Community Developments Investments (June 2016)
Leveraging Nontraditional Alliances
Source: Local Initiatives Support Corporation
The Healthy Futures Fund helped finance So Others May Eat (SOME)’s expansion in Washington, D.C. which will include a health center, affordable housing, a job-training center, and retail space.
Kevin Boes, President and Chief Executive Officer, New Markets Support Company, Local Initiatives Support Corporation
Crippling rates of chronic disease continue to rise in low-income communities—even those that have benefited from investments in good housing, health facilities, jobs, and community safety. Lack of affordable health insurance for low-income families pushes them to seek care at hospital emergency rooms because preventive and primary care are unreachable.
What can we do to more explicitly connect community development to health services in ways that break the link between poverty and poor health?
That question brought together the Local Initiatives Support Corporation (LISC), Morgan Stanley, and the Kresge Foundation (Kresge) to launch the Healthy Futures Fund: an investment vehicle designed to connect health services and affordable housing projects. The Healthy Futures Fund brings these three partners together with a creative, shared vision for a new finance tool.
Thus far, the Healthy Futures Fund has proven to offer a compelling case for both health and community development by integrating multiple financial tools. It provides a mechanism to finance affordable housing by investing equity in Low-Income Housing Tax Credit (LIHTC) projects. It supports new community health centers with equity investments in New Markets Tax Credit (NMTC) transactions. It provides predevelopment grants and loans to advance both types of projects. And it offers grants that promote cross-sector collaborations to make health and housing part of the same whole.
What’s more, the Healthy Futures Fund structures transactions so that the process is replicable, minimizes repeated documentation, and limits the third-party support necessary to close transactions. This process makes these deals less expensive, even though they are often more complex than a traditional development project.
The result? Our initial $100 million Healthy Futures Fund is fully deployed, and we are expanding with an additional $100 million in new capital for 2016. Since our launch, we have signed on more than seven supporting partners to diversify our resources and expertise. And we are creating new on-the-ground connections that are slowly making housing and health care part of a common community development mindset.
It hasn’t all been smooth sailing, of course. We learned early on that aligning the interests of housing developers with primary care providers was easier said than done. While both types of organizations have long served a common client base, the two have not typically worked together. They are driven by a different line-up of policies and unique funding streams that often create a fragmented approach. The Healthy Futures Fund offers the tools and partners to bring those pieces together.
That disconnect was pretty clear when the Healthy Futures Fund partners looked at a proposed affordable housing deal in the East Side community of St. Paul, Minn. Lutheran Social Services of Minnesota and the West Side Community Health Services (WSCHS) were both working in the area to meet the needs of low-income households. Yet they didn’t really know of each other. Lutheran Social Services focused on developing affordable housing to ensure residents had quality apartments they could afford. WSCHS was expanding its health care services through the development of its East Side Family Clinic. They were operating on parallel tracks but had little reason to intersect. LISC, which has long worked in the same neighborhood and had deep connections there, proved to be the common thread.
When Lutheran Social Services leaders approached LISC with their plan to rehabilitate the 108-unit Rolling Hills Apartments to serve low-income refugee families, we brought WSCHS and its health care delivery expertise to the table to work on ways to integrate health services into the development process. The Healthy Futures Fund invested more than $10 million in LIHTC equity to support the revitalized housing and also provided a grant to build out space for on-site health examinations as part of the rehabilitation effort. Now WSCHS is delivering preventive health care and health education for the housing residents and the surrounding community.
The Healthy Futures Fund contributed additional grant dollars so the two providers could do the research they needed to be thoughtful in their approach. WSCHS conducted a series of community needs assessments that brought them closer to residents and facilitated their understanding of the services needed. All told, the effort did more than join health care and housing for the benefit of low-income residents. The effort also helped stabilize refugee families and created a more cohesive community that would help support them as they acclimate into American life and economic stability.
Like so much of LISC’s community development experience over the last 35 years, Rolling Hills proved to be a convincing case in point. Success in community development often hinges on strong partnerships among public, private, nonprofit, and philanthropic organizations that reach beyond traditional approaches to solve deep-seated problems. It takes a good deal of creativity and expertise to have a sustainable impact. And it takes a good deal of long-term capital as well.
