NY’s revolving loan fund a critical tool for building more housing Upstate (Guest Opinion)

Valerie White is senior executive director of LISC NY, the New York branch of the national Local Initiatives Support Corporation. Christine R. O’Connell is the organization’s senior director of capital investments and housing. LISC NY, with offices in New York and Buffalo, is a statewide nonprofit that helps under-resourced neighborhoods meet community needs.

Under Gov. Kathy Hochul’s leadership, New York state’s newly agreed-upon budget includes a number of key housing initiatives aimed at supplementing continued efforts to create or preserve 100,000 affordable homes over five years. This includes the state’s first mixed-income revolving loan fund, an underutilized tool in housing finance that will be critical for housing development outside of New York City.

When discussing New York’s housing crisis, it can be easy to develop a tunnel vision for New York City, given the dense population and specifically intense demand for solutions within the five boroughs. However, we mustn’t forget our communities Upstate that are also dealing with shortages, and a need that is just as great. Major economic development is already in the works in Upstate New York. Micron’s $100 million investment in Clay will likely bring 100,000 new residents to Onondaga County. Chobani’s new $1.2 billion factory in Rome will create thousands of jobs and revitalize farms and local communities in Oneida County. This influx of labor, economic stimulus and development will lead to a higher demand for housing that will require identifying real solutions to the specific challenges hindering housing production Upstate.

This is where a revolving loan fund comes in. One major hurdle for housing production north of New York City is the lack of tools available to create mixed income rental units, which leaves many developments unable to secure proper financing. Permit delays, coupled with supply chain uncertainties, labor shortages and high interest rates, leave many lenders wary of investing in projects.

Organizations, such as LISC NY, have stepped in to help fill these gaps. For example, LISC NY this year is developing nine transactions outside of New York City that will invest $26.5 million to leverage $315.5 million in order to create 1,086 affordable housing units and 122,775 square feet of commercial space. But we can do more with further investment from our partners in government.

A revolving loan fund is uniquely equipped to bridge the gaps in capital and spur housing creation that will meet the demands of new economic investments. It serves as an evergreen source of capital that can be leveraged in tandem with other conventional financing methods, filling the gap where municipalities often come up short. The flexible terms and lower interest rates lessen the costs of housing production and mitigate risks for lenders, which encourages more investment into these developments.

The savings generated by this more accessible financing option can also contribute to making homeownership and rental housing more accessible. And because the fund is cyclically replenished through repayments, it is sustainable and can be stretched to finance more new projects over time. Project owners can obtain permanent financing at a cheaper rate and pay it back directly to the fund after construction is completed.

In New York, the $50 million state investment Upstate (another $50 million is slated for New York City) through Homes and Community Renewal will be a key part of unlocking new housing production in Upstate markets that will not only provide more homes but also produce good-paying jobs and extended economic stimulus that will be reinvested back into our communities. This measure has the potential to create thousands of housing options for low-and-middle income New Yorkers that otherwise would not have existed.

The incentive to invest in our Upstate communities is there, and it is likely more will follow in Micron’s and Chobani’s footsteps. New York must be prepared to take full advantage of these investments, and that means making housing in these areas accessible.

The value of this revolving loan fund for addressing housing challenges outside of New York City cannot be underestimated, as it represents an innovative policy and use of public funds that will amount to meaningful progress toward solving a complex problem.

As we prepare to allocate this fund and kickstart the cycle, we must do so in a careful and mindful manner that enables this initiative to work as intended and create a framework for generating even more housing under this model.