Money can’t fix everything, but when it comes to building more homes affordable to America’s middle-income workforce, it sure can’t hurt. Ron Terwilliger, chairman and CEO of Atlanta-based Trammell Crow Residential, recognized that recently when he made two $5 million gifts to further the development of more workforce housing. Enterprise Community Partners, a nonprofit based in Columbia, Md., used its gift to establish the Enterprise Terwilliger Fund, which it expects to use to springboard the development of more than 2,000 affordable homes a year, through three different funds: the Maryland Regional Workforce Housing Fund, the Atlanta Land Assemblage Fund, and the Enterprise Community Loan Fund. Stockton Williams, managing director of the Enterprise Terwilliger Fund, spoke to AFFORDABLE HOUSING FINANCE in May.
Q How will Enterprise turn Ron Terwilliger’s $5 million gift into $130 million in housing?
A $2 million is Enterprise’s investment in a $100 million fund that will create workforce housing in Maryland, D.C., and northern Virginia. Another $1 million leverages $5 million of philanthropic capital as part of the $30 million Atlanta Land Assemblage Fund to acquire sites for affordable housing development in metro Atlanta. The remaining $25 million in lending activity is what Enterprise’s internal loan fund is able to make in additional loans as a result of the gift. By adding to our balance sheet, we are able to borrow and lend more funds for affordable housing.
Q Why is producing workforce housing important?
A Housing costs have outpaced the rate of inflation in many markets. According to the National Housing Conference, more than 5 million working families in the U.S. pay at least 50 percent of their income for housing, a 67 percent increase since 1997. In many communities, people who provide the bulk of vital community services—teachers, firefighters, police officers, service workers—often cannot themselves afford to live in the communities they serve.
Q The new entity being formed by this gift is the Maryland Regional Workforce Housing Fund. Can you explain how that fund will work, and what type of housing it aims to create?
A It’s a fund for workforce housing, which we define as 60 to 120 percent of the area median income. The $100 million Maryland Regional Workforce Housing Fund, managed by Enterprise, will provide financing to create workforce housing developments; transit-oriented housing developments; mixed-income developments; inclusionary housing; and mixed-use projects with a residential component. We think transit access is critical from both an affordability as well as a sustainability point of view. Enterprise is deeply committed to making affordable housing as environmentally responsible as possible. That’s certainly an important strategy and also an important strategy for workforce housing development. The fund will focus on “double bottom line” investments, coupling the social mission of affordable housing with marketrate returns on investments in workforce housing developments.
Q What kind of financial support will the fund provide, and when will it begin making investments?
A We’ll be able to provide a range of financing options for developers. A loan for construction could be one use, a mezzanine financing to come in at a key point in the process could be another, and the fund will be able to support acquisition and predevelopment activities to some extent. We’re just in the phase now of raising capital and cultivating the pipeline of projects, so there aren’t any transactions in it yet, but we expect to be at it by the fall. Once we reach $40 million in capital raised, the fund is able to start deploying resources. That’s the first milestone to reach in terms of capital raising. We’ve seen a lot of interest in the fund from developers who have projects that would qualify. In all likelihood, we would see the first projects coming online in 2008.
Q At what stage of the development process will the fund inject money into workforce housing projects?
A Generally, the funds through Enterprise Community Loan Fund and the Atlanta Land Assemblage Fund are for predevelopment and site acquisition. Funds through the Maryland Workforce Housing Fund will be available for those and other purposes based on project need and other factors.
Q Won’t financing new rental housing be difficult without soft funding or equity investments?
A I agree. That’s why it would be great to have resources to stimulate equity investment in a broader range of affordable housing than the lowincome housing tax credit (LIHTC) serves. The needs the LIHTC is designed to serve are still huge. There ought to be additional tax credits for affordable and workforce housing, both rental and for sale, but they shouldn’t come at the expense of existing programs that are already oversubscribed.