Special Program Connects Developers to Financing

The national housing crisis has dramatically increased the urgent need for reasonably priced residential options across the nation and in our community. But dozens of low-income Jackson residents will soon have access to more quality, affordable housing with the development of Holly Hills, an apartment complex that is being renovated through a special financing program.

“I am excited to see this development in the City of Jackson and for the opportunity it represents for our citizens who need a place to call home,” said Jackson Mayor Harvey Johnson. “This is an outstanding example of how public-private partnerships can improve the quality of life for low-income families. It will help us in our work to create a better quality of life for all our city’s residents.”

A total of 60 rental units will be added to the affordable housing stock for people who meet income and other eligibility requirements. The complex will feature two- and three-bedroom units; fully furnished appliances; energy efficient and environmentally friendly choices like tankless water heaters, low-flow toilets, and low-VOC flooring; and an on-site business center. Construction began this month and will be completed by the end of the year.

The project is made possible with funding from the Mississippi Low-Income Housing Tax Credit Equity Fund (MSEF), which is managed by HOPE (Hope Enterprise Corporation/Hope Credit Union). Holly Hills represents a total investment of $7.75 million in affordable housing development.

“Access to decent, reasonably priced places to live continues to be a challenge across the nation, but it is a particularly difficult issue here in the Mid South,” said HOPE CEO, Bill Bynum. “The development of residences like Holly Hills strengthens communities and provides a better foundation for families and improves all of the health, education, and economic outcomes associated with improved living environments.”

The Low-Income Housing Tax Credit (LIHTC) Program, established by Congress in 1986, is a dollar-for-dollar tax credit for affordable housing investments. It was established to give incentives for the utilization of private equity in the development of affordable housing aimed at low-income Americans. LIHTC projects account for the majority of all affordable rental housing created in the United States today.

Great Lakes Capital Fund (GLCF), one of the fund partners, is evaluating the viability of projects for financing and ensuring compliance with LIHTC guidelines. GLCF has a 25 year track record of creating and managing LIHTC equity funds and is currently managing $1.2 billion in LIHTC assets.

“We are very honored to be part of this great team,” said Mark McDaniel, President & CEO of Great Lakes Capital Fund. “This is the best of triple bottom line investing, which provides investors with a great return on capital, is socially motivated and creates sustainability. It is the kind of capital that changes people’s lives for the better.”

MSEF matches local and regional investors with local LIHTC developers who have been awarded federal tax credits for their projects. Investments in the fund will provide a good return to the investor, are historically low risk, and provide capital to build high quality affordable housing in the region. Investors in the current LIHTC fund include BankPlus, First Commercial Bank, and Trustmark and one non-bank organization.

Until recently, relatively small corporate investors have not been able to enter the market. Large multinational investors dominated the market and used their economies of scale to determine pricing. With the national investment landscape now changed so dramatically, there is a large opportunity for smaller corporate investors to enter this market with relatively high yields and an easily manageable risk profile.

These non-traditional LIHTC investors often lack experience in this market and will also look to diversify their exposure in the LIHTC market to multiple projects which will likely be beyond their means as a sole investor. Regional equity funds such as MSEF solve these issues by providing the experience in LIHTC equity investment and management, pooling investors and projects to diversify risk, maximizing returns and concentrating impacts in the investors’ territory.

Many of the national investors who had been the largest purchasers of tax credits in recent years are facing financial challenges and so are no longer purchasing credits. Investors who are still willing to buy tax credits are cherry picking the highest yielding projects, which mean less equity for those housing developers and none for the many developments that cannot afford these yields. As a result, developers across the region who have been allocated tax credits by their State agencies are not able to find investors to purchase their tax credits for a price that allows the development to work.

New Horizon Group is developing the complex and has successfully completed a number of LIHTC construction projects. The company works to develop these properties in a way that meets the housing goals established by community leaders and residents.

“Through the MSEF, we are developing a tremendous asset for the community and an outstanding solution to pressing housing needs,” said David Strange, Managing Member of New Horizons Development, LLC. “Holly Hills will be a well-planned, well-constructed and professionally managed development where residents and staff can enjoy a safe, secure, family-oriented environment and take pride in where they live.”

HOPE is developing additional LIHTC funds that will be accessible to developers in Mississippi and Louisiana.