The Math and the Heart of Acquiring a House
You may be wondering: why/when/how does an organization like BNCLT go about purchasing a home? The question we ask ourselves is: where is the heart of this home?
BNCLT’s top priority is to buy occupied properties, and when we do, the answer is evident — the people who live there hold the pulse of the building — and sometimes this is held in their shared struggle to hold onto their homes. The people who live in the buildings we buy come with so many stories — sometimes weary stories of being displaced many times before — sometimes hopeful stories of building connections with their neighbors. Always, they come with the dream of being able to settle into their home without having to worry about leaving. Sometimes we find the heart in a generous owner who sells or gives us their building because they want it to be forever affordable — this is their legacy and dedication to their neighborhood. Sometimes the heart lies in the imagination of the future — an anonymous building transforming into vibrant, affordable homes. Wherever the heart is, it’s important for us to find it for each transaction, because that is the motivating force that sustains our CLT.
Okay, that all sounds great. But how the heck do you buy a property? Does the CLT have a ton of money to go out and buy these homes? The answer to this question is — no. We don’t operate like your typical cash buyer/investor who can plunk down $1 million to buy a building (but we do compete against buyers who can). Instead, we create a “stack” of funding from a variety of sources.
City Sources
Because we are a non-profit committed to affordable housing, we get some of our funding from public sources. In recent purchases, the City of Boston has granted us “soft loans” from the Acquisition Opportunity Program (AOP). While technically a loan, we don’t have to pay interest or principal, and as long as we follow the affordability restrictions included in the loan, we don’t have to pay it back. If in a few years we decided to sell the property for a profit, we would have to pay back the City for the full amount — but rest assured, that is the last thing we would do.
Private Lenders
For most of our purchases, we also get a regular loan from a lender. The lender has parameters for how big the loan can be. Since we are committed to keeping rents very low, our loan size is restricted. This is because the bank needs to know we can pay the monthly costs (interest, principal). So now, we have a loan from the lender, and a soft loan from the City.
Filling the Gap with Philanthropy and Solidarity Investors
But there is still often a gap. Remember, the Boston housing market is steep, and we also have to cover costs of repairs when we purchase. So this means we often need to raise additional money to cover all of these costs. This is where philanthropy comes in. Individuals who care immensely about this work have given us generous donations to be able to fill this gap, as have institutions, like BOS Collaborative, with Boston Medical Center as the anchoring partner. We also have received low interest “solidarity” loans from community members who invest for a 5 year term at a low or no interest rate. When we’re able to receive donations or lower interest loans, this means we are less reliant on the higher-interest traditional bank loans. There are numerous alternative funds emerging to support this work. So, we also find the “heart” right at the center of the “math” when we connect with investors who share our love for this mission. We’ll take a deeper dive on “alternative finance strategies” in a future newsletter.