Leveraging public dollars can multiply the availability of capital in a particular market. For example, the New York City Acquisition Fund was created with $40 million from local government and foundation sources which was leveraged to raise over $190 million of lending capital from private institutions.
A recent study by Enterprise of the New York City Acquisition Fund and other leveraged funds revealed that they were able to provide a large number of acquisition loans at very favorable terms while supporting affordable housing objectives. It also revealed that a successful fund requires the following local factors:
- City government support;
- Takeout financing;
- Foundation support;
- Bank investment;
- Ability to generate high loan volume;
- Established CDFI partners; and
- Housing development capacity in the target market.
Leveraged funds have proven their ability to bring large amounts of capital into a market in the form of acquisition loans with very favorable terms. However, the market’s deterioration in recent years has demonstrated the importance of any given fund’s flexibility to ensure that it can be repositioned for maximum utility.
My B. Trinh is the Bart Harvey Enterprise Fellow 2008-2010. She recently completed an in-depth study of three acquisition funds designed to leverage capital for affordable housing development.