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Community Developments Investments (February 2012)

Huntington National Bank Community Development Corporation: Making a Difference, One Bank at a Time

Joseph P. Molnar, Managing Director, Huntington National Bank Community Development Corporation

The Commons at Livingston, in Columbus, Ohio, provides supportive services to low-income, formerly homeless, disabled veterans and others experiencing homelessness.
NCR
The Commons at Livingston, in Columbus, Ohio, provides supportive services to low-income, formerly homeless, disabled veterans and others experiencing homelessness.
Landau Murphy (right), a formerly homeless veteran and resident of The Commons at Buckingham in Columbus, Ohio, speaks with Joe Molnar, Huntington Bank CDC’s managing director, and Barbara Poppe, USICH executive director.
Huntington Bank CDC
Landau Murphy (right), a formerly homeless veteran and resident of the Commons at Buckingham in Columbus, Ohio, speaks with Joe Molnar, Huntington Bank CDC’s managing director, and Barbara Poppe, USICH executive director, about his own experience and how he counsels homeless veterans.

Huntington National Bank, a regional bank headquartered in Columbus, Ohio, is using its resources to help provide affordable housing in Ohio and throughout the Midwest. The bank faces a big challenge. In 2010, approximately 150,000 Ohioans were homeless, according to the Coalition on Homelessness and Housing in Ohio. An additional 327,000 households spent more than 50 percent of their income on housing, leaving precious little for food, clothing, and other necessities of life.

Huntington Bank is committed to both small business and affordable housing financing in the Midwest. Ohio has a range of housing assistance services, including homelessness prevention, emergency shelters, transitional housing, and permanent affordable housing that provides supportive services. There never seems to be enough of these services, however, to fulfill the needs. Creating solutions to transition people experiencing homelessness in Huntington’s communities to permanent supportive housing (PSH) is one of the bank’s top community development priorities. Huntington has had to seek out these deals, because they are scarce. In addition, these projects require time, expertise, and intense effort to complete successfully.

Huntington Bank’s community development arm, the Huntington Community Development Corporation (Huntington CDC), based in Columbus, has invested in PSH projects in the Midwest for many years. Over the past five years, Huntington CDC has increased its focus on housing for the homeless, investing $34.5 million in equity in seven PSH projects with 487 units in Indiana, Michigan, and Ohio.

For more than 20 years, Huntington CDC has been an active and consistent investor in affordable housing. Our success is due to strong partnerships and portfolio performance. We work with many regional syndicators, such as Ohio Capital Corporation for Housing, Great Lakes Capital, City Real Estate Advisors, and National Affordable Housing Trust, to review, invest, and partner with local advocacy groups, such as the Community Housing Network of Columbus, and Dwelling Place in Grand Rapids, Mich. As a result, we have developed a strong working partnership with quality developers. One such organization is National Church Residences (NCR), which has created a niche in permanent supportive housing.

NCR is the nation’s largest not-for-profit developer of affordable senior housing and a leader in permanent supportive housing. Huntington CDC has partnered with NCR through the Low-Income Housing Tax Credit (LIHTC) program on investments of $14.9 million.

Our investments with NCR are made through our single investor/proprietary fund, rather than through a typical multi-investor fund. In other words, these are direct investments made by our proprietary fund and the investments are managed by National Affordable Housing Trust, NCR’s syndication arm. NCR is the owner, developer, and property manager.

The investments in our proprietary fund are asset-managed for the life of the investment. Since our team of three is a relatively small shop, we benefit from our syndicator’s expertise and staff of experienced asset managers. We established proprietary funds about seven years ago. We use this model as it is an efficient way to make larger dollar investments directly into developments in our Community Reinvestment Act (CRA) assessment areas.

We also continue to invest in multi-investor funds, and we have the same arrangements with our friends at Ohio Capital Corporation for Housing (Columbus), Great Lakes Capital Fund (Lansing, Mich.), and City Real Estate Advisors (Indianapolis, Ind.).

Knowledgeable and stable partnerships are critical to growing Huntington’s investments in PSH development. Fortunately, NCR and other partners offer a steady pipeline of opportunities that are well worthy of our investment.

In Columbus, NCR has developed four PSH projects for formerly homeless individuals: the Commons at Chantry; the Commons at Livingston; the Commons at Buckingham; and the Commons at Grant. NCR’s fifth project, the Commons at Third, is scheduled for completion in the summer of 2012.

The Commons at Chantry has 10 units dedicated to formerly homeless families. The Commons at Livingston offers 50 units, solely dedicated to disabled and homeless veterans. The Commons at Grant, the Commons at Livingston, the Commons at Buckingham, and the Commons at Third offer formerly homeless residents the opportunity and services they need to achieve stable, productive lives while increasing personal and economic independence through a host of resources.

