NeighborWorks Capital and National Equity Fund (NEF) have joined forces to provide high-performing community-based nonprofit organizations with a set of standardized, equitable low-income housing tax credit (LIHTC) terms.
The creation of the NeighborWorks Capital Equity Fund stems from a desire to provide NeighborWorks network organizations with access to equitable, consistent capital
"The idea to create a LIHTC fund for NeighborWorks organizations came from my time leading a syndication business," said Jim Peffley, CEO of NeighborWorks Capital, a national Community Development Financial Institution. "The capital marketplace is not always equitable, and that is certainly true for the LIHTC market. Because syndicators and investors need to secure large numbers of transactions in a competitive environment, they often prioritize large developers. Large developers with a significant pipeline have more leverage with investors, and, as a result, they often demand and receive better terms. I saw this happen year after year. Most nonprofit developers do not have the scale to have that market leverage, and, as a result, they often do not receive the best available terms."
The NeighborWorks network, which is made up of approximately 250 nonprofits across the country, has a pipeline of more than 8,000 affordable housing units, according to Peffley.
While the fund is a new option for in-network organizations, NEF is not a new partner to NeighborWorks America, having worked with 76 NeighborWorks members to deploy more than $2 billion in equity for the creation of nearly 350 developments across the country, which resulted in approximately 20,000 affordable housing units, according to the LIHTC syndicator.
Now, organizations within the NeighborWorks network will receive consistent terms for LIHTC developments, including NEF's exit terms that preserve affordability and protect against potential challenges in retaining their development at the end of the compliance period, said the fund partners.
"Our decades of experience working with partners of all sizes has helped us understand that there can be different experiences in terms of navigating LIHTC processes, terms, and resources depending on the size and tenure of a developer,” said Matt Reilein, NEF president and CEO. “The NeighborWorks Capital Equity Fund allows us to provide partner organizations with LIHTC terms that will positively impact the development of more affordable housing across the country for families in need."
In addition to equitable terms, the fund will allow network organizations to recognize efficiencies, including savings on legal fees and time spent on negotiating investment agreements.
"This fund changes that dynamic for members of the NeighborWorks network," Peffley added. "NeighborWorks organizations are true community-based organizations that advance the priorities of residents. These organizations and the communities they serve deserve the best available LIHTC terms. Collectively, NeighborWorks organizations produce more affordable rental housing than any other developer. This partnership with National Equity Fund gives these critical nonprofits the stature they deserve in the marketplace."
Officials hope to raise a minimum of $100 million and are targeting a closing of the fund by the end of the year, according to Liz Hibbard, managing director of innovation and strategic growth at NEF.
"This is an incredible opportunity to empower a nonprofit network to drive deeper impact in communities that have historically been underbanked and underserved," Hibbard said. "Now, we can offer mission-forward partners equitable terms and enhanced transparency while furthering our mission and vision that all individuals and families have access to safe, stable affordable housing."
