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Creative Financing for Affordable Housing

Local lenders are helping municipalities participate in affordable housing projects

By David Hanrahan, President/CEO, Capital Bank of New Jersey

Reprinted courtesy of New Jersey Municipalities, June 2015

New Jersey’s banks help provide urban communities with funding for units of affordable housing, retail and commercial space. In Vineland, construction costs for Melrose Court — an affordable housing complex which will consist of 17 single-family units — were financed using Low Income Housing Tax Credits (LIHTC). The hallmark of community banks such as ours is that they understand the needs of the communities they serve and can customize solutions that work for both the municipality and the bank.

Finding solutions
To take advantage of all your options, discuss all aspects of any project with your bank's management team. Often the local bank becomes as much a part of your team as your architect, developer and community-based organizations.

"Banks are eager to lend," said John E. McWeeney Jr. president/CEO of the­ New Jersey Bankers Association. "We hear this from our members who look to improve their communities and service their customers. Based upon FDIC data, New Jersey's 98 headquartered institutions finished 2014 with net loans and leases growing from $97. 8 billion to $103.9 billion, a year over year increase of $6.1 billion or 6.3%. This activity will help fuel New Jersey's economy by providing the funds needed to support important projects like Melrose Court.

The Melrose Court project will also benefit from an Affordable Housing Program grant from the Federal Home Loan Bank of New York and Capital Bank of New Jersey. The Federal Home Loan Bank System's Affordable Housing Program (AHP) provides Federal Home Loan Bank members with direct subsidies, which are passed on to qualified households through a sponsoring local non-profit organization. AHP financing is combined with other funding sources to create housing for moderate-, low and very -low -income families. Program awardees receive this funding through a competitive process. Each competing project must be sponsored by a financial organization that is a member of the Federal Horne Loan Bank in partnership with a community-based sponsoring organization.

The Vineland Housing Development Corporation was awarded a $263,500 AHP grant for Melrose Court. Capital Bank of New Jersey sponsored the application. The Vineland Housing Authority promotes affordable housing, economic opportunity and a suitable living environment free from discrimination in the city. The authority serves the housing and social needs of lower income, elderly, disabled and families within its jurisdiction.

"I am excited that Capital Bank took an opportunity to invest in this project," said Vineland City Council President Anthony Fanucci. "This site is an excellent choice for construction and will provide many opportunities for our citizens to finally call someplace "home." This shows good business sense, long term planning and pride in our community. Capital Bank is a true community partner and I look forward to their continued success for many years to come."

The Affordable Housing Program (AHP)
Created by Congress in 1989, the AHP and the Federal Home Loan Bank of New York, which covers New Jersey, New York, Puerto Rico and the U.S. Virgin Islands, awarded its first grants in 1990. In total, the Federal Home Loan Bank of New York and its members have supported 1,376 projects with more than $450 million in grants, helping to create or preserve nearly 60,000 units of affordable housing and generating an estimated $ 8.4 billion in total development costs. Now, 25 years after the first grants were made, the Melrose Court project illustrates the reason for the program's success.

"The strength of the Affordable Housing Program is in our members' commitment to and familiarity with the communities they serve," said Jose R. Gonzalez, president and CEO of the Federal Home Loan Bank of New York. "Our members know the housing needs of their communities, and work closely with the housing organizations that are focused on meeting those needs. This personal connection is visible in the Melrose Court project, and with Capital Bank of New York's presence in Vineland, and is visible in the nearly 1,400 affordable housing initiatives our members have supported through the AHP over the past 25 years."

Bankers spend countless hours supporting the communities they serve. Whether in a classroom teaching financial concepts, building a new house for Sandy victims or providing the financial wisdom and loans to promote community growth, New Jersey's bankers will become a part of your team and help find ways to extend affordable credit to municipal projects.