Breaking New Ground for Capital Campaigns
Covenant Presbyterian Church chose to finance affordable housing three miles away from the church as part of its 2018 capital campaign, For A Whole Community.
Groundbreaking for The Mezzanine at Freedom Drive (Photo Courtesy Jon Strayhorn-MAC330)
Choosing Affordable Housing
Through a comprehensive discernment process for the capital campaign, church leaders determined that an important component of supporting Covenant’s mission — to bravely work toward a whole and just world — would be to help address Charlotte’s critical affordable housing shortage.
Their decision coincided with recommendations by Charlotte’s Opportunity Task Force which called for an intentional focus on affordable housing and early childhood development, necessary for improving the city’s ranking as 50th out of 50 American cities in economic mobility.
Choosing to Lend, Not Donate
The clergy and lay leadership at Covenant Presbyterian wrestled with the mechanics of how to use their capital campaign funds most effectively. They considered making a charitable donation to affordable housing as others had done, albeit on a grander scale.
But they chose to make a $2 million loan, at minimal interest with the intention of getting the principal back in 20 years, creating the opportunity to invest in another affordable housing project. Importantly, Covenant worked with the developer to model a loan arrangement that worked within the complex structure of tax credit investments and could be easily replicated by other congregations. Covenant is quiet about just how low the interest rate is, stressing that each congregation should choose its own rate of financial return based on its congregational mission and needs.
The obligations of becoming a lender are considerable. While Covenant’s capital campaign pledges are paid over the three years ending in 2020, the full $2 million is due to the project early in the second year. A lay leader of the church attends regular monthly meetings to monitor the budget, scheduling, construction progress, and the general stewardship of church funds.
The income from the loan is designated for student financial aid at the church’s new child development center (CDC), another campaign commitment. While the church is creating a $1 million scholarship endowment specifically for the CDC, the loan income provides additional funding to meet the goal of providing financial aid for one-quarter of its students.
Choosing a Project and a Partner
To identify a viable affordable housing project, Covenant issued requests for proposals to developers, specifying its desire to invest in a site within an eight-mile radius from the church and calling for a mixed-income community with incomes ranging at a minimum from 30% to 80% of the area median income (AMI).
Coincidentally, The Housing Partnership -- Charlotte’s largest nonprofit developer -- was assembling a deal for this type of mixed-income development only three miles from Covenant and looking for community partners to help make the project feasible. Covenant’s RFP came at an opportune time and galvanized The Housing Partnership’s other financial partners to choose to also commit to the project.
The location of the project, named The Mezzanine at Freedom Drive, was compelling, as the area is quickly changing and has received other community investments, such as the adjacent Freedom Charter School and a nearby Novant Health Center, opening soon. The development is 185 units, a meaningful size from the church’s perspective, and in a sustainable neighborhood with access to schools, health care, and public transportation.
Covenant also appreciated the holistic approach of The Housing Partnership to its developments. The Housing Partnership considers its impact on the surrounding community and invites neighboring homeowners and renters onto its properties for programs, such as digital inclusion and tax relief clinics. Amenities such as community gardens, parks, and playgrounds are core to its philosophy.
Choosing Deep Subsidies
Most affordable housing developers utilizing tax credit financing focus on building units for families making 60% AMI (income of about $40,000/year for a family of 3 in Charlotte). The Housing Partnership works to include at least some units for 30%-50% AMI in their projects whenever possible, which can be a challenge as this type of income targeting requires a deep subsidy to build.
Covenant was determined to use their investment to provide deeper targeting. The combination of the church’s low-interest loan — along with a below-market rate loan from the City of Charlotte and the donation of land from the landowner — allowed The Housing Partnership to set aside 70% of the units for those making below 80% AMI, including 10% of the units for families making 30% AMI and another 10% for families making 50% AMI.
