Banks Aid Low-Cost Housing Developers
A consortium of 46 banks statewide officially launched a program Thursday to provide $100 million in long-term, fixed-rate loans to developers who build affordable housing for low-income families.
The formation of the California Community Reinvestment Corp., a nonprofit mortgage banking corporation based in Burbank, comes a year after preliminary plans were announced. The program is based on similar ones formed by banks in New York and Chicago, as well as another one formed in 1971 by savings and loans in California.
The corporation will make money available to groups wanting to develop low-income housing, with the initial emphasis on apartments for low-income tenants. More than half of the units in the developments must be rented to people with low incomes. As a rule of thumb, officials said, a family of four making less than $28,000 a year is considered low income.
Won’t Solve Problem
The corporation is expected to provide developers with such incentives as financing that will extend as long as 30 years, interest rates at below market rates and fixed-rate loans. In addition, the corporation expects to provide assistance to nonprofit groups developing housing and also will help put together financing packages.
Housing officials have called California’s shortage of low-priced apartments the worst in the nation. In Los Angeles, for example, the city is said to need 10,000 new or remodeled apartments a year to keep up with demand.
Officials with the corporation acknowledged that the program is unlikely to come close to solving the state’s huge low-income housing problem. Moreover, they said they feel pressure to make the program work and to screen groups and developers adequately to prevent abuses.
“We cannot afford to have the program fail,” said George F. Moody, president of Security Pacific Corp. and chairman of the new corporation’s board.
The corporation plans to sell the loans in the secondary mortgage market. That will replenish the loan pool and provide a constant source of money for projects.
Banks Under Pressure
For banks, participating in such a program has several advantages. Although the corporation is technically nonprofit, there will be a small return distributed to participating banks.
More important, banks are often under pressure from community groups to make money available for affordable housing. Regulators often consider a bank’s participation in community investments when approving mergers. Continental Illinois Bank was recently denied a merger by the Federal Reserve, based on its community investment record.
All of the state’s major banks are involved, as well as Japanese banks with major presences in California. The amount committed by each bank varies according to the size of its California operations. BankAmerica in San Francisco, the state’s largest banking company, contributed the most, $18 million.
The plan was initiated by John Trauth, who directs the San Francisco Development Fund, an affordable housing organization. Daniel B. Lopez, former statewide community lending officer at Citicorp Savings in Oakland, has been hired to run the corporation.
