Breaking new ground: the fight for affordable housing

Driven by a growing economy and strong stock market, home and rent prices have steadily increased for nearly 10 years straight. While this growth has been a boon for owners, renters are increasingly finding it harder to find stable, long-term housing. In fact, nearly 40 million Americans cannot afford their current homes—spending as much as half of their incomes just to meet their rentfootnote1.

To help solve an issue as large as the affordable housing crisis, city, county and state governments, nonprofits and private companies will need creative new ideas. That’s the approach Bank of America and its partners are taking to address housing shortages in San Francisco and Los Angeles.

Neither governments nor nonprofits alone seem able to marshal the resources needed. Where, then, can the money be found? Increasingly, the answer seems to be private investors—who are making great strides in learning how to partner with governments and nonprofits to address the housing crisis. In 2019, Bank of America was recognized on Fortune Magazine’s annual “Change the World” list for its work to address this gap in affordable housing through innovative financing solutions.

New financing partnerships could reshape housing

The federal government spends nearly $200 billion per year on housing assistance programs, but the vast majority of it is allocated, via tax deductions, to households earning more than $100,000 per year. Americans earning less than $30,000 per year receive only a small slice of that assistancefootnote2.

Meanwhile, it’s estimated that as many as 7.2 million new units are neededfootnote3 to meet current demand for affordable housing. To address this shortfall, local governments often partner with nonprofits to finance the building of more affordable homes. These partnerships provide critical support, but the problem is simply too large to be resolved on a state-by-state, or even county-by-county, basis.

That’s where private capital—through grants or direct investments, and working in partnership with local governments and nonprofits—can help come up with solutions. In 2020, for example, Bank of America deployed a record $5.9 billion through its Community Development Banking unit to help neighborhoods across the country in greatest need of affordable housing.

This investment helped produce more than 13,800 housing units, of which more than 13,000 were affordable, including:

  • 6,000 green housing units
  • 2,400 housing units for seniors
  • 1,600 housing units for veterans, special needs and the formerly homeless

This investment also supported 1,650 affordable housing units developed by Minority and Women-Owned Business Enterprises

1,400 new affordable units in Los Angeles

people in a circle with shovels

When completed, the Jordan Downs project will add 1,400 affordable housing units, new retail spaces, a community center, public green spaces and parks — and importantly, a place where neighbors can call home.

Five years ago, Jordan Downs, a 1950s-era public housing development in the Watts neighborhood of Los Angeles, was in dire need of redevelopment—which it’s now getting, through the cooperation of Bank of America, the City of Los Angeles, the Los Angeles Housing Authority, the nonprofit BRIDGE Housing and for-profit developer Michaels. The completed project will add 1,400 affordable housing units, new retail spaces, a community center, and public green spaces and parks. For the initial phase of the project, Bank of America Merrill Lynch provided $56.7 million in construction loans and $50.4 million in low-income housing tax credit (LIHTC) equity to break ground on 250 new units.

Now, other large companies are beginning to see the importance of helping develop affordable housing in the communities they serve. In January 2019, Washington state-based Microsoft announced a partnership with the cities of Seattle and Redmond to commit $500 million to increase the affordable housing stock. Their decision is part of a growing trend that looks beyond just philanthropy to find solutions to this problem.

To solve an issue as large as the affordable housing crisis, city, county and state governments, nonprofits and private companies will need to adopt and improve on the creative approaches like those that made the Jordan Downs and SF RAD projects a success. The combination of policy expertise from local governments, the deep understanding of the issues NGOs have, and the ability for large financial institutions to find ways to deliver the capital needed are all key elements to finding a lasting solution. As this cooperative model matures and brings more creative solutions to bear, it offers great promise for resolving affordable housing issues not just locally, but even globally.

Read more about our commitment to affordable housing and community development.

3,500 homes for 10,000 San Franciscans

In 2016, Bank of America Merrill Lynch completed financing for the San Francisco Rental Assistance Demonstration (RAD) program. San Francisco’s public housing projects needed an estimated $230 million for repairs—money the San Francisco Housing Authority didn’t have. To help close the financing gap, Bank of America combined debt and equity solutions to fund nearly 3,500 affordable housing units, providing long-term homes to more than 10,000 Bay Area residents. The bank also used tax-credit equity to get residents access to health and financial wellness services, create common spaces—and even install rooftop gardens so tenants can grow fresh produce.

Originally published 03/27/2019