Housing Policy Debate • Volume 2, Issue 2 499

Preserving the Low-Income Housing Stock:What Nonprofit Organizations Can Do Todayand Tomorrow

Neil S. MayerCity of Berkeley, California

Abstract

In recent years, nonprofit organizations involved in housing have multiplied innumber and expanded the size and scope of their activities in low-income housingpreservation. Newly available data show that nonprofits now constitute a signifi-cant sector in the upgrading, maintenance, and management of affordable housingand continue to focus their efforts on serving those most in need. Analysis alsoindicates that the potential exists for significant further expansion of their activi-ties in the short and medium term. While nonprofits cannot by themselves meetthe enormous needs for preserving low-income housing, they can be major contribu-tors, particularly if carefully designed expansion of federal support for projects andoperations comes to complement their current resources.

Problem and opportunity

Unquestionably, we face on a national scale a substantial and wors-ening problem in preserving a sufficient stock of decent housing atcosts that are affordable to low-income people. Detailed analysisshows that a significant portion of that stock has been lost to a com-bination of deterioration and abandonment on the one hand andupgrading for higher income occupancy on the other.1 Increases inrents and home prices have created much heavier burdens for manylow- and moderate-income people and have left rising numbers ofpeople homeless entirely. Further, we now confront potential sub-stantial losses from the existing subsidized stock in particular, asmortgage prepayments, expiring subsidies and use restrictions, andother features of the true long-run operation of these projects andtheir underlying subsidy programs come into play.

In recent years, nonprofit organizations involved in housing, andcommunity-based nonprofit organizations in particular, have multi-plied in number and expanded the size and scope of their housingpreservation activities. They may be well poised to make increas-ingly effective responses to the challenges of housing people oflimited means. This paper traces the evolution of contemporarynonprofit activity; suggests why nonprofit action may be of particu-lar value in facing today’s problems; assesses the magnitude,

500 Neil S. Mayer

quality, and character of nonprofit action in housing preservation todate; summarizes what nonprofits need in order to extend theireffectiveness to new levels; highlights some local initiatives that areproving or may prove effective in helping such organizations domore; and outlines the growth that might occur in nonprofit actionin the future with properly designed support, especially from thefederal government.

The conclusions are in many ways positive. Nonprofits havereached a significant scale of aggregate activity and capacity, haveample opportunity for growth over the short as well as long run,and seem well served by recent efforts to help them extend theirhousing preservation work. An opportunity exists for various actorseffectively to commit newly increased levels of resources to aidingnonprofit organizations in their efforts. But nonprofit activity willnot reach its potential unless such resources, including a significantfederal contribution, are properly directed to them and unless non-profits and their sources of support collaborate in further effectivecapacity building. Even the best efforts on all sides will fall wellshort of meeting national low-income housing preservation needs inthe near term.

Nonprofit organizations in housing: then and now

Nonprofit organizations have been involved in housing and housingpreservation for many years. But the nature of their participationhas changed dramatically, in ways that have important implicationsfor the organizations’ role in preserving low-income housing in thefuture.

In the later 1960s and early 1970s, nonprofit organizations wereactive sponsors of housing projects using federal insurance, below-market interest rate loans, and project operating or rent subsidies.But a large share of these organizations — often church groups andother long-standing institutions without a housing development ormanagement history — were in fact sponsors only. They joined withprivate developers, contractors, and management companies toproduce and operate housing projects, primarily in new construc-tion. But most did not, generally by design, build actual indepen-dent project capability in terms of such basic elements as providingtrained in-house development staff or increasing independent accessto financing. Significant exceptions include such national organiza-tions as Volunteers of America, Retirement Housing Foundation,and National Church Residences, which built internal capacity andgrew to play important roles in Section 202 and other programs.

Preserving the Low-Income Housing Stock 501

Nonetheless, these organizations did not generally represent abroadly emerging nonprofit housing sector substantially comple-menting or competing with private sector activity.

