Social Impact Investment Model (US)

Location

US

Lead Organisation

Community Solutions

Housing model type

Scatter-site and congregate housing

Financial Details

Government grants, subsidies, loans and social impact investment

Dwellings delivered

198+

Clients assisted

N/A

Management of properties and tenancies

Community Solutions and place-based property management services

Date of program commencement

2020

Project description and key objectives

Community Solutions brings together multiple private and public partners working to deliver Housing First models across the US using an innovative social impact real estate investment model.

With an objective to end homelessness for all, Community Solutions have developed an investment model that leverages social impact capital to help house the most vulnerable individuals. The social impact investment (SII) model delivers low-cost, affordable homes in less time and cost than traditional development methods. Used in combination with Community Solution’s Built for Zero methodology whereby real-time data is collected using a digitalised by-name system, long-term housing is allocated directly to people experiencing homelessness with high and complex needs.

Community Solutions’SII model consists of four key pillars:

  • Social Impact Capital from investors who are interested in social impact beyond making a return on their money.
  • Non-profit Ownership where the property is owned by national or local non-profits who are not incentivised to maximize the profit of the property
  • Connection to Housing Systems so the property is linked to the local housing system and connected to the ongoing needs of people at risk of or experiencing homelessness in the community. As units become vacant, the model prioritizes the most vulnerable people experiencing housing instability for residence.
  • Property Management Plus which connects residents to social services before they can enter a situation where they become housing unstable and get evicted. For example: If a resident is unable to pay rent because they need urgent medical care, the property management team would help connect them to care first.

Built form

Community Solutions’ have used the SII model to acquire housing in multiple locations across the US for people experiencing homelessness. Each project involves the purchasing of existing medium-to-high density apartment complexes which must be located in walkable neighbourhoods with access to a range of key amenity and services.

At least two projects have been developed using the social impact investment model, including:

  • Abrigo Apartments, Colorado: A mixed-income residence where two-thirds of the building’s 66units are allocated to veterans exiting homelessness.
  • Centra Villa, Georgia: A 132-unit housing development providing permanent supportive housing for veterans exiting homelessness. 

Financial details

The social impact real estate investment model involves raising equity from individuals and organisations dedicated to creating housing for people experiencing homelessness.

The first project developed under the social impact investment model is the Abrigo Apartment complex located near Denver, Colorado. Community Solutions acquired the complex for a total sum of US$7.5 million (including restoration costs). $2.5 million was social impact equity raised from individuals committed to creating permanent homes for veterans exiting homelessness. The remaining $5 million was funded through bank loans serviced by Community Solutions.

The specifics of the social impact investment are as follows:

  • Equity return is capped at 3 per cent
  • Proceeds in excess of 3 per cent buy down initial investment
  • As interest is bought down, proportionate ownership is transferred to Community Solutions
  • By Year 7, investors’ capital is returned (with 3% IRR), Community Solutions becomes the sole-owner and the building continues to providepermanent supportive housing.

The second project is the Central Villa, in Atlanta, Georgia, which is the result of a strong public-private partnership (PPP). Community Solutions purchased the apartment complex in February 2021 for US$12 million. The HomeFirst partnership provided $2.6 million in grant funding and $7.6 million was funded through a government-backed mortgage. The remaining $1.8 million involved a social impact loan provided by the Atlanta Affordable Housing Fund (AAHF), a social investment fund designed to provide low-interest rate gap (mezzanine) financing for affordable housing projects.

The objective of the AAHF is to provide loans in the 3-5 per cent interest rate range to qualified developers or housing providers who will either create or preserve affordable housing units. Impact investors receive an economic return, as well as a social return quantified in a report card of how many affordable housing units their investment benefits (Atlanta Affordable Housing Fund 2021).

A charity organisation (the Home Depot Foundation) support the project through an in-kind donation.

Property and tenancy management

Community Solutions provide on-site property management using their “property management plus” model, which incorporates wrap-around support services for Housing First clients. In some cases, Community Solutions contracts place-based property management services with experience managing supportive housing projects.

Further information

For further information about Community Solutions’ Social Impact Investment Model, please visit:https://community.solutions/using-social-impact-real-estate-investment-to-help-close-the-housing-gap/

Additional resources for this profile

Dave Foster, head of real estate at Community Solutions, explains how social impact investment can help end homelessness: https://www.youtube.com/watch?v=yKMqbnra3GU

Community Solutions, Built for Zero:https://community.solutions/our-solutions/built-for-zero/

Media article on Community Solutions’ data-driven Built to Zero methodology:https://www.fastcompany.com/90316607/3-cities-in-the-u-s-have-ended-chronic-homelessness-heres-how-they-did-it

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