Partners (Spring 2001)

Successful CDCs Require Strong Partnerships
Bank of America CDC

Bank of America operates one of the oldest and largest bank-owned community development corporations (CDC) in the United States. Since its inception in 1978, Bank of America CDC has invested more than $700 million in affordable housing developments nationwide, producing more than 20,000 units of affordable multi-family and single family housing. Working in collaboration with nonprofit community-based organizations and local governments, the CDC acts as the primary developer, providing the development expertise, as well as the debt and equity financing. The CDC currently operates in 17 cities across the country.

CDC Efforts in Tennessee

Bank of America started its CDC efforts in Nashville in April 1997. Since then, the CDC has rehabilitated more than 1,850 units of affordable multi-family housing in both Memphis and Nashville. These projects included some of the cities’ most distressed complexes. In late 1999, the CDC started developing in-fill single family affordable housing, and 17 new homes have been brought to market to date. These neighborhood initiatives will eventually result in more than 200 new homes in distressed areas. In total, the CDC has over $71 million in projects developed or under construction in Tennessee.

Neighborhood Stabilization

The CDC has completed the large-scale rehabilitation of four multi-family projects in Memphis and Nashville, with one project currently underway in Nashville. While each of these projects is quite different in terms of the degree of rehabilitation and investment required, as well as the financing structure and the partnerships involved, each has served its function of providing safe, affordable housing for low- and moderate-income families and introduced a stabilizing force in distressed neighborhoods.

The CDC puts many sources of funding together to balance its mission, which includes providing affordable housing to those who need it most—with sustainability—along with the business need to make a profit. In all of its projects, the CDC provides a significant equity investment. While some of the projects are conventionally financed, many are financed by two common mechanisms—tax exempt bonds provided by the Tennessee Housing Development Agency and Low Income Housing Tax Credits. Utilizing these sources increases a development’s ability to cash flow at rents affordable to low- and moderate-income families and individuals (those at or below 80 percent of area median income). In addition, the CDC seeks investment partners to provide additional equity, including FannieMae and local development authorities.

Integrating Social Service Provision

In addition to physical rehabilitation and providing managerial services, resident amenities are a key component of building a successful community. A unique feature of the Bank of America CDC multi-family redevelopment projects is the Make A Difference Centers. These centers provide after-school educational programs for children as well as adult education classes. The centers have libraries and computer labs. In Nashville, the CDC has partnered with the Woodbine Community Organization (WCO) to operate the centers. WCO brings additional resources to these programs through its connections to local businesses, organizations, and foundations.

The Single-Family Approach

The CDC also develops single-family, affordable homes in high impact locations within the Nashville market. CDC project locations are generally distressed neighborhoods that lack significant home ownership, but have community-based organizations focused on revitalization. Local government commitment to revitalize the area is also a necessity. In general, the single-family projects are financed exclusively through Bank of America debt and equity. In all instances, the CDC will target a neighborhood where there is an existing housing concentration in order to maximize the impact on the surrounding area.

The CDC also targets neighborhoods where it can either enhance work already underway by the public sector or where private investment has been absent for a significant amount of time. Frequently, the CDC will provide an initial private investment that can act as a catalyst in attracting additional public and private investment to a neighborhood. The CDC usually relies on the community-based organizations working in the area. These allies are instrumental in identifying potential homebuyers and assisting them throughout the homebuying process. In addition, they can often obtain additional financing resources and help promote the CDC to local government officials and other community organizations.

In 1999, the CDC formed a partnership with WCO to develop up to 100 single-family homes in selected neighborhoods throughout Nashville. One of the target neighborhoods for this partnership—the Hope Gardens neighborhood-lies just north of the central business district. The Tennessee Housing Development Agency designated the area a Bicentennial Neighborhood in 1996. As a result, it has been the target of significant revitalization efforts by both the public and private sectors. To date, the partnership has built approximately 10 new homes, helping stabilize this distressed urban neighborhood and attracting other revitalization efforts and development on the part of local community and faith-based organizations.

Bank of America CDC has several other single family initiatives underway in Nashville. In partnership with WCO, the CDC was selected by the Metropolitan Development and Housing Agency (MDHA) to develop the single-family component of the HOPE VI redevelopment of Preston Taylor Homes. In an effort to meet the goals of the HOPE VI program, MDHA determined that the best way to encourage mixed income development is to provide the opportunity for homeownership. HOPE VI funding for this component will be used to provide mortgage assistance in order to ensure affordability. This project is typical of the public/private partnerships in which the CDC succeeds by including the local housing authority and a nonprofit organization.

The CDC has also formed a partnership initiative with MDHA and another local non-profit, Residential Resources, Inc., to revitalize an extremely distressed neighborhood in East Nashville adjacent to one of the CDC’s multi-family projects. This is a common approach of the CDC where a significant investment is made in a multi-family project as the hub of a revitalization effort, and single family projects are undertaken in the surrounding neighborhood in order to protect the initial investment and further stabilize the neighborhood. The first phase of this project will be at least 25 new homes in a concentrated two-block area.

Like most affordable housing developers, Bank of America CDC is constantly working with its partners to further develop and refine its formula for a successful development project. A well-funded and experienced CDC is typically more effective in bringing substantial private capital into projects and neighborhoods where private sector capital is often lacking. While some nuances of the business and market change, the basic operating principals illustrated in Bank of America CDC’s projects in Tennessee are constant.

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