BofA to Help Develop Low-Income Rentals
BankAmerica Corp. said Thursday that it will invest $70 million, the biggest lump sum ever by a U.S. corporation, in developing rental housing for the homeless and working poor in California and six other Western states.
B of A’s investment is being made against a backdrop of grass-roots concern about the San Francisco-based banking giant’s pending merger with Security Pacific Corp. and criticism of B of A’s past lending practices involving minorities.
In exchange for the investment, B of A will receive tax credits under a provision of the 1986 tax reform legislation that has been periodically extended. The credits will help lower the company’s federal taxes.
Rep. Nancy Pelosi (D-Calif.), a leader in the effort to extend the tax credits, called the investment “a milestone.” It should encourage other corporations to follow suit and demonstrate to Congress the benefits of making the tax credit provision permanent, she said.
With federal support of affordable housing dwindling, Pelosi added, “we should encourage public-private partnerships.”
B of A’s announcement followed by a day the release in Washington of a report by two nonprofit groups describing how difficult it is for the nation’s poor to secure shelter.
The study, by the Center for Budget and Policy Priorities and the Low Income Housing Information Service, said 56% of poor renters, about 10 million people, pay more than half their income for housing. The government considers housing affordable if it takes no more than 30% of a family’s income.
Community groups have voiced fears that B of A, in its cost-cutting zeal after its merger with Security Pacific, will close unprofitable branches in poor neighborhoods. Moreover, in October, B of A released data showing that last year it turned down a far higher percentage of home-loan applications from minority customers than from white borrowers.
At the time, Don Mullane, the company’s executive vice president for corporate community development, said B of A was dissatisfied with that performance and vowed to improve its lending practices.
“I see this (the investment) as another . . . step to deal with the embarrassment of the high turndown (statistics) and to defuse” other criticism, said Donald K. Crowley, a banking analyst with the Keefe, Bruyette & Woods investment firm in San Francisco.
B of A’s funds will be distributed by the California Equity Fund and the National Equity Fund, both operated by Local Initiatives Support Corp., the nation’s largest nonprofit community development group. Investments will be made only in housing developed and owned by nonprofit, community-based organizations.
The investment “shows most of all that it makes sense financially as well as socially,” said Anita Landecker, a vice president in the Los Angeles office of LISC. “This shows companies they can do well by doing good.”
Under the agreement, B of A has committed $40 million for projects in California. In addition, $10 million is earmarked for housing in Arizona, Idaho, Nevada, New Mexico, Oregon and Washington. Plus, for four years beginning in 1992, B of A will invest $5 million annually in LISC’s two equity funds.
