Originally published at usbank.com.
The apartment building at Langley and 62nd Street in Chicago’s Woodlawn neighborhood had been vacant for years when Bill Williams bought it. After a complete gut job, it’s now home to 16 families who are enjoying central air, granite countertops and high-end finishes — all at affordable prices, for those earning 30%-80% of area median income.
It was rehabbed by KMW Communities with financing support from Chicago Community Loan Fund (CCLF). The two have formed an important relationship, especially as KMW expands its focus on developing in low- and moderate-income communities across Chicago.
“I want to meet the community where they are, wherever the need is,” said Williams, founder of KMW Communities. “Affordable housing has my full commitment as long as my capital and relationships and the policy will let me.”
That last part is key and speaks to some of the common barriers for any developer — but can be even more challenging when you’re a Black developer. That’s why he values his relationship with CCLF, which provided the construction and permanent loan on the Langley Avenue project — and other projects before and since.
“CCLF has always removed barriers to capital and knowledge for historically disadvantaged enterprises and this support from U.S. Bank is enabling us to remove more of them,” said Calvin L. Holmes, president of CCLF, a community development financial institution (CDFI). “CCLF is able to offer low-cost financing to KMW and other developers of color who care about the community and want to leave a lasting impact.”
Hoping to address some of these barriers, U.S. Bank piloted a program last year with three CDFIs to support and grow the number of developers led by people of color, awarding them a total of $250,000 in grants. CCLF, Capital Impact Partners and Enterprise Community Loan Fund each received grants supporting their technical assistance programs for developers of color.
U.S. Bank Access to Capital: Collaborating to Invest in Developers of Color is back this year, with increased grant funding to more CDFIs and a more specific focus. Five CDFIs are sharing $300,000 in grants from U.S. Bank. They include Community Housing Development Center Corporation, The Harbor Bank of Maryland, NewCorp Inc., Northside Economic Opportunity Network (NEON) and TruFund Financial Services. Each is Black-led and works with Black affordable housing developers, providing both technical support and lending.
“The combination of technical assistance and predevelopment capital is critical to creating on-ramps for developers of color in the affordable housing industry,” said Phillip Sangokoya, Director of Business Impact Integration with U.S. Bancorp Community Development Corporation (USBCDC), which is providing the funding. The program is part of U.S. Bank Access Commitment and supports USBCDC’s focus on racial equity as it works to expand relationships with organizations that are owned or led by people of color.
“We want to both elevate our partners and magnify the impact of our work together,” Sangokoya said. “There aren’t a lot of Black developers who are getting access to capital and those who are in the industry know that getting your first affordable housing project off the ground can be challenging — so we’re starting there and doing what we can to help break down those barriers.”
As Williams knows, the barriers can span a wide range.
“You need a lot of skills to be a developer. It involves a wide range of disciplines, and you learn by doing; they don’t teach it in school,” Williams said. “For example, it takes intimate knowledge of the market and a broad vision, coupled with the technical and capital resources.”
It’s why Williams participates in CCLF roundtable discussions with others on the development process, sharing best practices — and worst practices — on everything from construction technique to overall strategy. His own background is in finance and banking. His firm, KMW, had to reposition itself following the financial crisis in 2008. He began working with the City of Chicago, including its Neighborhood Stabilization Program, and to date has renovated about 100 units in mostly Black and brown neighborhoods. Most are rental units, but some were sold, enabling others to build wealth through homeownership. It was through those rehabbed for sale units he first became involved with CCLF.
“CCLF was one of the only lenders at the time to support affordable home ownership. We renovated and sold a few homes, and we do condo-quality rental units, indistinguishable from for-sale units,” Williams said. “CCLF understood our process and supported whatever we needed, given we were credit worthy. They were able to go into these neighborhoods when others wouldn’t.”
What he means is property values in some of the communities where investment in affordable housing is most needed can bring their own issues.
“Values are challenging in some of these areas and the profit is low. There can be value gaps, where the cost of construction exceeds the value of the property itself. There are lending guidelines that create barriers. Lending policies might say you need a certain amount or you’re a risk. Which I understand. And real estate doesn’t always go up. There is the possibility of losing money.”
No matter where a project is located, KMW brings its background in market-rate new construction to its affordable housing work, in terms of quality, finishes and amenities. Williams said the process is the same, whether it’s a $1 million or $250,000 property.
“There are a lot of barriers. You always need new money,” Williams said. “On the debt side, it’s patient capital and equity. Long-term equity and in an amount that’s sufficient to build a business. It’s hard to build a business one deal at a time. Deals take time and you can be in the poor house if you don’t have enough capital to sustain you.”
But Williams has found it’s all worth it, especially helping develop neighborhoods that need it most.
“Now we’re double downing on affordable housing because we understand the need,” Williams said. “It’s transformative and it’s also, for me, it’s a legacy. It’s very addictive.”