For developers of affordable housing, one problem often towers over the others: finding funding.
By pledging to keep rents low, property owners may be providing needed opportunities. But that lower rent can mean lower returns, and a slimmer chance that lenders will approve financing.
The result is that successful affordable housing projects are often cobbled together with a mix of funding mechanisms, from private financing to state and federal affordable housing dollars, many of which are competitive to obtain.
This year, some lawmakers are exploring establishing a new type of funding option to add to the mix: the housing investment trust.
Proponents are pushing for a law allowing for a trust that could operate as a 501(c)(3) nonprofit organization, accept donations and other funds, and develop or restore buildings for housing development. And last month, Gov. Kelly Ayotte signed legislation, House Bill 633, to study the issue.
The proposal has been championed by Michael Dell Orfano, an Amherst real estate developer, and Rep. Gary Daniels, a Milford Republican. As originally introduced, HB 633 would have created a new form of investment trust in New Hampshire law known as the housing investment trust, and require that trust to be a charitable organization.
The original bill would have also required that there be three trustees to oversee that trust, which could be a resident, a different charitable organization, a bank, or a credit union.
After that, the original bill is silent on how the trust might carry out charitable activity to support housing. Dell Orfano says the trust could buy land or properties, renovate buildings, develop units, and create arrangements allowing those units to be rented affordably.
The trust would have to be either a qualifying tax-exempt organization under 501(c)(3) of the Internal Revenue Code, or be recognized as charitable under the state’s definition.
Funding for the trust, according to Dell Orfano, could come from a revolving loan fund that could accept investments from outside funds or individuals and re-invest the returns on those investments into the fund.
Dell Orfano has proposed three investment classes within the fund: a debt class, a capital gains class, and a class for self-directed investments.
“The important takeaway here is that that is entirely independent,” said Dell Orfano, speaking about the revolving fund. “You think of Fidelity, Wellington Management, or New Hampshire’s own Pax World funds. These are the financial institutions that we’ll eventually be dealing with.”
In total, the mechanism could allow developers to access financing aside from state, federal, or other private funds, supporters say.
“What we are bringing to you is something unique, something we haven’t really seen in this legislature before, and that’s a private sector solution that can be added to the toolbox,” said Daniels, speaking to the Senate Commerce Committee. “We see plenty of bills coming in that look to do different things with the public sector funds.”
That tool could create the possibility of innovative housing developments, supporters say.
New Hampshire continues to experience a severe housing crisis, as median home prices have hit record levels and as rents rise faster than median income levels. Housing trusts, supporters say, could allow for arrangements such as traditional rental units, cooperative housing, supportive housing, and others, and could make those arrangements short term or long term.
But lawmakers say they need more time to understand the trusts before moving ahead with creating them, and by the time the bill left the House Judiciary Committee in March, the committee had proposed amending it to be a study committee.
“Although establishing another study committee is not ideal, the Judiciary Committee believes this is an important enough issue given the housing crisis that the House should investigate in collaboration with the (Senate),” wrote Rep. Joe Alexander, a Goffstown Republican who is also the chairman of the House Housing Committee, in March.
That version, which Ayotte signed in June, will create a committee of three house members and one senator, who will work to produce a report by Nov. 1.
The investment trust proposal has received the endorsement of Housing Action New Hampshire, which supports affordable housing developments; New Hampshire Housing, the state agency that operates the affordable housing fund; and NeighborWorks, a nonprofit developer of affordable homes.
And it models arrangements in other states, such as Arizona, which allows counties to establish housing trust funds to make similar investments.
In testimony to lawmakers this year, Robert Tourigny, executive director of NeighborWorks Southern New Hampshire, said the trusts could allow for both preservation of historical homes and buildings and the creation of new supply.
“One of the challenges associated with preserving affordability has been the limited financing mechanisms available to consumers outside of conventional long-term financing,” Tourigny said. “A housing investment trust will provide an opportunity to leverage private capital while maintaining affordability for the homebuyer.”
This story first appeared in The New Hampshire Bulletin and is being republished here under a Creative Commons license.(
