means that developers receive soft money up front, so less soft money has to be raised during the deal. Buying preservation projects with PFS capital is also less risky during the “hold” stage before recapitalization because philanthropic part- ners provide a safety net for affordable housing providers just in case a deal falls through. Four percent tax credit financing is an excellent example of how Pay for Success can complement existing programs to make them more efficient and popular with developers. Case Study: Mark Twain Residences NHPF recently began preservation of the historic Mark Twain Hotel in Chicago into an affordable housing prop- erty with 152 single-room occupancy units, combined with a mixed-use multifamily/retail structure. The prop- erty is located in a fast growing and revitalizing corner of the Gold Coast in Chicago where high-end luxury apart- ments are in high demand and being constructed. If Mark Twain were sold to a market buyer, property would be torn down and existing working poor residents would be dis- placed or become homeless. After loss of over 2,200 SRO units, the City of Chicago passed the SRO Preservation Ordinance in November 2014. The State (IHDA), City (DPD), and the Chicago Housing Authority (CHA) have set the SRO preservation projects as a high priority. Government Goal: The city of Chicago prioritizes addressing significant home- lessness/resident displacement prevention. In addition, the city underscores preservation of a scarce housing resource. Because most SRO occupants would likely end up homeless without affordable housing, the government saves money long-term by investing in preventive housing solutions that reduce social service costs and revitalize the surrounding area, raising property values and promoting increased tax revenues and investment into the neighborhood.
Mark Twain Hotel, c. 1940
Government Risk: None; the government does not incur risk through PFS financing.
Government Finance: City saves $842,000 of highly competitive donation cred- its by using investor money to pay upfront costs instead. Donation credits can be used to finance more projects. Government Efficiency: Stabilized properties and improvement in residents’ health and safety reduces burden on government resources and helps revitalize areas without gentrification.
Pay for Success & Affordable Housing | Stefano Rumi 39
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