These deep subsidies were a critical element of accomplishing Covenant’s mission. Congregants were also reassured to learn that as the subsidized families improved their earnings, they would not lose their housing. The Housing Partnership uses a floating model to maintain the AMI mix, looking for the next tenant who signs a lease to balance income changes among its existing tenants. The Housing Partnership’s property manager handles thousands of affordable housing units, conducting income certifications and annual “re-certs” to ensure that the deep subsidies are sustained throughout the life of the property.
Choosing to Support the Campaign
Covenant’s congregation of about 2,500 members pledged generously to ensure the success of the capital campaign and the projects it supports. Early in the campaign, church members, Jessica and Ben Mallicote spoke to the congregation to share their family’s perspective on participating.
To Jessica, the capital campaign was “…not an obligation we have to meet; it’s an opportunity we get to participate in. Of course, we all have household budgets, but this campaign is a chance to share God’s abundance, rather than worry about our scarcity.”
“God is creating holy ground,” she added, “and we – all of us – get to share in that creation.”
Ben spoke about his vision of how this capital campaign would change the lives of others, imagining how “someday, a mother will bring her grown son to the courtyard of the apartment complex on Freedom Drive to show him their first apartment. She’ll say to him ‘You were too young then to remember it, but the night before we moved into this place was the last night we ever slept in our car. We’ve had a decent place to live ever since. We’ve had a home. And this is where it started for us.’”
Choosing Other Ways to Contribute
What if Covenant Presbyterian’s $2 million loan is not a path for your congregation? Forest Hill Church is a mega-church that supports many local initiatives and organizations. The congregation with its six Charlotte campuses was also inspired by Charlotte’s Opportunity Task Force report to contribute to affordable housing in a unique way.
Forest Hill chose to partner with Charlotte Family Housing (CFH), an agency moving families from homelessness to housing through empowerment. The church’s partnership involved a significant two-year donation, large enough to fund a social worker at the agency. A single CFH social worker is responsible for 15-20 families, usually for a two-year period. The social services that CFH provides address the barriers that led the client to become homeless and help connect the client to resources to increase their income.
Forest Hill Church also provides volunteers through Hope Teams at this agency. These volunteers work in teams that are paired with CFH clients, committing to a multi-year relationship that provides emotional support, accountability, and social capital.
“If we wanted to see upward mobility happen in this city,” said Caylene Brown, Director of Local Outreach at Forest Hill. “Affordable housing was one of those issues that had to be faced.”
Draft Your Plan
The Place
Is there a place with a funding stream that could create an endowment or directly fund rental subsidies? Consider your city, county, United Way, or community foundation, along with the private sector.
Is there a place with suitable infrastructure for dispensing grants to agencies and evaluating outcomes?
The People
Are you targeting affordable housing renters who need special services or those who simply need housing that fits within their budget?
Consider the mission relevance of low-income seniors, those recently released from prison, LGBTQ young adults, moms with multiple evictions, refugees, people with disabilities, or a specific income level group – all people with barriers to affordable and stable housing.
Is there a process to connect tenants to services to enable them to increase their income over time?
The Partners
Are there homeless shelters or other agencies already using rental subsidies to move people from homelessness to homes?
How will communication channels work between the agencies and the granting organization? Is there a mechanism for sharing best practices?
Who is responsible for finding willing landlords? How will security deposits be managed?
The Plan
Who will choose the recipients and using what criteria?
How will you track clients after support ends?
Do you need an RFP process to select agencies?
What resources are available to social workers to help clients increase income, secure reliable childcare, and dependable transportation, and cope with mental and physical health issues?
What caseload are social workers expected to carry?
Judy Seldin-Cohen is a volunteer organizer on housing issues at the Stan Greenspon Center for Peace and Social Justice at Queens University of Charlotte, and she serves as the board chair for A Way Home, a $20 million public-private housing endowment. She is also the co-author of the recently published book Recharging Judaism: How Civic Engagement Is Good for Synagogues, Jews, & America.
Joe Taylor is Managing Partner at Centerlane Capital, a real estate private equity firm. He is a member of Covenant Presbyterian serving as volunteer chair of its Affordable Housing Implementation Committee and recently joined the Session as a ruling elder. He also serves on the Board of Crisis Assistance Ministry.