Nonprofits strive to meet affordable housing demand

Buncombe County is expected to need roughly 5,400 more units of affordable rental housing and 1,300 more units of affordable for-sale housing by 2025, according to a 2021 report by Bowen National Research commissioned by the Dogwood Health Trust. These numbers represent over 40% of Western North Carolina’s total need.

While Asheville’s rental stock grew by 1.3% in 2021, according to national apartment listing service RentCafe, it remained the ninth-most competitive small city for rentals in the country. Over the last year, median Asheville-area rents have increased by 17.8%, according to rental website ApartmentList, with the median two-bedroom apartment running $1,626 per month.

Enter the nonprofit developer. By combining social-driven management, tax incentives and lower revenue expectations, these entities can often find ways to make affordable housing work in markets where for-profit developers aren’t filling the need. And in Asheville, nonprofit building activity appears to be on the upswing — including by organizations based outside the area.

Three projects proposed by outside nonprofit developers, either recently approved by Asheville City Council or currently being considered, offer 100% affordable housing targeted for older residents. Together, the three will add over 200 affordable units to the city’s stock.

“Being a nonprofit, we don’t always have to maximize profits,” says Steve Sceranka of the Buckeye Community Hope Foundation, an Ohio nonprofit slated to develop a 70-unit complex called Redwood Commons on Governors View Road in East Asheville. “We can lower our rents, and as long as we meet certain metrics as far as revenue goes, we can be comfortable with that. For the market-rate developers to build something that’s affordable to the renters and profitable to the builder, that’s a challenge.”

Homes sweet homes

Redwood Commons will join Fairhaven Summit, a 77-unit complex off Sweeten Creek Road to be built by Wisconsin-based nonprofit Commonwealth Development, and Laurel Wood II, a 54-unit expansion of an existing complex on Caribou Road by Virginia-based nonprofit Volunteers of America. (Only Laurel Wood is still awaiting conditional zoning approval, with a Council hearing tentatively scheduled for Tuesday, Sept. 13.)

According to Sceranka, Redwood Commons was originally slated to be 49 units due to zoning considerations. He says it was support from local government that allowed the plans to add more density.

“Asheville does it well because they look to be a partner in the development. In our very first meetings with them, it was made very clear they would do everything they could to support increasing the density, so we pushed it up to 70 units,” he explains. “Things like that a lot of communities don’t do, and Asheville does pretty well.”

Of the three outside developers, VOA is the largest, boasting a portfolio of over 480 affordable housing properties across 40 states. Lee Goldstein, the organization’s director of national housing initiatives, says its success comes from pursuing a different model from for-profit developers.

“Private developers may build it, lease it, get the cash flow started from renters and then sell it off. That is not our model,” Goldstein says. “We leverage the low-income [housing] tax credit program and satisfy our investors, but we are not looking for a big upfront return.”

The LIHTC, a federal program administered by state governments, gives developers of affordable housing a tax credit equal to a certain percentage of a new development’s value. According to the national nonprofit Tax Policy Center, most developers don’t use those credits to offset their own taxes but instead sell them to investors with greater tax liabilities.

Crunching numbers

LIHTC money is key to making the math work for affordable housing developers, says Barry Bialik, the owner of local for-profit developer Compact Cottages and chair of Asheville’s Affordable Housing Committee. However, he continues, accessing those funds can be difficult; ensuring that a project meets all the requirements to qualify for the credit is a bureaucratic process that many small developers may not have the resources to handle.

“It’s not the easiest game to get into,” says Bialik. “The larger developers are mostly based out of town, and they are used to dealing with tax credit projects.”

As the area grows and the need for affordable housing increases, Bialik predicts that bigger, out-of-town developers will keep coming. Buncombe Couty government has made encouraging LIHTC projects a central pillar of its affordable housing strategy, with targets set earlier this year aiming for at least 1,200 new affordable units to take advantage of the credits through 2030.

The resources that larger developers like Buckeye and VOA bring, Bialik explains, can help lower costs, make affordable housing projects more realistic, and avoid the many difficulties that smaller private developers may face. They’re able to leverage economies of scale in buying materials, bring in outside labor to alleviate hiring challenges and rely on greater legal expertise when dealing with local bureaucracy.

Grow local

While outside organizations are looking to increase affordable housing inventory in the coming years, local nonprofits such as Asheville Area Habitat for Humanity and Mountain Housing Opportunities have a history of doing so and continue to add units. Other area organizations without an affordable housing history, such as Haywood Street Community Development and BeLoved Asheville, are also getting into the game. Being local and a nonprofit has its advantages, according to Adeline Wolfe, a real estate developer for Mountain Housing Opportunities.

“When a private developer builds these units, that’s great, but they’re based out of town. They take their fees and their salaries, and that money goes elsewhere,” Wolfe says. “One benefit of local nonprofits is we take fees they earn and we turn them right back into the next project in the community.”

Regardless of who ends up building affordable units, say many developers, increasing density and directing more money to the issue are critical steps. “I’m optimistic because 10 years ago, this wasn’t as much of an issue across the country,” says the VOA’s Goldstein of affordability. In the past, he says, many residents were unwilling to welcome higher-density affordable developments into their neighborhoods.

“Now, it’s affecting every locality. I’m hoping it provides the pressure to change things like zoning laws and funding,” he continues. “There is still resistance from folks that don’t want [increased] density, or are worried about people from certain demographics or income levels.”

Bialik argues that local governments can help the issue by abolishing single-family zoning, as well as directing more funds to encourage homeownership through programs such as down payment assistance programs. Wolfe agrees that relying on federal funds is not enough and that cities and counties need to play larger roles.

“We have a pretty rich local funding landscape,” Wolfe says, referencing the city’s housing trust fund and Buncombe County’s affordable housing service program. “Both are great funding mechanisms. There was a lot of aggressive goal setting done over the last few years. We can’t rely just on the [LIHTC] program but really have to get behind increasing production through local subsidy.”