By Amos Maki

A new initiative to provide permanent financing to the owners or developers of multifamily properties targeting low-income residents could have a major impact on Shelby County.

Nashville-based Pathway Lending is administering a program that will offer long-term, fixed-rate financing, which will be leveraged with federal Low Income Housing Tax Credits, to develop or rehabilitate apartment communities for low-income residents across the state. Members of the Tennessee Bankers Association will join the consortium that will be making the loans.

“If you’re an owner or developer who has been awarded tax credits, or has been or is in construction but has been awarded tax credits and need permanent financing, that’s where we come into the equation,” said Pathway Lending senior vice president Hank Helton.

The Tennessee Housing Development Agency’s 2012 Housing Needs Assessment determined that 150,000 more affordable rental units were needed across the state. The THDA report said that to provide enough affordable rental housing for every renter household in the state that earns less than $20,000 a year, Tennessee would need at least 100,000 more rental units renting for $500 per month or less. When the incomes of those living in existing low-cost rentals are taken into account, THDA says the actual shortfall of units jumps to 150,000 units as many households who earn higher incomes are paying relatively low rents.

THDA says the dearth of affordable housing units ripples throughout the county and state, compounding the problems associated with homelessness, foreclosures and other housing problems.

The need in Shelby County is especially acute. According to THDA, Shelby County has 83,850 low-income renters and 39,200 of those renters – or 46.8 percent – experienced “severe housing problems.”

“It just suggests there are not enough units in Shelby County for households that are low-income families.” –Mick Nelson, Tennessee Housing Development Agency

HDA defines severe housing problems as spending more than 50 percent of gross income on housing, lacking kitchen or plumbing facilities or living in overcrowded conditions. Shelby County led the state in the number of low-income renters and the number of renters experiencing severe housing problems.

“These are really, really significant problems,” said Mick Nelson, senior adviser for strategic and policy initiatives at THDA and author of assessment. “It just suggests there are not enough units in Shelby County for households that are low-income families.”

From 1987-2008, Shelby County led the state in the amount of low-income housing tax credits received through the state and the number of affordable units created. County properties were awarded $28.3 million in Low Income Housing Tax Credits through THDA, resulting in 6,541 units of affordable housing over that period.

The new program aims to chip away at the number of affordable rental units needed by creating financing to develop or rehabilitate apartment communities with rents that are affordable to households earning 80 percent or less of an area’s median family income. The program is currently offering a 5.25 percent fixed-interest rate for 15 years with a 30-year amortization.

“We hope we’ve created a practically priced, long-term financing product,” Helton said.

Bankers association president Brad Barrett said the program should be attractive. “By reducing risk concerns and increasing lending opportunities, we are offering our members a safe, sound and profitable community development lending opportunity,” Barrett said.

THDA executive director Ralph Perry said a public-private initiative was needed to help solve the problem. “By leveraging our public and private resources, we will be able to provide more quality affordable housing opportunities in communities across the state,” Perry said.