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February 24, 2014 / Rebekah Seder, Editor

Impact investing and the future of housing in our region

By Rebekah Seder, Program Manager

Our region is in the midst of an affordable housing crisis. And, the current situation will only be exacerbated by the wind down of Fannie Mae and Freddie Mac’s giving. In order to begin to change the housing landscape across the region, philanthropy will need to step up and increase giving toward housing – and to make a real impact, it is going to need to move beyond traditional grantmaking. One way that foundations and other grantmakers can begin to move additional resources toward housing is through impact investing – making below market-rate loans and equity investments in entities that build or preserve affordable housing.

At a recent panel discussion, funders with extensive experience in supporting affordable housing through impact investing shared some of their lessons learned. Panelists included

  • Allison Clark of the John D. and Catherine MacArthur Foundation, which has been making program-related investments (PRIs) for the past 30 years;
  • Warren Hanson, head of the Greater Minnesota Housing Fund created by Minnesota foundations;
  • Lori Chatman of the Enterprise Community Loan Fund, which helps raise funds for affordable housing through “Impact Notes”; and
  • Maicie Jones from the AARP Foundation, which began impact investing in the last year.

Each speaker’s organization engages in impact investing in different ways, but there were some common themes that came through their remarks:

Start small: Foundations can move a small amount of money into the impact investing space – and still have a big social impact – by making small investments through intermediaries like community development financial institutions.

Don’t reinvent the wheel: There are a number of organizations out there that have a wealth of knowledge and information to help foundations get started impact investing, such as Mission Investors Exchange.

Collaboration is key: By collaborating with other funders, you can share lessons learned and spread risk. Which leads to the last lesson…

Don’t overly stress the risk: PRIs are actually very low risk investments. According to Warren Hanson, financing affordable housing projects, particularly ones financed through low income housing tax credits, are especially low risk. These multifamily developments have the lowest rates of foreclosure among others in their asset class.

As moderator Michael Bodaken of the National Housing Trust put it, investing in housing isn’t impossible – and it doesn’t even have to be that difficult. We have the tools to solve the affordable housing crisis in our region. We just need, in his words, the determination, will, and thoughtfulness to make it happen.

For those who were unable to join us for the event, the video of the panelists’ remarks can be found here.

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