There's a new partnership for affordable housing bringing together a diverse array of funding partners including the Kresge Foundation, the Robert Wood Johnson Foundation, KeyBank and Goldman Sachs.
These partners are committing more than $70 million to launch the Strong Families Fund -- a new landmark for Pay for Performance since this is the largest project to date that is financing affordable housing for low-income families in conjunction with social service coordination.
This new partnership expects to finance 600 to 700 affordable housing units over the next three years. The Strong Families Fund will also support on-site access to high-quality social services over the next decade. While private impact investing is at the heart of this effort, traditional grant dollars are also playing a key role. Taken together, the fund is a showcase for several trends working to reshape the social sector.
Multiple studies provide evidence that outcomes improve for families and children who have access to high-quality affordable housing with links to services. Such settings, the research shows, may also be cost savers in the long run for taxpayers through lower public sector costs.
As we have seen in a number of new initiatives aimed at social sector impact, Pay for Performance is playing a key role. The fund will combine the federal Low-Income Housing Tax Credits for capital development with a pay-for-performance model that provides up to 10 years of incentive payments to housing developments.
In return for access to these incentive payments, developments must provide on-site social service coordination to improve resident and property outcome measures in five areas, including health and wellness, housing stability, and education.
The list of nonprofit partner organizations on this initiative is long, and includes the Community Development Trust, Great Lakes Capital Fund, the National Affording Housing Trust, Stewards of Affordable Housing for the Future, and the Corporation for Supportive Housing (CSH).
Goldman Sachs is investing $30 million in this project through its Urban Investment Group (UIG). The plan is to fund new constructions or substantial rehabs of family housing projects across the U.S.
Since 2001, Goldman Sachs has been deploying the firm's capital through UIG in an effort to catalyze economic development in underserved urban communities. UIG reports committing over $4.1 billion to the retain and preservation of 17,000 housing units.
It's not surprising that the Kresge Foundation is part of the Strong Families Fund. The foundation—a top funder working to boost underserved urban communities—has long been interested in the linkages between quality housing and other dimensions of well-being, particularly health. As well, Kresge is keenly attuned to the role that impact investing can play in achieving larger scale change, and has stepped up its efforts in this area, as we've recently reported.
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"This fund is a great example of the bold, innovative approaches that philanthropy and the private sector can use to create positive change," said Kresge Foundation President and CEO Rip Rapson. "Bringing together so many strong partners allows us to marshal shared resources around a common agenda, and achieve a greater impact than any of us can have by going it alone."
Meanwhile, the Robert Wood Johnson Foundation is investing in this project as part of its ambitious push to create a "culture of health" in America. RWJF has long considered the "upstream" factors that determine health, and believes that making improvements in housing and communities is crucial to creating a healthier population.
Kresge is providing $7.25 million for this initiative, including $6 million in Social Investment commitments and $1.25 million from its Human Services team. The Robert Wood Johnson Foundation is providing $4.8 million in grant funding, with a significant portion of this money going to pay for the incentive outcome payments.
Keybank is another important partner in this effort, and will be working with Goldman Sachs to provide Low-Income Housing Tax Credit equity. In addition, up to $20 million in debt for the developments will be invested from Community Development Trust, a major affordable housing lender. Great Lakes Capital Fund, based in Lansing, Michigan and the National Affordable Housing Trust, based in Columbus, Ohio, are syndicating the equity for the investors.
The Corporation for Supportive Housing (CSH) will oversee outcome measurement, evaluation, and strategies for replicating the Strong Families Fund model in other communities. Stewards of Affordable Housing for the Future has also been working closely with CSH in identifying social outcomes to be tracked by the Fund.