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Five Lessons for Creating a Housing Impact Fund

The Evergreen Impact Housing Fund

As mission-driven financial services providers deeply embedded in the communities they serve, credit unions are well-positioned to be key players in building partnerships and developing creative solutions to improve affordable housing. Below are 5 key lessons for successfully creating a housing impact fund. The Evergreen Impact Housing Fund, a collaborative effort to finance projects and increase capacity for affordable housing development, is one example that provides scalable strategies.

The Evergreen Impact Housing Fund

The Evergreen Impact Housing Fund is a public-private partnership between the Seattle Foundation and five Seattle-area credit unions to build affordable housing in Washington’s Puget Sound region.

The Evergreen Impact Housing Fund encompasses two funds that are worth a combined $86.1 million. The funds provide mezzanine debt financing towards the "last mile" of funding needed for large-scale affordable rental housing for families in the Puget Sound Region. Evergreen has leveraged a total of $35.5 million to add 970 affordable units to the Puget Sound region. Creating sustainable long-term funds is a central part of Evergreen's mission to not only finance projects, but also increase capacity for affordable housing development in their region.

The video below highlights how the Evergreen Impact Housing Fund is helping improve access to affordable housing in their community.

Produced by Ashley Archer Tindall at Film Archer
Access to affordable, stable housing is especially important at a time of economic uncertainty. More and more working families throughout Washington State are facing rising housing costs and growing threats of displacement.
Kris Hermanns
Fund Manager for the Evergreen Impact Housing Fund
Seattle Foundation

Five Lessons for Creating a Housing Impact Fund

The affordable housing crisis currently facing the United States has been precipitated by a lack of sufficient funding for affordable housing1. Housing impact funds are emerging as a vital source of capital to fund the construction and preservation of affordable housing. The lower cost “patient” capital provided by impact funds offers lower returns to investors than conventional lending, which makes up for financial deficits in the preservation and supply of affordable housing. However, all funds are not created equal. Below are five lessons, drawn from our research, for successfully funding, structuring, and deploying a housing impact fund.

Lesson 1

Build flexibility into the fund.

Housing impact funds that deploy capital from private philanthropy or donations can be more flexible than public funds because they are not beholden to the same regulatory and bureaucratic requirements. A nimble housing fund is advantageous, as it allows fund managers to opportunistically deploy capital, accelerate the development pipeline, and work on a greater diversity of projects with a wider variety of investors. Flexibility can be built into the fund when establishing the terms of its investments, loan products, and application requirements. Structuring the terms of a fund too restrictively may result in resources being used inefficiently or failure to adapt to unanticipated needs and circumstances. Creating a process for iterating the fund through its credit committee or another overseeing body can also be an important strategy to ensure that the fund is being deployed efficiently.

Lesson 2

Focus on the preservation of Naturally Occurring Affordable Housing [NOAH] in addition to new construction.

While impact funds have a variety of niches, the majority of housing impact funds focus on the development of new affordable housing and not on the preservation of NOAH. The United States is currently losing NOAH at a faster rate than it could practically be replaced due to the long timelines associated with new development2. Investing in NOAH preservation projects has unique advantages: it prevents immediate displacement of households and has a shorter timeline than new development. There are fewer robust federal programs for affordable housing preservation than new construction, meaning impact investments can help fill a vital gap in the affordable housing stock. Further, many NOAH preservation projects require relatively small lower-cost “patient” acquisition or rehabilitation loans3. Affordable housing funds should consider taking on preservation-based projects to maximize their impact.

Lesson 3

Significant investment of time and money into pre-development research pays off.

The capital used to create a housing impact fund often comes from a variety of sources. These sources could include a charitable donation by an individual, government funds, a foundation, or a trust. Regardless of the source of funding, it is vital to ensure that diligent research is completed before the fund is deployed. In particular, fund managers should have a clear understanding of the population their projects will ultimately serve and the type of affordable housing that the fund will prioritize. A thorough pre-development assessment determines what precise problem the fund will address. If the context is well understood, fund managers can ensure they offer the most effective loan products possible and identify strategic partners to work with. If pre-development research is insufficient, a fund is likely to be unsuccessful in attracting the right developers and investors. Furthermore, projects could fail to be truly affordable in the long or short term, and other unanticipated consequences may occur. A complete pre-development assessment should, at minimum, include: a community engagement process, market research, developer input, an evaluation of potential investor capacity, and professional financial modeling to determine what loan products are appropriate.