At these and other NCR projects, residents such as Landau Murphy, a Vietnam War veteran, have found a home and path to personal success. After returning home from the war, Murphy was injured while working as a coal miner. Following that injury and a divorce, he moved to Columbus with friends to seek an education. Instead, when his friends left town, he became homeless and lost his job. After living on the streets for numerous years, he was encouraged by the staff of the U.S. Department of Veterans Affairs to apply for housing at one of the NCR projects. The stable housing environment and support services led to training and a job: Murphy now counsels other homeless people and encourages them to come in from the streets.

In addition to equity funding, Huntington CDC has also provided $1.125 million in construction lending, supported by a $500,000 Federal Home Loan Bank of Cincinnati Affordable Housing Program grant, to the Commons at Livingston, which is designated for disabled and formerly homeless veterans.

Table 5: Sources and Uses of Funding for the Commons at Livingston

Sources of fundsAmount
HOME Grants (Ohio)$1,000,000
Ohio Housing Finance Agency (American Recovery and Reinvestment Act, Tax Credit Exchange)1,724,441
Federal Home Loan Bank (Affordable Housing Program)500,000
Ohio Housing Finance Agency (Tax Credit Assistance Program)500,000
Donation (Huntington, Porter Wright, Marris & Arthur, LLP)1,000
Construction loan (Huntington)1,125,000
Equity bridge (Franklin County Housing Trust Fund)1,000,000
LIHTC equity (Huntington)3,160,764
GP equity and deferred (National Church Residences)226,169
Total sources of funds$9,237,374
Uses of fundsAmount
Land$235,610
Hard costs with contingency4,694,938
Soft costs1,370,245
Reserves and escrow458,612
Financing and syndication costs352,969
Interim loan repayments (construction)2,125,000
Total uses of funds$9,237,374
Source: Huntington Bank CDCM

As shown in table 5, the development of these properties requires many partners working together, with federal, state, and local government support, to achieve an effective balance of private and public capital. This willingness, along with expertise to navigate this process, has achieved measurable results and many success stories. Careful financial structuring, integration of rental subsidies, and appropriate funding of reserves to ensure long-term performance are all needed to mitigate risks associated with services that are subject to annual appropriations.

Finally, from a taxpayer viewpoint, this approach is innovative and it significantly lowers the cost to deliver safe and affordable housing, along with the supportive services, than would otherwise be delivered by hospital and nursing home providers through Medicaid and Medicare.

Permanent supportive housing is an approach to ending homelessness based on the premise that people are much more likely to become stable, contributing members of society when they have a safe, affordable place to live. This approach works by providing immediate housing (usually subsidized with project-based Section 8 rental assistance), coupled with on-site supportive services tailored to meet residents’ needs. Supportive services include social, educational, therapeutic, vocational, and health care support programs, as necessary, to stabilize and maintain housing and affect lifestyle change. On-site supportive services are available to all residents of NCR’s permanent supportive housing programs. NCR is generally able to finance these critical services with a combination of grants from the Community Shelter Board of Columbus and resident rents.

Most candidates for permanent supportive housing include the chronically homeless, veterans, persons with physical disabilities, and those who struggle with mental or emotional disabilities. Candidates must also demonstrate one or a combination of multiple special needs that have impeded their success in obtaining housing, including severe and prolonged mental disability, chronic substance abuse, long-term health disorders, developmental disabilities, HIV/AIDS, or other mental or physical disabilities.

One former resident of NCR’s the Commons at Grant, is an example of how permanent supportive housing can help lead to productive lives. After moving into the Commons, the woman left behind her life of alcohol addiction and sleeping in homeless shelters. Having a stable place to call home, she became committed to helping herself and others. Having people to help her when needed—even in the middle of the night—made all the difference for her. After successfully reclaiming her life, she graduated from supportive housing and moving into traditional housing in 2009. She began working as a counselor and is pursuing an education.

Huntington and its partners recognize that the success of permanent supportive housing requires the coordination of federal, state, and local governments in connection with structuring the financing to secure long-term economic viability of the property. Just as important are the supportive services provided to the residents to ensure continuous support as the residents make progress in achieving independence and gaining personal and community productivity.

NCR President and CEO Thomas W. Slemmer views this partnership as a success. “In the 49 years that NCR has been developing affordable housing communities the establishment of our permanent, supportive housing presence … is one of the best examples … of community leaders and private industry coming together to solve a very real problem for an underserved population,” Slemmer said.

Joseph P. Molnar can be reached at (614) 480-6104 or Joe.Molnar@huntington.com.