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One of the properties acquired by the CS Large Cities Housing Fund in Charlotte, North Carolina. (Photo courtesy Community Solutions)
The housing and homelessness nonprofit Community Solutions found itself at a crossroads in 2018.
The previous year, it had cut the ribbon on a seven-year project to build a new affordable housing development in Washington, D.C. The group realized the traditional affordable housing financing process was too slow and inefficient to address the urgent housing crisis, says Dave Foster, President of BDP Impact Real Estate, which manages Community Solutions’ properties.
“We [knew] that using the traditional means of creating this affordable housing is not getting it done. We need[ed] a different model.”
The partners created a plan to use private capital to buy up property and keep it permanently affordable, promising investors modest returns of about 9%.
Now, the BDP-managed CS Large Cities Housing Fund has raised $135 million from a group of investors that includes UnitedHealth Group, the Ford Foundation and Wells Fargo.
Foster says the fund can compete “toe-to-toe” with private equity, going from identifying and buying property to moving people in less than 90 days. That’s because it isn’t hampered by traditional affordable housing financing methods — such as utilizing the Low Income Housing Tax Credit, which subsidizes the development of affordable rental units – which can add high transaction costs, legal fees and long delays.
Since 2022, the fund has acquired 1,155 units in six cities — Baltimore, Charlotte, Denver, Jacksonville, Nashville and Phoenix — so far housing over 270 people exiting homelessness. Their goal is to acquire more than 2,500 units, half of those for people exiting homelessness and half to be used for workforce housing.
This fundraising comes as homelessness hits a record high nationwide, according to the Department of Housing and Urban Development. On a single night in 2023, over 650,000 people experienced homelessness, or about 20 in every 10,000 individuals. A lack of affordable housing for people exiting homelessness and the working class is contributing to the issue — a shortage that grew to over 7 million homes last year, according to the National Low Income Housing Coalition.
“This one fund may not make a meaningful dent in homelessness,” Foster says. “But we believe that if more organizations and developers replicate this model, we could impact the amount of affordable housing in this country in a statistically significant way.”
The fund looks to acquire properties in decent condition that typically hold 100-200 units and are located close to support services, health care, grocery stores and job centers, according to Foster. After acquisition, the fund transfers ownership of the properties to local nonprofit partners for maintenance and management.
“Housing is the first intervention,” Foster says. “It is very difficult to make any other support — job training or job placement or health — work until someone is stably housed. Once they have permanent housing, then the rest of it can take hold.”
Paired with the Community Solutions’ well-known “Built for Zero” campaign, which promotes a housing-first approach to move toward “functional zero” homelessness, the fund aims to address two of the leading obstacles communities face in reducing homelessness: the lack of affordable housing and the complexity of housing systems which delay placements of people in homes.
Without connection to a housing system, simply building affordable housing wont materially impact homelessness, says Foster.
“The people who are most able to access that housing are going to do it and the people who are most vulnerable and least able to navigate the system will remain homeless.”