Lesson 4

Ensure that providing returns to investors does not overshadow the mission of the fund or the long-term affordability of completed projects.

A private-sector ethos can speed up the notoriously slow process of affordable housing development and redevelopment. Nonetheless, it is vital to ensure that the primary goal of an impact fund is to address the deficit of affordable housing and not to obtain higher returns on investment. This principle is particularly important because many funds' loans offer a "blended" interest rate that is possible due to credit enhancement provided by charitable or government dollars. When structuring a fund, long-term affordability must be codified so that affordable projects are not being "flipped" to market-rate in the near future. Some ways this can be done are to make long-term affordability covenants part of the loan-product terms, or to work on projects receiving other sources of funding that enforce these requirements (such as LIHTC funding).

Lesson 5

Finding experienced partners with strong track records is vital to the success of a fund.

Awareness of potential collaborators, both investors and developers, bolsters the success of a fund's development and deployment. Being well-connected in the regional affordable housing ecosystem enables fund managers to make decisions more rapidly when opportunities arise. For example, strong relationships with local housing agencies can move projects forward more quickly; large credit enhancement from philanthropic or private sources can bring down the spread on loans; and public, private, or charitable land donations can lower the cost of affordable housing developments. Recently, the affordable housing development space has been diversifying due to a growing awareness of the interplay between the affordable housing deficit and other causes. Faith-based organizations, health organizations, private businesses, and others have increasingly recognized their stake in affordable development and preservation. Unconventional collaborations can result in innovative projects that fill gaps in the existing portfolio of affordable housing or take advantage of underutilized resources. Nonetheless, working with seasoned organizations and stacking strong balance sheets is a vital strategy for a successful housing impact fund.


1 Blumenthal, P., & Handelman, E. (2016). The Cost of Affordable Housing: Does It Pencil Out?. Washington, DC: Urban Institute.

2 La Jeunesse, Elizabeth A. et al. 2019. "Documenting the long-run decline in low-cost rental units in the U.S. by State." Joint Center of Housing Studies of Harvard University.

3 Kling, Steve et al. 2021. "Preserving the Largest and Most At-Risk Supply of Affordable Housing." McKinsey & Company.

Additional Case Studies

These two funds, in addition to The Evergreen Impact Housing Fund, illustrate the variety that exists across housing impact funds and provide some scalable strategies.

Self-Help Credit Union logoSelf-Help Ventures Fund houses a series of loan funds dedicated to supporting affordable housing development and preservation that are worth a total of $71.5 million in Durham and Wake Counties in North Carolina. They offer a line of loan products geared towards preservation and development. Bridge-financing products maximize the impact of loans for preservation, whereas more conventional low-cost loans are available for new development. Self-Help’s Housing Funds are a model for both flexibility and integrity: their loans come with strict affordability covenants and are pure debt. Their strong track record allows them to attract 0% interest investments into their funds to provide credit enhancement for their loans.
The Bay's Future Family of Loan Funds logoThe Bay's Future Family of Loan Funds is one of the largest private-sector housing funds in the United States. The Family of Loan Funds is a collaboration among the Chan-Zuckerberg Initiative, the San Francisco Foundation, and the Partnership for the Bay's Future. By 2025, the goal is to invest $500 million to preserve and create 8,000 new affordable units in the Bay Area region of California. Their investors include large corporations and charities, alongside CDFIs and a regional bank. This fund exemplifies how finding a lead source of credit enhancement can catalyze the creation of a fund and attract diverse sets of strategic partners needed to work on a broad scope of projects across a large geographic area.

Filene's Center for Community Social Impact is generously funded by:

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