CFHomes Baltimore Affordable Housing Initiative

City First Homes, a Washington D.C.-based affordable housing non-profit, will partner with the Baltimore City Department of Housing and Community Development, City First Enterprises and local for-profit developers to buy distressed single-family homes, renovate them to high standards, and then maintain them in perpetuity as affordable housing.

The program will focus on supporting low- and moderate-income (LMI) individuals and families utilizing a proven program of integrated services for both the residents and the houses assets.

CFHomes will acquire 450 units of recently renovated, occupied single-family houses, using a single transaction to create a substantial portfolio of quality affordable rental housing. By purchasing this existing collection of occupied properties with stabilized positive net cash flows and by retaining the existing property management company, CFHomes will significantly reduce the typical risks involved in undertaking such a broad and significant affordable housing initiative. The program will offer a continuum of rental housing, rent-to-own conversions, and direct homeownership for city residents. The homes will be maintained as affordable in perpetuity by CFHomes for successive generations of future residents.

Financial description

We will finance the acquisition primarily through the use of debt. The portfolio has been consistently generating approximately 8% NOI, which provides significant debt service coverage. We have received three term sheets for senior debt from national lenders that will take us to approximately 65% LTV on the approximately $52 million deal price. We also have a term sheet from a national CDFI (community development financial institution/non-profit lender) for sub-debt that will take us to approximately 80-85% of the purchase price. The seller has offered to stay in for 5% of the purchase price as equity. That means we have to raise approximately $5.2-$7.7 million in grant funding – which works out to under $18,000 per house.
In addition, the City of Baltimore Housing Commissioner and his team have been working to provide CFHomes with a payment-in-lieu-of-taxes (PILOT) program on the initiative. CFHomes projects that this type of program would reduce the tax payment from approximately $550,000 annually by 50% -- generating an annual subsidy of about $225,000 to support operational expenses/services to residents. Based on our conversations with Baltimore Housing and Community Development, the City believes that this project is eligible for this type of program under the existing laws governing PILOTs. Ultimately the PILOT will require approval of the City’s Board of Estimates.