Civic Community Partners and Norwood Development Strategies have partnered to form a middle-income housing development fund. The fund has targeted a capital raise of $100 million from social impact investors, and will provide equity investment for the development of rental housing for residents making 80% to 150% of the median area income.
"Across the state, there is a significant need for affordable housing, and that is the most pressing issue in our community," Michael Lengyel of Civic Community Partners, tells GlobeSt.com. "There are dedicated resources for low-income housing, like federal tax credits and local funds. However, in San Diego, rents have gone up and those in the middle with average incomes are struggling to obtain housing. There aren't any subsidies to help bring the cost down for those renters."
In looking for solutions to San Diego's demand for attainably priced homes, Civic noted several social impact-focused funds in other markets across the country. Social impact investors accept a lower return in exchange of a strong social component to the investment. "We set up a fund to attract those investors. They are willing to take a slightly lower return but to sponsor housing for those in the middle that will help address our housing needs. This was a way for us to help those in the middle by using private capital," says Lengyel.
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This model allows the organization to work with developers to build new construction—which inevitably comes with high land and construction costs—while delivering properties that pencil at attainable rents. "We are looking for investors that are willing to accept less than a 10% return," says Lengyel. "That is still a fair return, but that will really help our developers to build product that is going to be priced at a fair rent. It is a unique mix to generate a return while delivering a product in the right pricing range. Social impact investing seems to be the right model to do that."
The $100 million fund has the potential to facilitate the development of 2,000 new units in mixed-income projects throughout the County of San Diego. "We would like to put $5 million into each project with a target unit count of 100 units per project. With $100 million, that gets you close to 2,000 units," says Lengyel. "Not all of those units will meet the middle income, but we want a good percentage of each project to meet the middle income range."
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Kelsi Maree Borland
