Five Seattle credit unions are contributing the final piece of financing for an affordable housing project to serve the city’s residents.
The investment will pay below-market returns on money but above-market value on resources beyond profits.
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 just 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.
The cooperatives are BECU ($30.0B, Tukwila, WA), Salal Credit Union ($1.1B, Seattle, WA), Sound Credit Union ($2.5B, Tacoma, WA),Verity Credit Union ($763.1M, Seattle, WA), and WSECU ($4.5B, Olympia, WA).
Our intent is to incent developers to build affordable housing. Our goal is about community impact, not revenue.
The development, Solera, is the first project of the Evergreen Impact Housing Fund (EIHF), which is managed by the Seattle Foundation. According to the EIHF, the builder, DevCo LLC, already has built 7,700 affordable housing units in the state. Solera is expected to be ready for rent in 2024 for households earning an average $54,000 to $58,000 a year, or 50% of King County’s annual median income.
Working people who play critical roles in our society elementary school teachers, grocery clerks, caregivers cannot afford our region’s skyrocketing rents, says Kris Hermanns, the Seattle Foundation’s chief impact officer. This is about providing housing stability and ensuring enhanced equity and economic opportunity across our region.
A Brand-Building Project That Displays The Movement’s Values
Microsoft has committed $50 million to the EIHF, and the Washington State Housing Finance Commission has awarded Solera $70 million in federal tax-exempt bonds. The federal Low Income Housing Tax Credit (LIHTC) program also is involved.
The final piece is coming from those five credit unions. They’ll make below-market returns on their money, but profit’s not the point.
“The funds are structured as an investment and are expected to return principal and interest over time,” says Ann Flannigan, vice president of public relations at WSECU. “The amount of interest is very low and less than the rate of return we could have otherwise made on an investment like this. Our intent is to incent developers to build affordable housing. Our goal is about community impact, not revenue.”
Flannigan says the area’s economics also contributed to the cooperative’s decision to contribute.
The Puget Sound region has been among the hottest housing areas in the nation, she says. But hot for some means unattainable for others. Gaining access to affordable housing in urban areas has been a brutally difficult challenge for many residents. Joining the collaborative fund was a way for WSECU to help address some of the housing need along with seasoned partners, even if we didn’t have expertise in this arena.
WSECU contributed $2.36 million to the EIHF, an amount Flannigan says was proportional to the asset size of the individual credit unions and that posed little risk to the cooperative itself.
“The united effort makes a statement,” she says. “Credit unions are showing up and addressing community needs. This is a great project for brand-building and an expression of the value of credit unions as an industry.”
A Sound Investment With Trusted Partners
For its part, Sound contributed $2.5 million to the fund to help bridge the equity gap in the Solera project, says Lyman Williams, Sound’s senior vice president and chief lending officer.
“Working with other credit unions on the project is the only way we’re able to make this big of an impact for the community,” he says. “This model of cooperative investing elevates credit unions and demonstrates the effect we can have when we work together.”
Flannigan at WSECU highlights the fact the project involves working with trusted partners both outside the credit union movement for example, the foundation is in charge of the project itself as well as with credit union peers.
“Working together allows us to leverage one another’s strengths and resources to have a greater impact,” she says. “As an interesting aside, when one of the original credit unions needed to pull out, the remaining partners were committed enough that we each contributed a bit more to fill the gap so that it remained a credit union investment.”
Credit Unions Come Together On Financial Challenges
Flannigan says the Solera project is an opportunity to show how credit unions come together to tackle the most relevant and challenging financial issues of our time. It also provides experience for future endeavors.
WSECU has worked collaboratively with other credit unions, primarily in the creation of CUSOs, and Flannigan says her cooperative will be using what it learns here for future opportunities that involve multi-stakeholder initiatives.
This project is one small piece of a much larger problem, but our hope is that it will inspire other business and community leaders to work together to create more affordable housing solutions.
The investment is the first of its kind for Sound, Williams says, adding that the ultimate measure of success will be seeing the project complete and in stable operation.
“We want to see families occupying the affordable units and the area flourishing,” the Sound lending chief says.
The Solera development is intended to provide safe, affordable housing to working people with modest incomes in a single Seattle neighborhood, but it’s a start.
“This project is one small piece of a much larger problem,” Williams says. “But our hope is that it will inspire other business and community leaders to work together to create more affordable housing solutions.”