Developers Adam Noel and Tom Anderton have spent the past seven years focusing on ways to build attractive, affordable apartments in Detroit. But they faced an uphill battle getting financing to renovate an abandoned building in Detroit’s Midtown neighborhood. The bank that had loaned them money before was too small to take on a project that would ultimately create 28 units.
Grant makers are backing a variety of solutions to bolster the availability of affordable housing, in part to address other issues they care about, like health and education. Read more:
Only after they discovered the Detroit Housing for the Future Fund, a new effort that finances low-cost housing in the city, were they able to go forward with the project they called
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Developers Adam Noel and Tom Anderton have spent the past seven years focusing on ways to build attractive, affordable apartments in Detroit. But they faced an uphill battle getting financing to renovate an abandoned building in Detroit’s Midtown neighborhood. The bank that had loaned them money before was too small to take on a project that would ultimately create 28 units.
Grant makers are backing a variety of solutions to bolster the availability of affordable housing, in part to address other issues they care about, like health and education. Read more:
Through the fund, Noel and Anderton secured a $2.55 million loan to transform the three-story building into apartments. Noel says his company was able to secure better terms than it could have through a traditional bank.
“It really reduces our cost of capital, and it reduces the amount that we have to charge our tenants in order to make sure that we cover our bills,” he says.
The Charlotte is one of 11 housing projects, with a total of 388 units, that have been financed by the Detroit Housing for the Future Fund since it started in 2020. The fund says more projects will be underway soon.
The fund was created with support from local and state governments. It is managed by LISC Detroit, an affiliate of a national community-development finance institution, or CDFI, called the Local Initiatives Support Corporation.
LISC, which was created by the Ford Foundation in 1979, has invested more than $2.8 billion in neighborhoods dominated by people with low incomes. It was a pioneer in testing whether foundation and corporate money could be successfully invested in areas that banks ignored — and proving that repaid loans could provide a revolving fund to fuel expansion.
CDFIs have received a rush of support as foundations and corporations have sought ways to close the racial wealth gap after George Floyd’s murder.
CDFIs have since grown significantly, but they really took off after foundations and corporations sought ways to close the racial gap in the wake of the protests after George Floyd’s murder in 2020. Billionaire philanthropist MacKenzie Scott alone has given them more than $407 million, including $40 million for LISC. Foundations such as MacArthur and W.K. Kellogg Foundation have supported them, as have Bank of America, Wells Fargo, and other major banks.
Still, broader economic trends have limited the impact of organizations like the Detroit Housing for the Future Fund.
Labor shortages and increased construction costs have made progress harder, and rising interest rates will only make financing home building more difficult.
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Range of Housing Activities
CDFIs like LISC are complex institutions. These mission-driven organizations — which are often but not always nonprofits — generally help people buy homes through down-payment assistance programs, for example, and lending money to homeowners for renovations.
They are also active in financing affordable housing. This is vital because for-profit developers like Noel and Anderton often have a hard time balancing the low-price rentals with the cost of construction and maintenance. Getting low-interest loans is one important way developers can bridge that gap to make their affordable-housing projects viable.
CDFIs have more flexibility than traditional lending institutions when it comes to financing affordable housing, says Camille Walker Banks, executive director of LISC Detroit. Traditional banks put a greater emphasis on ensuring that borrowers repay their loans and therefore are less likely to take on risky projects. On the other hand, LISC Detroit’s mission is to invest in neighborhoods where a lot of low-income people live. This allows LISC Detroit to offer better terms for its loans, tailor support to borrowers’ needs, and finance projects that a traditional bank would avoid.
“We can be more mission driven as a first priority,” Walker Banks says.
LISC Detroit’s Housing Fund depends on philanthropic and corporate support. The Detroit fund has brought in about $58 million in grants, low-cost debt, and guarantees since September 2020.
Joe Powers
Mission-driven lenders can take risks financing affordable housing that traditional banks can’t, says Camille Walker Banks, executive director of LISC Detroit.
JP Morgan Chase provided critical funding early on, awarding the fund $12.5 million in loans and making $2.5 million in grants. The bank has long made investments in the city and played an especially important role when it committed to provide $200 million in loans and grants to Detroit after it went bankrupt in 2013.
The Kresge Foundation was also an important early philanthropic supporter, but it didn’t give traditional grants. Instead, it used its endowment to provide a $10 million guarantee to the fund, which meant that if the fund were to fall short of its goals, the foundation would cover financial losses up to $10 million.
“Since there were so many partners at the table, particularly lending institutions, we felt that the best tool that we could provide was that guarantee capacity, which provided additional comfort and support for others to come alongside and invest in the fund with Detroit LISC and the city,” says Wendy Lewis Jackson, managing director of Kresge’s Detroit program.
That guarantee played a key role in expanding the fund’s impact.
“If not for that [the guarantee], I don’t know that we would have been able to move forward with this program and be able to provide the units that we have to this market,” Walker Banks says.
New Rentals
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As a young woman raised in Detroit, Cheryl Anderson often felt like she would have to leave the city to find good-quality housing.
“Especially growing up, I’ve never seen any apartment complex or unit or area that looks appealing,” the 22-year-old college student says. “Everything just looked really outdated, rundown.”
That made it even more frustrating when the rent for her outdated studio apartment in downtown Detroit increased from $650 a month to nearly $800.
She then found The Charlotte. Anderson moved into a spacious one-bedroom apartment in the building that had new appliances and granite countertops. She pays around $900 a month for an apartment she says is better than her old place and cheaper than others nearby.
Most of the new housing units created with help from the Detroit Housing for the Future Fund are set aside for households earning no more than 80 percent of the area’s median income. Single people in Detroit are eligible if they earn $44,000 a year or less.
The fund has faced some obstacles.
Brittany Greeson for The Chronicle
Cheryl Anderson, 22, lives in the first affordable apartment building created with support from the Detroit Housing for the Future Fund.
It hasn’t been able to create as much housing as it had planned because developers haven’t been eager to do what it would take to meet that goal.
Walker Banks said the fund initially hoped to create 2,400 units per year by supporting large multifamily buildings. But Detroit developers have focused on smaller projects, Walker Banks says.
Noel, the developer who oversaw The Charlotte project, says LISC has been a great help to his business. He and his business partner Anderton completed renovations on a second apartment building in March with help from the fund.
“We’re creating what we think are good-quality apartments in this area that the market can bear,” Noel says, “but they happen to be for people that don’t make quite as much money as the people that live downtown or maybe live in the suburbs.”
Reporting for this article was underwritten by a Lilly Endowment grant to enhance public understanding of philanthropy. The Chronicle is solely responsible for the content. See more about the Chronicle, the grant, how our foundation-supported journalism works, and our gift-acceptance policy.
Kay Dervishi is a staff writer for the Chronicle of Philanthropy. She previously worked as an associate editor at City & StateNew York magazine covering local and state politics. She also previously reported on New York’s nonprofit sector for City & State’s sister publication, NYN Media, where she also wrote a daily newsletter for nonprofits. She received her bachelor’s degree in journalism and political science from the University of Richmond.