At the same time, a small group of community-based nonprofit orga-nizations began to undertake housing development and manage-ment. Many of these groups were supported by funds from the FordFoundation or the federal government under the Special ImpactProgram of the Equal Opportunity Act and regarded at least limiteddevelopment work as a goal from the outset. Others sprang fromadvocacy efforts of the time and turned to housing project work onlylater. Although some of these organizations, though by no meansall, have emerged as leaders in the nonprofit development field overan extended period, they numbered only in the dozens until themid-1970s, when Community Development Block Grant (CDBG)funding and other new sources of organizational support stimulatedsome additional rounds of growth. Best available evidence aboutthe universe of such community-based development organizations(CBDOs) indicates that fewer than a quarter of those in existencetoday were even in operation at all by 19722 and of those involved inhousing rehabilitation today, only 35 percent existed before 1976.3Among organizations that existed before 1972, on average nearlysix years elapsed between the time they were established and thetime they started a community development project of any kind.4 Insimple terms, that means that it was rather rare for a CBDO actu-ally to carry out a housing preservation project until well into the1970s.

The picture today, described in more detail below, is very different.CBDOs are the predominant form of nonprofit organization in thehousing field, and it is likely that a thousand or more are involvedin housing rehabilitation alone (see the section on current nonprofitdelivery in the housing preservation field). Overwhelmingly theyare the developers and often the managers, not simply the sponsors,of their projects.5 They have built permanent staffs, including manyindividuals with project development experience they gained on thejob or brought with them. CBDO sources of support have broadenedto include many types of public and private monies,6 and while foun-dation funding is still modest, it has spread from Ford to manyothers.7 Specialized intermediaries, including the Local InitiativesSupport Corporation (LISC), the Neighborhood ReinvestmentCorporation, the Center for Community Change, and others exist onnational and more local levels specifically to help funnel funds andtechnical assistance to the CBDOs and to help them build their owncapabilities.

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Unlike earlier periods, then, now there truly is a nonprofit sectoractive in housing preservation as an independent (if in many waysinterdependent) set of players. This fact provides grounds for con-sidering ways of fostering further growth of nonprofit capability inpreserving low-income housing and designing public and privatefinancing and funding initiatives for effective use by nonprofitorganizations.

The potential value of nonprofit participation

Before turning to detailed evidence of the capability and perfor-mance of nonprofit organizations, let us address why it is importantto know whether these organizations are now significant actors inhousing preservation, specifically, low-income housing, and howthey might be assisted to grow in that role. Several aspects of non-profit, particularly CBDO, function suggest that nonprofit actionmay be especially beneficial and important.8

1. Most nonprofit organizations deliberately and voluntarily targettheir housing activities to meet the needs of lower incomepeople, often those in distressed neighborhoods. Nonprofitdevelopment may require less use of complex program regula-tion and monitoring and reduce the need to pay potentiallyexpensive incentives to attract developers or investors whoexpect the profitability of low-income housing preservation tocompare well with that of other investments. Of course, effi-ciency increases only when nonprofit organizations are in facteffective developer-managers.

2. Most nonprofit organizations have permanent affordability as aconsistent goal in the housing they renovate and manage. Giventhe current problems in preserving the affordability of a signifi-cant part of the subsidized stock because of prepayments andexpiring use restrictions, nonprofit organizations may have animportant role in both new construction and preservation if weare to avoid repeating this problem.

3. Because of their focus on delivering housing for low-incomepeople, nonprofit organizations have a high level of patience forpainstakingly assembling funding from multiple sources toensure that resulting projects will be affordable to their“clients.” Available if not yet extensive indicators suggest suchdiversity will be critical to preserving the existing subsidizedstock for low-income use.9 While simpler, more “one-shot”

Preserving the Low-Income Housing Stock 503

funding is probably preferable, the likely reality is that fundswill be fragmented and patience will remain important.

4. Nonprofit housing producers are the most willing (along withpublic housing authorities) to serve population groups withspecial needs, which increasingly predominate among thoserequiring housing assistance, including large families, single-parent households, and the homeless. They also may bring sen-sitivity to managing effectively the housing in which thesegroups live.

5. CBDOs are particularly active in troubled neighborhoods thathave concentrations of low-income people and housing in need ofpreservation. Housing rehabilitation in these areas is by fartheir largest single community development activity,10 whereasmany other housing actors may be wary of the risks of preserva-tion in general (e.g., uncertain rehabilitation costs) and of theselocations in particular (e.g., uncertain return in the form ofadded rent).

6. When funds are available, nonprofit organizations often mayspend them in maintaining and repairing housing that theycontrol or manage even if the low-income residents cannotjustify this expenditure on profitability grounds by payinghigher rents for better quality.”

