A Conversation with Calvin Holmes, Executive Director of Chicago Community Loan Fund (CCLF)

Calvin Holmes is the executive director of the $25 million Chicago Community Loan Fund (CCLF). CCLF manages the Gateway Fund, a $2 million loan pool that is part of the Preservation Compact’s Preservation Fund, a suite of loan products developed to provide financing for affordable rental housing preservation.

What is the Gateway Fund? The Gateway Fund is used for purchase contract loans and for supplemental pre-development or construction loans. It was designed to complement and supplement the Preservation Compact’s larger Acquisition Fund and is one end of a continuum of financial products within the Preservation Fund.

What in CCLF’s experience makes it suited for this role? We are comfortable with and successful at making deals work that might not otherwise get done because they are too risky for other lenders. For example, we can make a purchase contract loan for which there may be no real estate collateral through the Preservation Compact because we have $1 million in credit enhancement from the MacArthur Foundation and U.S. Treasury CDFI Fund. Nevertheless, in these deals we are essentially making character loans. Or, by accepting the subordinate lien in a transaction -- a more risky position -- we can leverage additional funding for the pre-development phase or senior construction funds. We have been working in low-income neighborhoods for more than 15 years and specialize in working with emerging, small and midsize groups who may not have a lot of development experience. Because we have developed an expertise in working with these groups and approve loans prudently (even though we are flexible), we have maintained a cumulative loss rate of less than two percent..

What other kinds of affordable rental housing preservation work do you do? We primarily work with nonprofit organizations and are especially suited for situations requiring a quick turnaround, higher risk and flexibility. The strength of the mission-driven, housing developers that we work with is that they are close to the community and they are close to the people who need the housing that they are producing. But they need loans to get started, and they often need help along the way to see their project through to completion. We continue providing our customers with technical assistance even after the loan is funded.

The economy has changed a lot since the Preservation Compact started a year and a half ago. What’s your sense of where affordable housing preservationists should be focused in this current economy? The risk of losing project-based section 8 buildings to gentrification has abated for the moment, but the trends that previously led to widespread condo conversions will reassert themselves eventually. Therefore, I think we should be using this lull to work intensively with nonprofit and tenant groups so that they understand their options and are well positioned to take control of their buildings when their buildings’ section 8 contracts expire, if they believe that is a viable direction for them. We also need to expand resources for buildings in need of deferred maintenance and take the opportunity to retrofit them with energy saving systems. Deferred maintenance has become a significant threat to the preservation of affordable housing, including that caused by buildings that languish in foreclosure during our current economic crisis. Further, it is increasingly very expensive to live in Cook County and lowered energy costs are critical for both low-income tenants and the owners and property managers that serve them. Finally, we also need to find ways to fill equity gaps, given that the market for Low Income Housing Tax Credits has contracted severely, and we need to find a way to intervene in the foreclosure crisis to save multi-unit buildings. So, the work of the Preservation Compact is still very much needed.

Do you see encouraging preservation signs on the national scene? This is a very exciting time in the community development field. We are starting to see a lot of changes due to the new Obama Administration. During the Bush years, few listened to us. Now the regulators are listening. Congress is listening, and the President is listening. There have been numerous forums and symposiums on our issues, and every week I am in conversations at the national level about community development. It’s a very exciting time. Two of the most promising developments are modernization of the Community Reinvestment Act (CRA) and funds for building energy efficiency and “green collar” jobs. CRA will likely be expanded to more financial service firms, creating more capital for communities, and while no one seems to be quite sure yet how much money for energy will be available ultimately, there will be billions provided by the Federal government alone. Furthermore, as it relates specifically to community development loan funds, the Obama Administration has doubled the budget of the Community Development Financial Institutions Fund (CDFI Fund) at the U.S. Treasury which is creating hundreds of millions of dollars of additional resources for CDFIs. These additional resources could not come at a better time. Many CDFIs are seeing dramatic increases in demand for loans --- in part because banks have tightened credit standards too much for many customers. For example, our lending was up 67 percent last year. Other community development loan funds are experiencing similar increases.