Three major financial institutions are pledging more than $70 million to fund low-income housing developments in Charlotte, giving a boost to the city’s efforts to keep up with the fast-rising costs of renting or buying a home.
Bank of America, Ally Financial and Barings said they will invest a combined $70.75 million through a series of initiatives. The bulk of it, $50 million, will be in the form of low-interest loans to private developers building income-restricted housing.
“We do need to address these issues now, before they become unsustainable,” said Barings CEO Tom Finke, speaking at an event held to roll out the initiative at Bank of America’s uptown headquarters.
Rents and home prices have risen much faster than inflation over the past decade in cities across the U.S., making affordable housing a more potent political issue. Charlotte’s fast pace of growth has also led to the demolition or renovation of thousands of older houses and apartments, which are typically replaced by more upscale and expensive housing.
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“As the Charlotte economy has grown, low- to moderate-income families have to pay a disproportionate percentage of their take-home pay for decent housing in safe and stable neighborhoods,” said Jeff Brown, CEO of Ally.
More than a third of all households in Charlotte are “cost-burdened,” meaning they spend more than 30 percent of their income on housing, according to the city’s Housing Charlotte report. To meet the demand, the city would need about 24,000 units of affordable housing, mostly for people who make less than 50 percent of the area’s median income — a segment of the market that usually requires costly subsidies to develop.
Bank of America CEO Brian Moynihan said the exact number of affordable housing units needed matters less than mobilizing government and the private sector to work together.
“Whether that number is 20,000 or 30,000, it’s a big number,” he said. “Nobody can do this alone.”
Combined, the city is hoping to raise $100 million for its affordable housing push. Half of that comes from bonds that voters approved in November, and half will come from private sources, via a new fund coordinated by the nonprofit Foundation for the Carolinas and administered by low-income housing developer Local Initiatives Support Corporation.
While it’s a big headline number, Tuesday’s announcement doesn’t mean the city has solved the affordable housing dilemma. A $100 million fund would be enough to finance about 2,100 new mixed-income housing units — a small percentage of the total estimated need, officials said Tuesday.
“We’re about 10 percent of a dent with this effort,” Foundation for the Carolinas CEO Michael Marsicano said. “A good start.”
Officials said they will also look at preserving more of the city’s existing affordable housing, such as older apartments that are prime redevelopment targets, in addition to building new developments.
Here’s how the new funds from the three companies announced Tuesday break down:
▪ $50 million for loans up to 2 percent below market rate to private developers building affordable housing. Marsicano said this is the first time such loans have been used in Charlotte.
▪ $11 million for the new Housing Opportunity Trust Fund, a private effort to raise $50 million. That would match the city of Charlotte’s $50 million worth of Housing Trust Fund bonds, designed to subsidize low-income developers, which voters approved in November.
Other Charlotte companies and groups have already started to chip in equity. Foundation for the Carolinas started the Housing Opportunity Fund with a $5 million pledge last year. Wells Fargo pledged another $5 million. Given the $11 million pledged Tuesday, that brings public commitments to the fund up to $21 million. The Foundation for the Carolinas plans to wrap up raising money for the fund by this summer.
▪ $2.5 million in grants for “economic mobility programming” over the next five years.
▪ $7.25 million worth of land donations for new affordable housing projects. The land in question consists of two surface parking lots owned by Bank of America — one behind the Charlotte Ballet building and one at Seventh and Tryon streets. Charles Bowman, Bank of America’s market president for Charlotte, said the bank is exploring projects that would combine a mix of uses, such as arts facilities and other development, and would include affordable housing.
“This is a great model for other cities addressing similar issues,” said Moynihan.
Mayor Vi Lyles said public-private partnerships will be essential for the city to address affordable housing. Most low-income renters live in privately owned housing and don’t receive government housing subsidies.
“It is not the government only,” said Lyles. “We are never going to be successful if we try to govern ourselves into a solution for affordable housing...The private sector is very important.”
The city hasn’t detailed how it will spend all of the money from its newest housing bond. The $50 million voters authorized is more than triple the usual $15 million the city raises every two years. Charlotte has faced criticism for focusing on “workforce housing,” which is typically affordable for people making 80 percent or so of the area median income, instead of housing for the very low-income, which is where the greatest subsidies are usually needed.
From 2002 through March 2018, records show the city provided developers money from the Housing Trust Fund to build about 4,500 apartments and houses. But only about 1,300 were affordable to households making less than 30 percent of area median income, or $25,100 a year for a family of four.
The $100 million public-private housing fund will focus on creating housing for people making 30 to 120 percent of the area’s median income. That could include housing for people making up to almost $89,000, using federal income limits.
Lyles said people shouldn’t focus on which specific income groups new housing is targeted for, because there’s need at all levels.
“The issue of under 30 percent...can either be an issue that divides us or unites us. We need to make sure we’re carefully thinking through what we do in this effort so it can serve everyone, because it is a difficult and complex task,” she said.
“The concentration of low-income families is not the way to go,” said Marsicano. “You have to have mixed-income housing.”
Dale Mullenix, executive director of the Charlotte Urban Ministry Center, questioned the mayor about why there isn’t more focus on the very low income in the city’s big housing push.
“I heard the mayor and Michael (Marsicano) both say we don’t want division or controversy around the 30 (percent income level) or below,” said Mullenix. “How do we not have division if we don’t talk about the 30 and below, and if they’re not part of the conversation we’re having today?”
Lyles said very low-income housing is “definitely a part of the conversation.”
“Yes, the need is great,” she said, adding that the city should work with the Charlotte Housing Authority and private landlords renting to low-income people, as well as aiding people in getting better jobs so they can earn more money. “We have to have some balance.”
To manage the big influx of new money, the Local Initiatives Support Corporation is opening a Charlotte office and has hired a local executive director to oversee the fund. The New York-based group manages private development and other projects meant to help low-income people.
Former Bank of America CEO Hugh McColl Jr. said the effort is a good start and encouraged business leaders to do more.
“There’s still a hell of a lot more to be done,” said McColl. “Over the past decades, we’ve built Charlotte into a great city. But too many people have been left behind.”