7. The sense of community ownership and support in CBDO activ-ity may help prevent vandalism and otherwise promote long-term preservation.

8. CBDOs carry out other neighborhood preservation and humandevelopment activities that increase the chances that housingrepair and rehabilitation activities will produce long-termimprovement in housing quality. Public housing authorities areincreasingly entering this field as well, but the phenomenon isnot common outside these sectors.12

On the other hand, nonprofits may show some disadvantages aswell, including the following:

1. On average, at least, the output of individual organizations hasremained fairly small (See section on current nonprofit deliveryin the housing preservation field). To what extent this resultsfrom external forces, including funding limitations, or frominternal reasons is not fully clear.

504 Neil S. Mayer

2. Pressures to restrain salaries may make it difficult for nonprofitorganizations to retain some of their more skilled developmentstaff. Charismatic CBDO leaders may not always be effectivedevelopers or managers of development staff.

3. Attention to diverse community issues, including issues outsidethe development sphere, and debates about how to allocate timeand energy among objectives may slow production.

Assuming that nonprofits have on balance at least some special potential as outlined above, it is still necessary to know whetherthey show real signs of being able to deliver targeted results on asignificant scale. That is the topic of the next section.

Current nonprofit delivery in the housingpreservation field

Levels of activity

In the past, analysts and policymakers have been able to make onlyvery rough guesses about the total amount of activity by nonprofitorganizations in the housing conservation and other communitydevelopment fields. Some observers contended that, interestingexamples notwithstanding, the level of production was insignificant,while others felt that nonprofit organizations had assumed theleading role in providing housing for people of limited means, espe-cially in distressed neighborhoods and rural areas.13

Newly available data have substantially increased the quality ofinformation in this area. By far the most complete census to date ofthis activity was undertaken in 1988 by the National Congress forCommunity Economic Development (NCCED) in cosponsorship withthe Community Information Exchange (CIE).14 The survey is repro-duced in the appendix. Working from CIE lists of nonprofit organi-zations and other sources, NCCED surveyed 4,150 organizations.About 1,400 met their criteria as community-based developmentorganizations, and 834 responded to their questionnaire.l5 To beincluded, respondents were required to have a nonprofit status, toserve a low-income community or constituency, to be governed by acommunity-based board, and to be an ongoing developer that hadcompleted at least one community development project (housing orother real estate or enterprise). Given that no survey is all-inclu-sive, it is reasonable to expect that there are 1,500 to 2,000 suchorganizations in all (about twice the number that responded); in

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addition an unknown number of nonprofit developers do not fitNCCED’s other criteria, including some prominent developers thatare not community based and others that have work under way buthave not finished a project.16

Over 80 percent (694) of the nonprofit organizations that respondedto the survey carried out housing projects in either construction,rehabilitation, or more limited home repair.17 Nearly 80 percent ofthose (552) included housing rehabilitation in their activities.Rehabilitation production totaled 76,816 units over the lifetimes ofthe organizations. Since the average age of the organizations thatdid rehabilitation was 11 years, the average production rate for asingle group over its lifetime was about 13 units rehabilitatedper year.

Nineteen percent of all types of housing production was completedin 1986 and 1987, the last two years before the survey was taken.Assuming that the mix of rehabilitation and new construction wasthe same then as in all years combined, housing rehabilitationactivity reported by these groups exceeded 7,500 units per year inthat two-year period.18 If the capacity of organizations that did notrespond to the survey were included, rehabilitation activity could beabout 15,000 units annually, and the potential rises to perhaps20,000 units if one includes the capacity of still-functioning organi-zations that completed housing in the past but not in those twoyears.19 Nonprofit organizations that do not qualify as communitybased under NCCED’s definition would add further production.

Somewhat less promising is estimated annual rehabilitation pro-duction per CBDO in the two-year period. Under reasonableassumptions, the rate appears to be slightly lower than the averageannual production over the full lifetime of nonprofit groups in thesurvey.20 While the large numbers of new, young organizations andreduced federal funding may be the primary limitations on theaverage scale, it is still apparently true that annual output by non-profit organizations to date is growing more by multiplication ofnumbers of CBDOs than by the rising production per group overall.However, it is possible for most or all groups to produce moreas they mature; a large infusion of newcomers may keep theaverage down.

