OLR Research Report

December 22, 2008




By: Joseph R. Holstead, Associate Analyst

You asked (1) for information about New York's acquisition fund organization and its core function; (2) if there are similar entities in other states or municipalities; and (3) about the $25 million in federal funds for the state to address the housing crisis, a portion of which is slated for Waterbury.


The New York City Acquisition Fund, LLC (the Fund) is a collaboration between the city, major foundations, and New York's public and private community investment groups. The Fund's core function is to provide “flexible capital for acquisition and pre-development costs to developers committed to creating and preserving affordable housing in New York City's five boroughs,” according to its website: http://www.nycacquisitionfund.com/.

Several other states have private and public partnerships working to create affordable housing, but these are closer to programs of the quasi-public Connecticut Housing Finance Authority and the state Department of Economic and Community Development than the Fund in that state entities partner with private firms (instead of the private management of the Fund). For example, Massachusetts and Rhode Island have programs that involve private funding, tax credits, and state involvement to develop affordable housing.

Specifically, according to its website, the Massachusetts Housing Partnership is a statewide public, non-profit organization that works with the state and private firms to increase Massachusetts' affordable housing supply. More information is available at: http://www.mhp.net/rental_development/. In Rhode Island, Housing Works Rhode Island is a coalition that acts as an affordable housing advocate and information source on private and public funding, working to end the affordable housing crisis in the state, according to its website: http://housingworksri.org/matriarch/MultiPiecePage.asp_Q_PageID_E_47_A_PageName_E_about

Finally, part of the federal Housing and Economic Act (HERA) of 2008 (Public Law 110-289), which the President signed into law on July 30, 2008, is funding for the Neighborhood Stabilization Program (NSP). NSP funds are for states and cities to stabilize neighborhood's hardest hit by the housing crisis. The act requires states to “give priority emphasis and consideration” to those metropolitan areas, metropolitan cities, urban areas, rural areas, low- and moderate-income areas, and other areas with the greatest needs (i.e., the greatest number or percentage of foreclosures, subprime mortgages, and homes in default or delinquency).

Connecticut's NSP allocation is $25,043,385 (approximately $23 million after administrative costs are subtracted). The Department of Economic and Community Development (DECD) will administer all of the NSP funds.

According to the DECD action plan required by this law, seven cities will receive the majority of funding, including Waterbury. For example, Waterbury qualifies for about $3.5 million (only Bridgeport will receive more). Nine other municipalities will also receive smaller portions of the funds. Recipient cities must use the funds to purchase and redevelop abandoned and foreclosed homes and residential properties. More information is available in DECD's plan, which is at: http://www.ct.gov/ecd/lib/ecd/2008_action_plan_substantial_amendment_neighborhood_stabilization_program.pdf (the document is 190 pages with the public comments).

Additionally, see the DECD Commissioner's testimony on the NSP plan from the December 10, 2008 Banks Committee informational hearing at: http://cgalites/ba/Forum/Neighborhood/ba_inforum_DECD_121008.pdf (or see attached).


According to an article at the Local Initiatives Support Corporation website, the Fund came about because of the city's need for more affordable housing. The article states that the city's supply of city-owned land for affordable housing is nearly gone. With land scarce, creating affordable housing is more difficult. The lack of properties, combined with the fact that many developers interested in developing affordable housing are nonprofit organizations and small for-profit developers with limited financial resources brought about the creation of the Fund. The November 24, 2008 article, entitled “New York City Acquisition Fund Honored as Innovations in American Government Award Winner,” is available at: http://www.lisc.org/content/article/detail/7790.

The Fund is managed by Enterprise Community Investment, Inc. and National Equity Fund, Inc. Forsyth Street Advisors LLC oversees the day-to-day operations of the Fund and JPMorgan Chase Bank serves as the administrative agent, representing 15 banks involved in the program.

According to its website, "based on soft commitments from public agencies to provide subsidies and financing in the future, the Fund makes loans to developers of affordable housing to bridge the period between acquisition and construction closing. The Fund finances both the new construction of affordable housing and the preservation of at-risk affordable housing." This and more information is available at: http://www.nycacquisitionfund.com/files/Publication2.pdf.

As further information on the genesis of the fund, according to an article on the Multi-Housing News web site, the Battery Park City Authority created a “guarantee pool” for securing loans under the Fund by investing $8 million in city funds with $32.6 million in foundation funding. The authority is a New York State public benefit corporation whose mission is to plan, create, co-ordinate and maintain a balanced community of commercial, residential, retail, and park space within its 92-acre site on the lower west side of Manhattan, according to its website: http://www.batteryparkcity.org/page/page11.html.

Additionally, The Starr Foundation, which is one of the largest private foundations in the U.S., made an initial $12.5 million challenge grant that helped start the Fund. Private sector banks and financial institutions also contributed $190 million to it. The article is available at: http://www.multihousingnews.com/multihousing/content_display/industry-news/e3i086cdad4ee3307a5cf46859acc10f904


Fund Distribution


To secure NSP funding, HERA (Public Law 110-289) required DECD to have a 15 day public comment period on a draft plan for fund distribution before submitting a final plan for federal Department of Housing and Urban Development (HUD) approval. DECD made its draft publicly available on November 7, 2008 and published its final plan, entitled “2008 Action Plan Substantial Amendment Neighborhood Stabilization Program (NSP),” with adjustments based on the public comments it received, on December 1, 2008. The major change DECD made in the final version was adding nine additional communities that qualify for federal NSP funding. 

Specifically, DECD determined, using the criteria the law requires, that there are nine additional communities in the state with significant needs, in addition to Bridgeport, Waterbury, New Haven, Stamford, Hartford, Meriden, and New Britain (the only cities identified in the November 7, 2008 draft plan). The nine are: Bristol, Danbury, East Hartford, Hamden, New London, Norwalk, Norwich, Stratford, and West Haven. According to the final NSP action plan it submitted to HUD on December 1, 2008, DECD will invite these nine communities to compete for up to $2.6 million in NSP funds with a maximum award of $867,850 per community. This includes 5% for administration.

HERA's short deadlines required DECD to act quickly, the commissioner said in her December 10, 2008 testimony to the Banks Committee. Connecticut's major cities had the greatest needs and also the local administrative capabilities to quickly use the funds. Specifically, the commissioner said in her testimony:

First, DECD made the decision that it would be in the best interests of the state to make NSP funds available for implementation at the local level, because a key goal of NSP was the stabilization of individual neighborhoods, and targeting specific activities at the neighborhood level would be essential to the program's success. Second, it was important that local capacity be taken into consideration. Congress set an aggressive timetable to obligate NSP funds within 18 months [or] face recapture of the unallocated funds.


Public Comments and Plans for Smaller Communities

The final plan also contains copies of the public comments DECD received on the November 7 draft. By including nine additional communities, DECD's final plan addresses concerns expressed by some entities and representatives across the state that the draft plan did not fairly distribute the NSP funding. But the final plan does not address concerns expressed about various smaller towns' needs, particularly in eastern Connecticut.

However, with regard to smaller towns' concerns, the final plan notes:

Governor Rell has urged the HUD secretary to temporarily modify the regular Community Development Block Grant program to allow those cities and towns not receiving NSP funds to undertake similar activities and expand income limits to address the sub-prime crisis within their communities. The state will further attempt to address neighborhood stabilization in small towns through the 2009 Small Cities Community Development Block Grant (CDBG) funding round. Priority status will be given to communities which seek to address NSP-related activities such as, purchase and rehabilitation of foreclosed or abandoned properties, within existing CDBG rules and regulations.