with
banks. “Nonprofits now have the ability to shop around for
a deal,” says Ms. Feingold. “They’ve become a
lot more savvy. Before it was hard for them to get a lot of banks
to sit down with them.”
Another change, says Mr. Hammarlund, is that many nonprofit developers
can no longer afford long-term, fixed-rate mortgages. “Bankers
used to do more 30-year, fixed-rate mortgages at around prime, but
now projects can’t afford that,” he says.
To make these developments feasible now, many developers have been
relying on the AHP as a key funding source. “The mortgages
I’m involved with now are either very below-market construction
loans, or they are part of an AHP-subsidized advance,” he says. “I’m
seeing more subsidized advance money in these projects than I have
seen historically. There’s a real dependency on the Federal
Home Loan Bank of Boston’s subsidized advance.”
Ms. Feingold agrees, explaining that 80 percent of Wainwright Bank’s
affordable-housing deals involve some form of Federal Home Loan Bank
of Boston funding.
“We rely very heavily on the AHP money,” she says. “The subsidized
advance piece is extremely important. And if we do some long-term fixed-rate
funding, we rely on
the Bank’s amortizing advance for match-funding.”
Over the years, participation in the AHP has provided an additional
opportunity to bring together member banks with local nonprofits. “Our
participation in the AHP has deepened the relationship we have had
with our nonprofit community,” says
Mr. Price.
Mr. Hammarlund notes that working together on an AHP application
reinforces a bond between the member and the sponsor. It was through
an AHP application that he developed a relationship with Habitat
for Humanity, he says. “It at least set up that relationship,
even though the AHP application failed.” T
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