Private investment fuels new innovative approach to create more affordable housing

Cape Fear Collective has a long-term vision for affordable housing
Updated: Mar. 18, 2021 at 4:15 PM EDT
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WILMINGTON, N.C. (WECT) - City councils and county commissions have talked for years about ways to address the affordable housing issue. They’ve developed initiatives like the City of Wilmington’s rental rehabilitation program, where property owners can receive loans to help renovate houses that can then be operated as affordable housing. Counties have offered incentives to developers in exchange for dedicating units as affordable or workforce housing. But home ownership remains a barrier to success for many Americans.

Cape Fear Collective has developed a new initiative in the effort to create more affordable housing. CFC brings data and capital to the table, resources that many non-profit groups may not have had access to in the past. Frankie Roberts, the Executive Director of LINC (Leading Into New Communities) Incorporated, which works in the affordable housing realm while providing transitional living to individuals returning from prison, says the Cape Fear Collective endeavor shows potential.

“Because Cape Fear Collective has made the effort to bring or set a table for people to come and have this conversation that have historically been in this work, that’s what has been different,” Roberts said while walking through a property on Meares Street in Wilmington. “To get our feedback, our input, and see how they can empower us to empower the people that we serve.”

The data that CFC collects can take many forms. The organization teamed up with the Greater Wilmington Chamber of Commerce and dozens of organizations to survey the quality of the workforce and the needs of employers across southeastern North Carolina. Staff has also had face-to-face conversations with residents young and old, to learn their life experiences and daily interactions. The accumulated information can become the roadmap for non-profits to learn where they intersect in the effort to address generational issues, how their services to the community may overlap without knowing it.

“There’s going to be non-profits that are building houses, like Habitat for Humanity,” said Patrick Brien, CEO of Cape Fear Collective. “There’s going to be non-profits that support the homeless community like Good Shepherd (Center), and there might be case management-medical type of non-profits who are just interacting a lot with housing problems because that’s who their clientele is and some of the issues they are suffering from. Those organizations all understanding how they affect that big severe housing metric, which is big and scary and like ‘how can we ever move the needle there?’ When you break it down to an organizational level you start to have this sort of self-organizing effect where people really understand where they’re driving generational change.”

For capital, Caper Fear Collective secured a $2.5 million investment from Live Oak Bank, one of the organizations that helped to create CFC in 2018 following Hurricane Florence hitting southeastern North Carolina.

“In terms of investing, we believe, and a lot of people have been talking about the notion that there is capital that can earn more than just a financial return, but there is a social return,” said Huntley Garriott, president of Live Oak Bank in Wilmington. “We really believe there is a lot of opportunity to do a lot of good with capital. So, this was sort of the first foray into that.”

Brien and his CFC team bought twenty properties in Wilmington and Pender County. The properties take different shapes. Some are standalone, including the property Roberts walked through on Meares Street. Others may be duplexes or condominiums. Most have the same thing in common, the need for some repair or renovation. CFC will bear that cost, then look to organizations like LINC, Habitat for Humanity and Good Shepherd Center to possibly buy and maintain the property as affordable housing.

“When you talk about first-time homebuyers, a lot of those programs require folks to already have improvements already done to the house,” Brien said. “A lot of times if you’re looking at $130,000 to $150,000 range, that house needs improvement. We solve that problem by doing that rehab for them, then being able to offload that house into that first-time home buyers’ pipeline.”

Where many investors look to flip a property quickly, leaving with substantial profits, Cape Fear Collective’s approach is more long-term. The investment from Live Oak Bank is for five years, calling for a two percent return on the $2.5 million. As Garriott says, the social return is the more important part of this deal.

“We’re a little bit of the guinea pig here,” Garriott says. “But if we can show that you can safely earn a return, while doing good, we think there is a lot more capital that can be unlocked here in Wilmington, and then we can scale this into other markets in North Carolina and beyond.”

“We’re probably going to cycle that money probably two or three times over the next five years,” Brien added. “They (Live Oak Bank) get two percent back on $2.5 million. We’ll turn that $2.5 million into five (million), maybe $7.5 million in affordable housing investments because we’ll buy, we’ll sell, we’ll buy again, we’ll sell until the duration of the investment is up.”

Roberts, a Wilmington native who has seen many efforts to address the affordable housing issue, seems to welcome the long-term vision with this new endeavor.

“If there was any skepticism that I had, it would be that you don’t want to be in a situation where you ultimately, if you’ve got people that are investing, you start protecting the investors,” Roberts said. “Then it won’t become affordable anymore. That is typically what we found working with other efforts in the past that have been directed toward affordable housing. But I believe this will be different. That would be my only skepticism. Other than that, I think it will work.”

Cape Fear Collective has not sold any of the homes it purchased. Brien and his team are also looking to make similar investments into workforce development, growing small businesses and transportation.

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