New York City is making another move to tackle the affordable housing crisis, this time by partnering with the financial services firm Goldman Sachs.
In a newly announced public/private partnership, the city and Goldman Sachs say they will be offering a new $50 million line of credit to Minority Business Enterprise (MBE) developers.
With the creation of the New York City Minority Business Enterprise Guaranty Facility, some ten different MBE developers will have access to as much as $500 million in private construction lending.
The MBE Guaranty Facility is designed for minority developers who see opportunities to refurbish a building or develop a vacant lot yet find themselves having to reach out to various funding sources and pay countless fees just to put a new construction project in play, said Asahi Pompey, Goldman Sachs’ global head of corporate engagement and president of the Goldman Sachs Foundation.
“In order to be a developer they have to show a certain amount of capital,” Pompey explained in an interview with the AmNews. “Money––that whole quandary of ‘you have to have money to make money’ or the capital to be able to fund these projects––minority developers are locked out of these development opportunities because they don’t have the capital, the liquidity, [or] the carry guarantees generally required by lenders to be able to build much-needed affordable housing units. A number of minority developers have broken through by partnering with larger firms, mostly majority firms, to build those developments. But what that also means is that they’re getting a smaller share of the profit on those developments because they’re having to partner with larger firms.”
Goldman Sachs, a global investment firm, will play a crucial role in the city’s new MBE Guaranty Facility. Over the next 10 years the company has committed to put $10 billion in direct investments and $100 million in philanthropic capital into its One Million Black Women initiative, which is designed to have the company work with Black-women-led organizations in efforts to address the nation’s racial wealth gap.
Goldman Sachs’ outlay for the MBE Guaranty Facility will help certified MBE developers secure up to $50 million in construction financing, allowing them to get to work without the need for outside loans. “The MBE Guaranty Facility includes a $25 million commitment from the Housing Development Corporation (HDC) on behalf of the city,” the press release for the program notes, “and a $25 million commitment from Goldman Sachs Asset Management over a five-year period, with the Community Preservation Corporation (CPC) serving as the facility manager. The $50 million is expected to leverage as much as $500 million in investment in affordable housing.”
“Here’s the way I think this is progress,” Pompey said about the new MBE loan program. “It does a number of things: one is [that] a minority developer tends to be a bit of an anomaly––less than 1% of developers are people of color and so the few that exist in the marketplace have really had serious barriers to entry. What this allows is more entrance and it allows the ones that have broken through to be able to build more development; it takes these minority business developers from being an anomaly to being a proof point and eventually a standard bearer so that this model can then be replicated to allow more minority developers to be able to be in this marketplace and be able to build more affordable housing.
“I think that’s the reason this really matters from a progress perspective.”
The MBE Guaranty Facility will be managed by the Community Preservation Corporation (CPC) which will start accepting program applications before the end of the month. For more information, email mbeguaranty@hpd.nyc.gov.