Wall Street Journal: New Cash for Affordable Housing

Wall Street Journal
July 30, 2014

Longtime affordable-housing lender Community Preservation Corp. is getting an infusion of $350 million to invest in struggling neighborhoods, part of a private-public partnership that New York City Mayor Bill de Blasio called essential to his agenda.

The partnership, between the city and banks, will allow the nonprofit lender to spur the renovation of an estimated 7,500 units of affordable housing, most in low-rise buildings across the five boroughs.

Mr. de Blasio said the private capital was critical to making good on his $41 billion plan to create or preserve 200,000 units of affordable housing over the next decade.

“Private involvement of course is deeply necessary for what we’re doing here today and everything that we intend to do in our plan,” Mr. de Blasio said Wednesday at a news conference in the Bronx.

“It’s very, very important that companies that are here invest in the future of this city,” Mr. de Blasio said. “A lot of this housing will be in neighborhoods that need it most.”

Citigroup Inc. and the city put forth large amounts of the money. Citigroup contributed $75 million. The city’s five public pension funds contributed $40 million, and its Housing Development Corp. put up the initial $20 million investment. Wells Fargo & Co. and Morgan Stanley each contributed $50 million. In all, 14 banks invested in the partnership.

Banks are required by federal law to invest a certain amount of money in community projects, such as affordable housing, in areas where they have deposits.

Mr. de Blasio, a Democrat who campaigned last year in part on reducing income inequality, thanked Citigroup on Wednesday and said the bank had invested hundreds of millions in affordable housing ventures in recent years.

“They’re going to have a lot more business with this administration,” Mr. de Blasio joked.

The CPC, founded by David Rockefeller in 1974, was known for years as an important player in nonprofit lendingā€”aiding in the revitalization of about 150,000 units of affordable housing across New York. The lender struggled during the recession, however, grappling with nearly $900 million in exposure to the hard-hit condominium market. It has recovered in the past few years.

Last year, it received $250 million in capital from Citigroup to rehabilitate affordable housing.

This year’s capital infusion means “more people are going to have homes they can afford” and more “neighborhoods are going to be stabilized,” said Rafael E. Cestero, CPC’s president and chief executive.

Citigroup Chief Executive Michael Corbat described the $75 million commitment by the New York-based bank as an investment.

“I want to make clear that this isn’t philanthropy,” Mr. Corbat said. “This is a business decision as well as an investment in our hometown.”