Harvard University’s Impactful Investments in Affordable Housing

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Harvard University’s Impactful Investments in Affordable Housing

The Boston area, like many of the nation’s most economically productive urban regions, has struggled with income inequality and rising housing costs that disproportionately burden lower-income residents. Harvard University, which has its constituent schools, teaching hospitals, and other administrative units located in both Boston and, primarily, the neighboring city of Cambridge, is one of the wealthiest institutions in the United States and is a major employer and economic engine in the region. To help address the affordability crisis in the cities it calls home, the university launched the 20/20/2000 Initiative in 2000, pledging to invest $20 million into local affordable housing and community development initiatives over 20 years. In the summer of 2019, just months before the original pledge was set to expire, Harvard recommitted $20 million for another 20 years under a new name to better communicate the initiative’s mission: the Harvard Local Housing Collaborative.

How the Fund Works

Harvard does not select projects to receive funding. Instead, the university has partnered with three intermediary organizations that have a stronger institutional focus and more extensive experience in funding affordable housing projects. These organizations identify projects to support that will best advance the goals of the Harvard initiative: to create and preserve affordable housing in the Boston area. In both the original allocation and in the 2020 recommitment, Harvard designated $6 million to the Cambridge Affordable Housing Trust, which preserves, creates, and advocates for affordable housing; $4 million to BlueHub Capital, which has as its mission the creation of affordable housing and community facilities to help build equitable prosperity in society; and $10 million to LISC Boston, the area’s branch of the Local Initiatives Support Corporation, which convenes like-minded organizations to advance comprehensive approaches to community development. For example, past LISC-hosted gatherings have brought together organizations focused on the issues of housing, education, and health care to better align efforts across domains. Harvard selected these partner organizations for their well-developed competencies and longstanding missions, which positioned them to invest initiative funding where it can be most effective.

Each organization receives funding from Harvard in the form of a low-interest loan, with the university expecting a 1.8 percent return from the partners. The partners, in turn, loan money to affordable housing developers at an interest rate of 4.5 percent, which is below typical market rates. The partners’ investments are a form of patient capital, according to Margaret Keaveny, senior program officer for lending and investment at LISC Boston, allowing developers the time needed to assemble the often-complicated financing packages used in the production of affordable housing. LISC Boston, for example, provides early-stage financing to selected projects. Such early investment can help projects attract the other investment sources needed to complete a financing package. As developers repay their loans to the intermediaries and the intermediaries repay their loans to Harvard, the university can then reinvest that money with the initiative partners; over the initiative’s first two decades, Harvard has committed more than $40 million in total.

Impacts to Date

With the university providing the money and the intermediaries distributing funds, the development of individual projects, including decisions about their goals, target populations, and programming, is left to the developers. Because many of the funded projects are produced by community development organizations with their fingers on the pulse of their neighborhood, the projects respond to a community’s particular needs. The projects are often situated near public transit or include commercial or community space, ensuring that the developments maximize opportunities for residents. Many projects also include sustainability features that can ease a project’s operational costs, thereby supporting their long-term viability.

Renewing the university’s pledge under the new moniker Harvard Local Housing Collaborative presented an opportunity for the university to reflect on the fund’s results in its first 20 years. More than 7,000 units of affordable housing — 5,500 in Boston and 1,600 in Cambridge —spread across more than 180 projects have been created or preserved. Harvard funds have also supported the construction of housing in the neighboring cities of Somerville and Watertown. The investment in Cambridge has been particularly significant, with Harvard-supported units representing a quarter of all affordable housing units created or preserved in the first decade of the 2000s. The initiative has also proven to be flexible, funding projects that include cooperative housing and assisted senior housing as well as programs supporting first-time homebuyers, artist lofts, and shelters.

Funding Large-Scale Development

The scale and flexibility of Harvard’s investment enables the partner organizations to fund large projects that can significantly impact the neighborhoods in which they are located. For example, LISC Boston made its largest single investment of Harvard money to help create 323 new housing units in Roxbury along with commercial and community space. Called Bartlett Station and built by Nuestra Comunidad Development Corporation and Windale Developers, the project occupies an 8.6-acre former bus lot for the Massachusetts Bay Transportation Authority. When the final phase of Bartlett Station is completed, 129 of the units will be for sale and 194 units will be to rent. The project will reserve approximately one-third of its units for low-income households and another third for middle-income households as workforce housing; the remaining units will sell or rent at market rates. Two of the project’s anticipated 10 buildings were completed by fall 2020. Building B features 60 rental units, including 32 low-income apartments, and a ground-level grocery store. Building E contains 14 market-rate and 2 affordable condominiums for purchase.

The impacts of Harvard’s commitment to preserving and creating affordable housing highlight the important role of anchor institutions in the equitable development of the places they call home. Furthermore, in committing to flexible funding with experienced local partners, Harvard ensures that the projects it supports reflect the evolving needs of the city and its neighborhoods. Leveraging the on-the-ground, multisector competencies of its partner organizations allows the fund to best support promising and transformative projects, which often incorporate programming to further educational, employment, and healthcare goals. As the Boston area continues to face ongoing affordability challenges, the Harvard Local Housing Collaborative will continue to help local organizations achieve the area’s affordable housing goals.