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Investing That’s Good For Business and Cities

By Ben Hecht

A scan of recent headlines reveals much about the issues facing America’s cities over the years and for decades to come. Infrastructure, education, traffic congestion, climate change and housing affordability are just a few of the key challenges now facing our urban centers.

With cities so essential to the economic, social and cultural vitality of our country, it’s clear that we can’t sit idly by. We all have a stake in the health of our cities. And for the private sector, and especially banks, investing in cities not only makes good business sense, but is also an indispensable ingredient in efforts to strengthen urban communities and improve the lives of residents at all income levels.

In a recent paper on the subject – “How Banks Invest in Communities” – Living Cities, a collaborative of many of America’s leading foundations and financial institutions, looks at how banks can collaborate with government agencies and nonprofits as investment partners to revive distressed communities. Such relationships are not only profitable for banks, but provide much-needed capital for a whole host of community-based housing, educational, environmental, entrepreneurship and workforce development initiatives.

Working in Partnership
Living Cities has been showing the power of partnerships for more than 15 years. Across 23 cities, we have turned $500 million of our funds into nearly $16 billion of investment in long under-resourced communities through community investment partnerships. Among other benefits, our partnerships have helped banks to gain entry to new customers and markets, and access to additional services such as credit counseling and homebuyer education for their customers. Local partnerships have helped banks to mitigate risk with guarantees, subordinate loans, linked deposits, incentives and information about other partnership opportunities.
We also have seen how the trust and confidence resulting from these community investment partnerships can open the door to new, innovative financing vehicles. The New York City Land Acquisition Fund is an extraordinary example of this evolution. Because of their experience working together on other Living Cities investments in New York city, many of the participating banks and public and nonprofit organizations were able to come together to develop a unprecedented solution to a significant barrier to housing development – acquiring land. The $200 million Land Acquisition Fund provides local and not-for-profit developers with resources to acquire private property for the construction and preservation of affordable housing.
The fund guarantee pool consists of $8 million in Battery Park City Authority funds and $32 million from various foundations including: Ford Foundation, Robin Hood Foundation, Heron Foundation, MacArthur Foundation, Rockefeller Foundation, Starr Foundation, New York Community Trust, Gimbel Foundation and the Open Society Institute, among others. Senior lender debt of up to $190 million is available from major banks and financial institutions, such as JPMorganChase, Bank of America, Citibank, Deutsche Bank, Fannie Mae, Wachovia, HSBC, North Fork, Mizuho, Merrill Lynch, Signature and M&T.

21st Century Strategy
While the efforts to create the NYC Land Acquisition Fund will help pave the way for the creation of up to 30,000 rental, homeownership and supportive housing units over the next 10 years in New York city, this partnership has already begun to pay dividends elsewhere in the country as well. Building upon the groundwork in New York, several Living Cities partners helped to create a $47 million Louisiana Loan Fund that will help to produce as many as 4,500 new and rehabbed affordable homes and apartments in areas affected by Hurricanes Katrina and Rita. This approach is also under consideration to create land acquisition funds for Denver, Los Angeles and Atlanta.
Based on the early growth in these acquisition funds, it’s clear that there is a pressing need in New York and across the country for innovative approaches to financing community initiatives. It’s also clear that no single organization or sector will be able to fill the gap alone. But by developing long-standing relationships that combine the human, financial and intellectual resources of banks with the focus and knowledge of community partners, innovative and scalable approaches can emerge.
Today the need for these types of successful partnerships is greater than ever. We have to harness the power of public sector flexibility, nonprofit entrepreneurship and capital from banks to improve schools, connect local residents to good jobs, build family assets, and encourage healthy lifestyles and behaviors. Working together and building upon the successes of the past, banks and their community partners have a unique opportunity to ensure the long-term health and vitality of America’s cities and the people who live there.

Ben Hecht is president and CEO of Living Cities (www.livingcities.org).

 


Posted on Friday, April 04, 2008 (Archive on Thursday, July 03, 2008)
Posted by Scott  Contributed by Scott
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