Money is a big problem for nonprofits trying to build affordable housing. It’s expensive to redevelop old buildings or build new ones.
There are tax credits and grants, and in Seattle there’s money from the city housing levy.
But one group is tapping a new source: private investors, who get a return on the money they put into affordable housing.
That’s the idea behind a new 50-unit development called The Parker Apartments that has opened on the north side of Queen Anne Hill. It used to be student housing for nearby Seattle Pacific University but has been redeveloped into studio, one-bedroom and two-bedroom units renting for about half the market rate.
Tory Laughlin Taylor with Bellwether Housing, the nonprofit that redeveloped the Parker, says such projects could keep rising rents from forcing more people out of the city. The Parker is aimed at people making 50 to 60 percent of the area's median income, Bellwether says.
Most of the $12 million spent redeveloping the Parker Apartments came from government grants and loans. But $1.8 million came from investors. Each one invested $25,000 to $100,000 to help make the Parker a reality.
Investors are guaranteed they’ll get 100 percent of their investment back in five years, and each year they’ll collect a 2 percent return. Bellwether Housing also promises every dollar invested will leverage five more dollars in funding for affordable housing.
"What we're promoting really is a low-risk investment in a stable nonprofit that can deliver both financial return and the impact of their dollars in solving this problem," Laughlin Taylor said. "Or people could put it into money market and get a .25 percent return."
Laughlin Taylor calls it impact investing, a form of socially responsible investing.
Investment adviser Leslie Christian put money into the Parker and encourages others to do so, too. Is this purely charity?
"Absolutely not," she said. "First, it’s a moral imperative to have charitable housing. Secondly, it is an investment. It’s credit-worthy because Bellwether has been in business for 30 years."
Can this type of private investment be a big part of the affordable housing funding future? It’s too soon to tell.
Those investments in The Parker Apartments are for five years, and Bellwether Housing is counting on investors renewing for another five years. That promised return of 2 percent looks good today, but interest rates are expected to go up. So in five years it might not be as appealing to socially minded investors.