What we’re up against
Sharing the hopes and challenges with making Baldwin House a reality
Hello Baldwin House supporters! While we've loved sharing our progress with you as neighbors and friends working to preserve affordable housing in DC, today we want to shed some light on a major barrier to this process: securing bank financing on the tight TOPA timeline.
First, a recap on where we are:
We have a purchase agreement with the building owner of an apartment building in the Howard University neighborhood.
We put down a deposit of $125k when we signed the purchase agreement.
We’ve successfully paid back rent owed by tenants and disbursed transition support funds for any tenants who choose to move out of the building. Now, we are hustling to nail down our bank loan.
Why it’s so hard to get banks to loan to a project like this:
Deep affordability: We are purchasing the building at market rate and are committed to building a deeply affordable housing cooperative. Our current model has sliding scale rents between 30 and 60% of the Area Median Income. While we will have less revenue coming in to pay off our mortgage, we are exploring uses of the commercial side to bring in additional money to go towards the mortgage.
Small number of units: A lot of affordable rental housing in the city is in small buildings. This means the city process for tenants to buy their buildings, known as the Tenant Opportunity to Purchase Act (TOPA), really needs to work for small buildings — this is not the case. Lenders view making loans to small buildings as risky because if one of the 6 residential tenants moves out, we lose ⅙ of our revenue from the residential part of the building. Plus, fewer units = higher costs per unit for some types of repairs.
Highly competitive public sources for long-term financing: Housing cooperatives must compete with big for-profit developers to access the city’s primary source of long-term financing, the Housing Production Trust Fund. Though advocates are calling on the city to be more transparent with the criteria for the Housing Production Trust Fund, there is no guarantee that we’ll receive a long-term mortgage this way, and banks are reluctant to provide a short-term acquisition loan without secure long-term financing.
And, we have to navigate these challenges on a very tight timeline. That’s why we’re so grateful to be surrounded by community support that enables us to manage these risks. Mobilizing money from community members through donations and community loans allows us to borrow less from banks as we work on a creative financial strategy with our community partners.
Want to contribute your time or talents to this effort? Let’s talk! Email us at email@example.com or make a direct donation via our Givebutter or Patreon.
P.S. For a more complete picture of the challenges with small affordable buildings and how Baldwin House has progressed despite the odds, stay tuned for a longform post on how most projects like Baldwin House fall through the cracks of the TOPA process.