Are Community Foundations the answer to New York’s affordable housing crisis - by Michael Discenzo

Over a century after banker Frederic Goff established the first community foundation in Cleveland, Ohio, in 1914, more than 900 community foundations across the country manage approximately $110 billion in assets and award about $14 billion in annual grants.

Those foundations offer a variety of programs designed to support community needs, with the most common areas of support being education and human services.

New York University’s Furman Center reports nearly 50% of New York renters spend more than 30% of their income on monthly rent and utilities and, more than a quarter spend more than 50%. At the same time, the state, and in particular New York City, lags behind peers in establishing new affordable housing.

So why not tap into community foundations to improve those numbers?

Why Should Community Foundations Assist with Affordable Housing?

Affordable housing at the local level is sprawling and often disorganized, making it difficult to assess community needs and coordinate production and preservation. Without a centralized process to match projects with funders, developers must piecemeal capital stacks for worthwhile projects, leaving many opportunities unidentified or abandoned.

Community foundations can step in, bringing together key stakeholders to evaluate data, engage community, prioritize needs and develop comprehensive housing strategies. As aggregators of mission-driven capital, community foundations can expand housing production and affordability through impact investment funds, traditional grant-making and public-private partnerships. 

And the work aligns with the objectives of community foundations: enhancing individual and community well-being. 

Four Actions Community Foundations Can Take on Affordable Housing 

Defining and Prioritizing: Help regions identify the scope of housing challenges by funding a local market analysis, convening key stakeholders to evaluate findings and developing strategic plans to bolster production. 

Convening and Organizing: The short-term tenure and competing demands of elected officials may not align with the longer-term strategic focus needed to increase housing production. Non-governmental actors, such as community foundations, can fund intermediaries to coordinate long-term, regional strategic plans.

Piloting Investment and Program Models: Elected leaders and public officials may hesitate to pilot new programs, particularly due to NIMBY constituent concerns and competing budget pressures. Private investors may be reluctant to invest in risky projects, such as neighborhoods with high loan-to-value and large appraisal gaps. Community Foundations can fund efforts to validate the feasibility of new housing and finance models. 

Organizing and Aggregating Long-Term Capital: Community foundations already serve as capital aggregators, pooling community donations into investment portfolios to achieve economies of scale and greater returns. By establishing impact investment funds focused on housing production, they gain advantages over traditional grants, including attracting capital from a wider range of funders and uncovering a broader range of investment vehicles, including equity-like instruments. 

Affordable Housing as an Investment

The U.S. affordable housing sector is an attractive investment strategy within commercial real estate and an effective diversifier among housing investments. The need for affordable housing remains steady throughout economic cycles; in fact, demand increases during recessions as incomes stagnate or drop. Affordable housing investments have yielded an average return of 4.8% since 2011, comparing favorably to assets such as bonds, equities and T-Bills.

A smart investment and a way to address a systemic issue affecting community stability? That is a win-win for community foundations that will lead to stronger individuals, families and communities. 

Michael Discenza co-leads the affordable housing industry team and is a member of the commercial real estate practice group at Harris Beach Murtha, Rochester, N.Y.