In addition to conducting rehabilitation activity, some 290 organiza-tions carried out home repair and weatherization work (under$10,000 per unit) on 273,116 units. While such work does notincrease the supply of affordable housing in the same sense as con-struction or substantial rehabilitation, repair is certainly a

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component of housing preservation strategy. If this activity wasconcentrated in the 1986-1987 period in the same proportion aswere rehabilitation and construction, it would amount to about26,200 units repaired per year.

The CBDOs were active in both rental and owner-occupant rehabili-tation and repair (see table 1). Rehabilitation activity was splitnearly evenly between renter and owner units. In repair programs,owner-occupied housing was slightly (58 percent) predominant, asone might anticipate.

Table 1. CBDO Rehabilitation and Repair Work Over Lifeof CBDO Work, by Tenure

Type of activity Number of CBDOs

Rehabilitation 552 *

Number of units

76,816

Rental 392 40,125Owner-occupied 354 36,691

Home repair and weatherization 290 * 273,116

Rental 166 115,608Owner-occupied 236 157,508

Source: Special tabulations of NCCED/CIE survey data.*Totals are less than the sum of components because many CBDOs did work on rental andowner housing.

The CBDOs also were active in property management, another keyaspect of housing preservation. Nearly 43 percent of respondentsplayed this role, but information on numbers of units managed wasnot available from the NCCED survey. The organizations’ fre-quency of involvement in property management and other specificaspects of housing preservation are summarized in table 2.

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Table 2. Types of CBDO Housing Preservation Activities

Type of activity Number of CBDOs reporting

Rehabilitation 552*Repair/weatherization 290*Acquisition 469Revolving Loan Fund Administration 245Property management 356Loan packaging 244

Source: Special tabulations of NCCED/CIE survey data.*Organizations that said they did the activity but did not report numbers of units are notincluded in these numbers.

A second recent study, by the Community Development ResearchCenter at the New School for Social Research, offers further evi-dence of the substantial scale of community-based nonprofit actionin housing preservation.21 This research restricted itself to 130 orga-nizations in 29 cities and overrepresented cities with relatively well-developed sets of nonprofit developers, but it had the advantage ofactually visiting the organizations and independently reviewingdocumentation. Nearly all the organizations in the sample wereactive in housing; three-quarters did housing rehabilitation specifi-cally, and many were involved in housing management and otherpreservation functions (see table 3). Over their lifetimes, theseCBDOs produced over 25,000 units of rehabilitated housing,repaired or weatherized almost 53,000 units more, and managedover 24,000 units of their own and others (see table 4).

Average annual rehabilitation production per organization, countingyears since each began housing involvement of any kind, is 24 units,for an annual total of more than 2,300. If all CBDOs estimated toexist by the NCCED survey were to reach the same average produc-tion as those in the New School’s sample and undertook rehabilita-tion in the same proportions, they would rehabilitate about 31,300units each year.22 Home repair activity would be just over double thenumber of rehabilitated units (using the New School’s proportions ofrepair to rehabilitation activity). Units managed would be nearly325,000,23 a substantial figure but still only a small part of the low-income rental stock (7.5 million poor households in 1987).

The NCCED survey indicates that CBDO activity is widespreadgeographically. Although units of production were not computed bygeographic subareas, it was determined that CBDOs respondedfrom 49 of the 60 cities with populations of 250,000 or more, and

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that 35 percent of the organizations were from rural or mixed ruraland urban areas. The largest regional concentration of organiza-tions doing housing was in the East (37 percent) and the lowest wasin the West (16 percent); in the central and southern regions it wassomewhere in between.

Table 3. CBDOs Active in Housing Development by Type and Importanceof Activity

(Sample Size = 113)

Type of activity

Currently activeEver Formerly

active active Major Minorimportance importance

N % N % N (%) (%)

New constructionRehabilitationRepair/weatherizationPaint-up/clean-upCondo/co-op conversionAntidisplacement purchasesOthers’ units managementCBDOs’ units managementHome purchase loans/grantsHome rehabilitation

loans/grantsHomeownership counseling

76 67 3 4 73 82 18104 92 6 6 98 92 863 56 12 19 51 43 5750 44 9 18 41 14 8633 29 6 18 27 52 4849 43 7 14 42 60 4043 38 5 12 38 45 5578 69 4 5 74 62 3827 24 7 26 20 48 52

38 34 7 18 31 38 6270 62 12 17 58 45 55

Source: New School for Social Research, 1989.

