ST. LOUIS — The city’s economic development arm is launching a new $15 million loan fund to spur development and mortgage activity in neighborhoods that traditional lenders have tended to avoid.
The ºüÀêÊÓƵ Development Corporation says the new fund will help finance as many as 200 new or rehabbed homes.
Much of the money — $10 million — comes from $20 million in federal American Rescue Plan Act funds the ºüÀêÊÓƵ Board of Aldermen this summer directed to SLDC for a citywide housing development fund. SLDC will use federal New Markets Tax Credits to generate another $5 million in equity for the fund, which will finance housing development and residential mortgages across north ºüÀêÊÓƵ and low-income areas of south ºüÀêÊÓƵ.
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SLDC Director Neal Richardson said the fund will create “accessible homeownership opportunities†and “stimulate the markets†in neighborhoods that see little to no new development.
“I’m very excited for this initiative,†Richardson told the SLDC board Thursday.
In a first step to launching the program, the SLDC board approved issuing a request for proposals for a “master developer†that will administer the program, under SLDC oversight. The chosen developer will extend loans worth around $2 million to $3 million to several sub-developers, who Richardson said will try “to develop an entire block, rather than one house at a time.â€
The program aims to recruit minority- and women-owned sub-developers and contractors in an effort to grow capacity among minority-owned businesses in the city, a goal within SLDC’s “equitable economic development†plan released last year.
Not only will the fund finance new construction and rehabs, it will originate and service mortgages for the new homes, overcoming a major obstacle in the targeted neighborhoods. Traditional mortgage financing can be impossible to obtain throughout much of north ºüÀêÊÓƵ because of low real estate valuations and the lack of “comparable sales†lenders and appraisers use to underwrite loans.
Richardson said the dual program will help begin to nudge up homeownership rates in areas where they have been in decline “for generations†and “build generational wealth and close that wealth gap†by helping residents buy property and build equity.
SLDC said it hopes to have a developer identified by February, when staff plans to present a more detailed outline of the program to the board for approval. SLDC will maintain oversight as the money is loaned out to sub developers.
“This is going to be a very transparent process,†Richardson said.
Bill Seddon, who handles SLDC’s New Markets Tax Credit program, said it’s the first time SLDC has used its regular allocation of the federal credits for housing development.
Some portion of the mortgages and developer loans could be forgiven to help the contractors and homeowners build wealth, but ultimately the plan is to make the program fund a revolving loan operation that will ultimately lend out far more than $15 million — developing and underwriting hundreds of homes and mortgages.
“The goal is really to keep this going in perpetuity,†Seddon said.
The new program faced an uncertain start over the summer, when aldermanic leaders and Mayor Tishaura O. Jones clashed over how this initial round of federal stimulus funds were appropriated. An opinion from the then-acting city attorney questioned whether the $20 million for a citywide housing development fund would violate federal rules barring ARPA money from being used for “general economic development.â€
The rules offer more leeway if funds are used in low-income areas, and Jones ultimately spared the fund while using her line-item veto power to strip $33 million for redevelopment in several north ºüÀêÊÓƵ commercial corridors. At the time, a mayoral spokesman said any concerns about the $20 million citywide housing development authority could be alleviated by shifting the money to affordable housing programs. But the money has stayed under SLDC purview.
“I just want to say how excited I am to see this come to fruition,†said Alderman Jeffrey Boyd, who sits on SLDC’s board and backed the disputed appropriations this summer. “It was a little bit of a battle.â€