5 Ways Credit Unions Are Fighting The Affordable Housing Crisis

Credit unions across the country have rolled out programs to create better days in their communities.

A new term is gaining widespread recognition and shining a light on problems that might leave leaders of financial institutions feeling as though they’ve stepped through the looking glass.

The term is ALICE, and it stands for Asset Limited, Income Constrained, Employed.

Households that meet ALICE standards earn incomes above the federal poverty level, but don’t earn enough to maintain an adequate budget to meet their household’s needs.

This isn’t a new problem. In 2019, the Minneapolis Fed revealed research showing that 50% of adults would have difficulty covering a $400 emergency expense. These are ALICE families, and things have only gotten worse for them during the pandemic. According to reporting by CNBC, 63% of Americans have been living paycheck to paycheck since COVID-19 hit.

That’s a lot of a financial pain. But credit unions can help. The institutions highlighted below have rolled out programs to make housing more affordable and create beautiful days in their neighborhoods.

High Tech Presents Problems For Low Income

Seattle has a housing problem. By one estimate, 40% of the city’s residents are considered low income — making less than 80% of the area’s median income — in a market where rents have risen by one-third in the past decade.

Demand largely driven by workers in the city’s high-paying tech sector has prompted builders to respond with new housing at price points that leave many people behind.

In response, a group of credit unions has invested $11.1 million in one project to help address the need for affordable housing. They’re providing the final gap in financing needed to kick-start the construction of 277 affordable housing units in a 686-unit mixed-housing development that broke ground on Aug. 31 in the Renton Highlands neighborhood in suburban Seattle.

Read more in Seattle Credit Unions Invest Together In Affordable Housing.

The Power Of Nonprofit Partnerships

ELGA Credit Union ($1.25B, Burton, MI) has gone against the grain of industry trends for years, focusing on serving low- to moderate-income members of the community who have been largely cut off from traditional financial services. In 2017, the credit union became a certified Community Development Financial Institution (CDFI) and soon after received its first CDFI grant for $776,500, which it used to fund potential loan losses and help fuel loan growth.

The standard for CDFI is to leverage each dollar of those funds 10 times within a three-year period, says Terry Katzur, executive vice president of ELGA. We leveraged the funds 1,000 times over that period.

When the pandemic depressed local economies that were already economically challenged, ELGA received a $1.8 million grant from the CDFI Rapid Response Program. To deploy those funds, ELGA has focused its lending on four major areas of community concern: transportation, small businesses, affordable housing, and community revitalization.

Read more in ELGA Fuels Growth For Areas In Need.

Fighting Foreclosures

In the aftermath of the Great Recession, State Employees Credit Union ($53.1B, Raleigh, NC) created a CUSO that uses the resources and ethos of the nation’s second-largest credit union to turn foreclosures into single-family rentals and owner-occupied homes.

Known as SECU*RE, the property management CUSO has a mission to rehab and rent or sell SECU’s real estate owned (REO) properties. The result is fewer losses to the credit union itself and, just as critically, more affordable housing and less neighborhood decay in the communities where those houses are located.

In early 2020, SECU*RE owned 1,546 properties with a market value of $221 million. By midyear, it was managing 1,302 occupied rental units.

Read more in Rehab, Rent, Sell: A 3-Part Strategy To Fight Foreclosures.

Digging In For Displaced Community Members

Although the exact dividing line between Seattle north and south sides is somewhat subjective, the differences especially as they relate to diversity are clear, says Justin Martin, COO of Verity Credit Union ($794.7M, Seattle, WA).

In 2010, the 98118 zip code on Seattle’s south side was the most diverse in the city, according to U.S. Census data. But a light rail station that opened in the zip code in 2009 contributed to a decline in diversity, and by 2020, Census data indicated the zip code had fallen to the area’s fourth-most diverse.

With the light rail comes development, Martin says. With development tends to come gentrification and displacement. The cost of living goes up. All these things can have negative effects on the people who have historically lived in a place and made it a vibrant community.

Read more in Equity Housing Bridges A North-South Divide.

Building Neighborhoods In Nebraska

Columbus United Federal Credit Union ($83M, Columbus, NE) is leveraging its relationship with another nonprofit provider of affordable housing to make a difference in their rural corner of the Cornhusker State.

Through its work with NeighborWorks Northeast Nebraska, one of the more than 245 community development organizations working under the NeighborWorks America umbrella, Columbus United has helped develop subdivisions, sold homes in them, and expanded its reach within its newly expanded field of membership.

Without partnerships like this, we wouldn’t be doing a lot of these things, says Brian Christensen, president and CEO of Columbus United FC. Our demographics, service areas, and community involvement all overlap. We know and trust each other.

NeighborWorks Northeast Nebraska buys 30 to 35 houses every year to rehab and sell, and it extensively uses a revolving loan fund to help keep costs in check.

Read more in It’s A Beautiful Day In The Neighborhood.

 

June 6, 2022

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