Still, the breadth of nonprofit activity is cause for concern. Ourdata show that significant cities may be entirely unserved by thesector (depending on where nonrespondents are located), and surelyother areas are underserved. It would be worthwhile to computeproduction levels, rather than only numbers of organizations, inrural areas and to examine further the relation of rural CBDOactivity to the relatively higher incidence of housing quality short-falls per unit measured there. No doubt successful reliance on non-profit organizations for housing preservation activity would have toinclude building capacity where it is now limited or nonexistent aswell as for nurturing it where it is more substantial.

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Table 4. Total Housing Outputs by CBDOs

Output

New units constructedUnits rehabilitatedUnits repaired/weatherizedUnits painted/cleaned upUnits converted to

condos/co-opsUnits bought

(antidisplacement)Others’ units managedCBDOs’ units managedHomeownership families

counseledHome purchase loansHome purchase grantsHome rehabilitation loansHome rehabilitation grants

Mean

108249

1,037505

59

81257176

1,394$4,736,667

$98,100$2,357,326

$813,500

Number ofMedian CBDOs active

44 73122 102125 5172 37

47 22

50 3245 3773 74

118 52$300,000 15

$15,500 10$852,000 23

$87,500 18

Source: New School for Social Research, 1989.

Although the average annual housing preservation activities of anindividual CBDO are of modest scale, numerous organizations haveachieved high levels of production. Among the larger producers inthe NCCED survey are the following:

• A New York City nonprofit that has averaged 75 units of rentalrehabilitation and 220 units of rental repair a year for nearly adecade.

• A Virginia nonprofit that has averaged 60 units of rental rehabili-tation over 12 years and another in California that has averaged50 units over 15 years and 80 in each of the last two reportingyears.

• A Michigan CBDO that has averaged 235 owner rehabilitationsand 480 owner repairs over a decade.

• A rural Florida nonprofit that has averaged 81 owner rehabilita-tions over a span of 14 years.

Almost all of the CBDOs’ housing activity is in housing for low-income people. In the NCCED survey, 88 percent of the owner-occu-pied and 92 percent of the rental units rehabilitated were for

510 Neil S. Mayer

low-income people (incomes below 80 percent of the median), andover 90 percent of the organizations were rehabilitating housing pri-marily for people of limited means, whether to own or to rent (seetable 5). This self-reported targeting of housing activity is consis-tent with previous research. A careful study of the early 1980sexperience of nonprofit recipients of HUD Neighborhood Self-HelpDevelopment (NSHD) grants showed that all of the 73 housingrehabilitation projects funded, involving nearly 3,000 units, weredirected solely to low-income people.24

Table 5. Percent of CBDO’s Housing Rehabilitation ActivityServing Low-Income People

0 to 20% 21 to 40% 41 to 60% 61 to 80% 81 to 100%

Number of CBDOsthat did rentalrehabilitation 3 7 21 41 298

Number of CBDOsthat did ownerrehabilitation 5 10 22 61 250

Source: Special tabulations of NCCED/CIE survey data.Note: Low income is defined as income below 80 percent of the area median.

In sum then, there is evidence that large numbers of nonprofit orga-nizations have undertaken substantial rehabilitation and repairactivity, tightly targeted for the benefit of low-income people. Giventhe very deep reductions in federal subsidies for such activityduring the last decade and the resulting increased difficulty ofmaking housing improvements while keeping housing affordable, itseems clear that nonprofit groups are major actors in the preserva-tion of low-income housing. No doubt their role is still larger withinthe often distressed, generally low-income, neighborhoods in whichthey typically operate and which private developers often avoid.Available studies show that CBDO work was heavily concentratedin the most blighted neighborhoods where significant comparableactivity by other actors was often difficult to find.25

On the other hand, the average production levels of individual orga-nizations are still modest, and their geographic limitations are ofsome consequence. And at least one local Chicago study showedthat even in lower income neighborhoods aggregate spending onconstruction and renovations by nonprofit organizations made up

Preserving the Low-Income Housing Stock 511

only a small part of such investment, at least before taking intoaccount such critical issues as whether low-income people occupythe units after renovation and on what terms.26 Nonprofit agenciesare one important set of players that do significant aggregate workwhere it is greatly needed. Nonetheless, their work seems to fallwell short of fully encompassing national low-income housingpreservation activity.

