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Chicago

Lenders pledge $36M for loans to multifamily investors who keep buildings affordable

The city’s new Opportunity Investment Fund promises lower-cost financing in exchange for 15 years worth of affordable rents

Rahm Emmanuel (Credit: Getty Images)
Rahm Emmanuel (Credit: Getty Images)

BMO Harris and CIBC are among several financial institutions and nonprofits that have pledged millions of dollars for a fund to provide lower-cost financing to multifamily developers who set aside units as affordable housing.

Two nonprofits, Community Investment Corporation and the Preservation Compact, have secured a total of $35.5 million in pledges. They have been raising money for the Opportunity Investment Fund since the summer, when Mayor Rahm Emanuel said the city would jump-start it with a $5 million contribution, according to Crain’s.

Along with BMO Harris and CIBC, other institutions like MB Financial, Northern Trust and Byline Bank have contributed to the combined $20 million total. Local nonprofit Benefit Chicago committed $5 million, the Illinois Housing & Development Authority committed $2.5 million and the Capital Magnet Fund, a federal affordable housing program, committed $3 million.

The fund typically will provide mezzanine loans that make up 10 percent of a project’s financing stack, but at interest rates about 7.5 percent, well below the typical 20 percent mezzanine loan interest rate, an official told Crain’s.

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Developers who secure financing from the fund must set aside 20 percent of the units in the building for 15 years for tenants who make less than 50 percent of the area’s median income.

CIC and the Preservation Compact expect to finance about 1,500 apartments through the fund, 300 set aside as affordable. The program has already provided loans for seven properties totaling 176 units in areas including Hermosa, Morgan Park, Galewood and Oak Park.

The program was one of a flurry of initiatives rolled out this year by Emanuel, who said they would help provide affordable housing in the city.

He most recently proposed creating another pilot zone through the city’s Affordable Requirements Ordinance that would increase the number of affordable units a developer would have to set aside in Pilsen and Little Village.

Developers have been critical of the existing pilot zones, and an analysis by The Real Deal showed the number of projects in the pipeline in those areas has declined since the program was created. [Crain’s] — John O’Brien

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