Journal of Housing & Community Development

Using Public-Private Partnerships to Fund Affordable Housing

March 28, 2019

The Housing Opportunities Commission of Montgomery County (HOC) wins a 2019 Award of Excellence in Affordable Housing for partnering with a private, mission-driven organization to create an innovative financing structure to fund new affordable housing near a future public transit hub. Nominated from among the NAHRO Award of Merit winners each year, the Awards of Excellence winners are chosen by national juries and honored at the annual National Conference and Exhibition in October. They represent the very best in innovative programs in assisted housing and community development.    

In Montgomery County, Maryland — and across the nation — rent increases continue to outpace wage growth. A family living in the county cannot afford to rent a modest, two-bedroom apartment on minimum wage. The median household income in Montgomery County is $103,178, while the average annual income for the Housing Opportunities Commission of Montgomery County (HOC) customers – most of who are working adults, seniors and/or persons with disabilities – is $18,600. Government resources for affordable housing development are disappearing and many low- and moderate-income households are forced to seek housing options in the county outskirts, without suitable public transit options or connections to high-performing schools.

The development of the Purple Line light rail connecting Montgomery and Prince George’s Counties presented HOC with a chance to preserve and increase affordable units near a future transit hub, keeping residents connected to community resources and employment opportunities. In 2018, the HOC opened The Lindley in Chevy Chase to provide much needed affordable housing for the community.  

The Lindley replaced Chevy Chase Lakes, a property that was built in the 1950s and updated in 2005. The unit and community layouts of Chevy Chase Lakes had become functionally obsolete and unappealing to the modern market. The age and location of the property were suitable for redevelopment and increased density, providing more on-site amenities and an opportunity to increase affordable housing in one of the country’s best school clusters.

HOC partnered with Bethesda-based residential developer EYA to increase density in the Lindley. By selling a portion of the original site to EYA and consolidating the low-rise garden apartments into a 200-unit high-rise building, HOC leveraged the land value in the highly desirable Chevy Chase Lake neighborhood.

The Lindley is comprised of 96 one-bedroom, 89 two-bedroom, and 15 three-bedroom units. Forty units are restricted at up to 100 percent of area median income as workforce housing and the remaining 40 units are restricted at 50 percent of AMI – providing welcomed affordability. Additionally, all 15 three-bedroom units are restricted at 50 percent AMI to serve very low-income families and maximize access to the strong network of schools in the Bethesda-Chevy Chase community.

HOC is the first public housing authority (PHA) in the country to include private foundation capital as a source of equity while also maintaining principal control and ownership of the property.  HOC partnered with the Morris and Gwendolyn Cafritz Foundation, which focuses on improving the quality of life for residents in the Washington Metropolitan Region by funding affordable housing development and other community services, as well as programs in the arts and humanities, education, health and the environment. The operating agreement admitted the Cafritz Foundation as the non-profit equity investor member while retaining HOC’s controlling interest and property ownership through designation as the managing member of the ownership entity and a 51 percent ownership interest. HOC believes that retaining ownership and control of the property ensures units will stay affordable for the long-term.

For this project, HOC recognized the opportunity to step outside of the conventional financing structure for developing affordable housing. By partnering with a private, mission-aligned foundation, HOC was able to secure direct capital investment in The Lindley at a lower cost of capital than traditional financing sources and create long-term affordable housing.

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