Performance

In addition to the scale and targets of their activity, it is useful toknow about nonprofit organizations’ reliability and efficiency in car-rying out housing preservation activities. The best available evi-dence compares the objectives CBDOs set for themselves in defininghousing rehabilitation projects and seeking support for them withthe actual outcomes of those project efforts. The goals were at leastacceptable to external funding sources seeking to promote effectivenonprofit action and represented promises the CBDOs hoped wouldwin them fund awards and be feasible to reach. How well they werefulfilled, therefore, provides one sensible, if imperfect, performancestandard. The overall findings were that in housing rehabilitationin particular, CBDOs were highly successful in meeting their goalsfor levels of production and leveraging resources.

The most detailed published research concerns the performance ofCBDOs under the now-defunct NSHD program, mentioned above.27

The study covers 99 urban CBDOs, which generally received grantsof $150,000 or less from HUD during 1980. The grants weredesigned to provide funds for completing the planning and prepara-tion of already well-defined development projects or to underwritepart of the expense of actual implementation, or both. In eithercase, the organizations were expected to obtain other majorresources from various public and private sources. The program, bydesign, generally avoided making grants to the largest and mostsophisticated CBDOs.

Among the 73 housing rehabilitation projects (including mixed-useprojects) reported, 83 percent of the units planned for rehabilitationwere completed. Performance in this area exceeded performance inhousing construction or nonhousing development. The median ratioof NSHD funds to other resources was 3:1, and the average rate wasthree times that high (for all projects, including rehabilitation). Theaverage ratio had been projected almost exactly in CBDO grant pro-posals, even though federal funding was cut back sharply during

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project implementation. Private sources provided about one-quarter of total funds, and private lenders were more often thelargest single source of funding.

Evidence indicates that CBDOs have continued to deliver on com-mitments in the later 1980s. A recent evaluation of a sample ofLISC-assisted organizations showed that housing projects were suc-cessful in meeting their output goals in 86 percent of cases (and theothers were qualified successes), and three-quarters of the projectsreached anticipated financial objectives.28

Ideally, an evaluation of the performance of CBDOs would comparethe unit costs to nonprofit organizations of carrying out well-definedhousing preservation activities with the costs to other actors. Asyet no such studies exist, and for many reasons — including thecomplexities of comparability — they are difficult to conduct. Theongoing evaluation of Chicago’s Fund for Community Developmenteffort, supported by the MacArthur Foundation and LISC, mayproduce some data of this type. Meanwhile, existing informationindicates that nonprofit organizations, despite the inherent difficul-ties in operating in distressed areas, do deliver on their housingpreservation commitments.

Types of activity

Nonprofit organizations are involved in a wide array of activitiesthat fall within the category of preservation of the low-incomehousing stock. These include buying, rehabilitating, and managingrental housing; buying and rehabilitating rental housing but thenconverting it to resident ownership as limited-equity cooperatives;rehabilitating and managing single room occupancy (SRO) residen-tial hotels; managing buildings for themselves and other public andprivate parties; acquiring, rehabilitating, and reselling single-family homes for owner occupancy; aiding homeowners to rehabili-tate or repair their homes; and now purchasing and rehabilitatingor managing buildings from the existing for-profit subsidized stockas mortgage prepayment and related concerns arise. They havetaken extensive advantage of many financing tools over time,including tax advantages (credits and accelerated depreciation);deep federal subsidies when available; CDBG monies; privategrants and concessionary capital; and many others. TheCommunity Information Exchange maintains computerized recordsof the details of projects of these and other types, and “model”

Preserving the Low-Income Housing Stock 513

projects are described throughout the literature of the nonprofitfield; such diversity cannot be represented in this short paper.

What does seem to tie many of these efforts together, especially cur-rently, is the need to combine a great many pieces into a fundingpackage that can both preserve the housing and keep it affordablefor lower income people. As one example, the Boston HousingPartnership worked with ten CBDOs to renovate 69 rental build-ings with 700 units. Mortgage financing came through theMassachusetts Housing Finance Agency’s revenue bonds programcoupled with an interest subsidy from another state rental housingassistance program. The first mortgage loans were transferredafter construction to Fannie Mae in exchange for mortgage-backedsecurities. Equity financing came through syndication. City andfoundation grants to the individual CBDOs allowed them to meettheir net worth requirements for acting as general partners in thesyndication. Interim loans came from the Ford Foundation, LISC,and the Massachusetts Community Development FinanceCorporation. CBDOs’ continuing operations during the projectperiod were funded by another set of private and public sources.29

While the investment of multiple CBDOs and the partnerships’ skillno doubt increased the complexity somewhat, a lone CBDO wouldotherwise have to provide for each of the same project componentson its own.

