Cities across the U.S. are struggling to provide enough affordable housing for low- and moderate-income residents. According to the real estate company Zillow, at the end of 2016 “a typical buyer purchasing the typical U.S. home could expect to pay 15.8 percent of their income on a mortgage — the highest share necessary in more than six years,” while the share of income necessary to afford a U.S. rental home was nearly 30 percent.
Denver’s mayor, Michael B. Hancock, has gone so far as to call the need for affordable housing the most “important priority in the city.”
Recognizing this as a critical issue for millions of Americans, Wells Fargo has invested $9 billion in low-income housing tax credits, making it the No. 1 investor in affordable, multifamily housing in the country. The company is also an active lender for affordable housing projects and has financed the creation of more than 180,000 units for individuals and families since 2012.
Wells Fargo has supported efforts to curb the affordable housing crisis in Denver and cities throughout the country, from San Francisco to New York City.
“There is a significant affordable housing crisis impacting the country right now,” said Mark Myers, head of Wells Fargo Commercial Real Estate. “As the largest commercial real estate lender in the country, being able to meet the need for more affordable living options for our customers and communities is a top priority for Wells Fargo.”
Investing in low-income housing tax credits
Wells Fargo is helping bridge the affordability gap in housing by investing in low-income housing tax credits, which allows real estate developers across the country to access the cash needed to build affordable housing.
“Federal housing tax credits are awarded to developers of qualified projects,” said Lesley Milovich, head of Community Lending and Investment. “Developers then sell these credits to investors like Wells Fargo to raise capital for their projects, which reduces the debt that the developer would otherwise have to borrow.”
Hancock wants to make affordable housing that is close to public transit a reality for the residents of his city, and Wells Fargo continues to play an important role in making this happen. In 2016, the company helped finance Park Hill Station, a 156-unit apartment building.
“What affordable housing means in terms of access to transit is that we can connect people to jobs in a very affordable, efficient manner,” said Hancock. “We could not have provided this new opportunity in this city and this region without the collaboration of Wells Fargo.”
Park Hill Station is one of six projects in the Denver area for Wells Fargo’s Community Lending and Investment group, which invests debt and equity capital for economic development, job creation, and affordable housing in areas of need. Hancock’s goal is to create 6,000 affordable housing units in Denver over the next 10 years.
Commitments throughout the country
Wells Fargo’s efforts to improve the lives of low-income American families extend beyond Denver. In San Francisco, the company helped finance Veterans Commons, a 75-unit affordable housing complex for homeless U.S. veterans. And in New York City, Wells Fargo is helping to reverse a supply-and-demand crisis.
“In New York, we have more people who want to live here than we have housing,” said Rafael Cestero, president and CEO of Community Preservation Corporation, a nonprofit affordable housing lender in New York City. “This creates a supply-and-demand issue that’s driving rents higher and creating a need for affordable housing. Without Wells Fargo’s commitment to working with local government and investing in organizations like CPC, New York would be a different place.”
In addition to tax credit investments, Wells Fargo is an active lender to the affordable housing sector and provides short-term construction, bridge, and permanent financing for affordable, multifamily properties.
Wells Fargo works with many established affordable housing developers around the country, such as Artspace, a national nonprofit that provides artists a place to live and create amongst their peers. In 2014, Wells Fargo provided more than $8 million in construction loans and permanent (or long-term) debt and a $6.9 million equity investment to help Artspace create Jackson Flats, a 35-unit apartment building in Minneapolis.
“When an affordable housing project is created, it transforms the quality of life for the residents. And the residents form a community that shares common interests,” said Alan Wiener, head of Wells Fargo Multifamily Capital. “The improved quality of life can lead to the emergence of small businesses, new jobs, and the education of children. All of these things, in turn, also then improve the quality of life in a neighborhood. It’s a continuous cycle.”