That’s why, in addition to LISC, Kresge, and Morgan Stanley, the Healthy Futures Fund has been adding additional community development finance partners to help. All of the new partners bring multiple assets to the table, especially their deep passion and experience in community development components, such as housing and health care, and the federal programs that help fuel them.
Notably, many of our partners are contributing portions of their NMTC allocations to the effort. The tax credits are part of $3.5 billion in annual investment authority from the U.S. Department of the Treasury’s Community Development Financial Institutions Fund to encourage commercial redevelopment in low-income communities. In many respects, the NMTC Program is a companion community development tool to the LIHTC Program: one promotes housing development for low-income people, and the other focuses on attracting businesses and community facilities to low-income neighborhoods.
This alignment of partners and programs is critical because the Healthy Futures Fund’s deals do not generally come together like most community development projects. These projects depend on new alliances that have to be nurtured, both from an investment perspective and an operational one. For example, in Brockton, Mass., the Healthy Futures Fund supported a new community health center that is co-located with a new grocery store, with the partners jointly redeveloping a blighted commercial corner that has dragged down the surrounding area. The partnership is, however, about much more than real estate development. It quite intentionally pairs a health provider with a food provider in an effort to help low-income people eat better and live longer. The two are working together to offer nutrition programming, advice on shopping for healthy food, and cooking classes—all focused on reducing diabetes, obesity, and a range of other conditions.
Technically, the Brockton plan is structured as two different deals, one to finance the health center and a second for the grocery store. Brockton Neighborhood Health Center developed the 14,000-square-foot clinic, with $8.4 million from the Healthy Futures Fund, including capital contributions from LISC, Morgan Stanley, Kresge, and Opportunity Finance Network. LISC also financed the grocery store, with $3 million in low-cost loan capital.
How does all of that connect to affordable housing? The health center is collaborating with local housing providers on a series of outreach and education programs around chronic disease management, funded in part with Healthy Futures Fund grants. Under normal circumstances, little impetus exists for a grocer, health care provider, and housing organization to join forces. But this partnership effort illustrates one of the Healthy Futures Fund’s key goals: to help build nontraditional alliances that bring lasting gains to neighborhoods.
Another rationale for the Healthy Futures Fund centers on the Affordable Care Act, more commonly known as Obamacare. The law earmarks funding for more health centers, especially in disadvantaged areas. It also created millions of newly insured residents eager to take advantage of consistent access to primary care—in the case of many low-income families, for the first time ever.
After the law was passed the Healthy Futures Fund partners wanted to support health center expansion to meet growing demand. Disadvantaged areas are particularly evident in rural America, where so many areas are medically underserved. The first health center deal the Healthy Futures Fund closed was in the small town of Omak, Wash., where approximately 34 percent of the population lives below the poverty line. A local provider, Family Health Centers, wanted to relocate and expand its clinic to better reach residents. With $6.6 million in Healthy Futures Fund financing, made possible by NMTCs from the National Development Council, the provider nearly quadrupled the size of the medical clinic and doubled the size of its pharmacy. It can now accommodate more than 70,000 patient visits a year.
On its own, the new facility is a much-needed local resource. But the Healthy Futures Fund partners also wanted to more directly connect it to low-income housing residents. That’s why the Healthy Futures Fund provided grant dollars for the purchase of transportation vouchers. The vouchers will help area residents overcome a major barrier to care in rural communities: ready access to personal or public transportation.
With each deal, we cement more partnerships and gain more experience. From Menominee, Mich., and Muncie, Ind., where the Healthy Futures Fund has supported new housing with on-site health care, to Toledo, Ohio, and Raleigh, N.C., where we are funding new health centers that extend services to nearby housing developments, the Healthy Futures Fund partners are focused on innovative ways to improve the quality of life for people who struggle to make ends meet.
LISC has always been a bridge, bringing technical assistance and financing to support the dreams of its community development partners and create lasting physical assets in distressed communities. Now, with the various tools of the Healthy Futures Fund, we are more intentionally connecting community development to health care in ways that will have a lasting impact on the communities where we work.
For more information, e-mail Kevin Boes.