Nonprofit agencies’ forthcoming efforts to rescue parts of the exist-ing subsidized low-income housing stock from problems of mortgageprepayments and expiring use restrictions and subsidies seem des-tined to face the same complexity. A Massachusetts project willinvolve acquisition with tax exempt 501(c)(3) bonds, interest only atfirst; a state loan to help subsidize operating costs in the earlyyears; a loan from the for-profit seller; a weatherization grant; andSection 8 certificates. Another in Vermont will include housing taxcredits, state trust funds, and possibly a HUD flexible subsidy1oan.30

It seems reasonable to assume that nonprofit organizations couldcarry out housing rehabilitation, management, and other preserva-tion activities more effectively and at much higher levels of output ifprojects could be supported by either prepackaged combinations offunds for the various necessary uses, ready lines of funds of each ofthe key types, or single pots of funding to cover several of the multi-ple needs. The same would likely be true for other actors.

514 Neil S. Mayer

Building capacity for expanded delivery

Key elements

Most nonprofit agencies involved in housing preservation are stillquite young, have small staffs and budgets, and have limited experi-ence. Special tabulations from NCCED’s census of CBDOs indicatethat 22 percent of the organizations with housing rehabilitationactivity were five years old or less at the time of the survey, and 65percent were less than ten years old, even though the surveyneglected organizations that had not yet finished at least oneproject. Forty-four percent had five or fewer staff people (total of alltypes, for all programs and projects); over 60 percent had ten staffor fewer (see table 6). Nearly a third had annual operating budgetsunder $100,000, and nearly two-thirds operated on less than$250,000 (see table 7). Mean lifetime rehabilitation activity was118 units, despite reports by some individual organizations ofhaving rehabilitated as many as 3,500 units.

Table 6. Number of CBDOs Doing Housing Rehabilitation by Staff Size

Number of staff1 2 to 5 6 to 10 11 to 20 21 to 50 51 and up

Number of CBDOs 34 198 94 76 63 67

Source: Special tabulations of NCCED/CIE survey data.

Table 7. Numbers of CBDOs Doing Housing Rehabilitationby Annual Operating Budget

Size of operating budget$51,000 $101,000 $251,000

up to to to to$50,000 $100,000 $250,000 $500,000

$501,000and over

Number of CBDOs 48 76 127 54 80

Source: Special tabulations of NCCED/CIE survey data.

Preserving the Low-Income Housing Stock 515

It is natural, then, to anticipate that many nonprofits need addi-tional capacity-building to expand their level and effectiveness ofhousing preservation activity. Extensive recent analyses indicatethat key contributors to effective CBDO work include thefollowing:31

1.

2.

3.

4.

5.

6.

7.

A strong executive director at least familiar with housing anddevelopment, and continuity and stability in this leadershipposition.

Staff trained and experienced in housing development andrelated functions, including overall development and projectmanagers, not just the executive director.

In-house capability to conduct project financial analysis.

Successful experience with at least one project.

Access to technical assistance at critical points.

Cooperation from key outside funders, especially local govern-ment (with CDBG a major source of funds).

A clear strategy for planning and carrying out housingactivities.

It will be no surprise that nonprofit organizations also have quiteconventional needs for resources to make their projects work and,specifically, to be affordable to lower income people — in many waysthe same needs as any other housing developer, investor, ormanager. Experienced analysts of CBDO activity have concludedrepeatedly that limited project funds and organizational operatingfunds are primary constraints to immediate expansion of nonprofithousing activity.32 Resources are required for the following expenses:

1. Early predevelopment costs for securing options for propertiesand preparing initial project plans and feasibility analyses; oth-erwise, nonprofit groups miss out on project opportunities or aredelayed by needing to search for money each time an opportu-nity arises.

2. Later predevelopment costs, including architectural and engi-neering services, acquisition, and financing fees.