The National Community Reinvestment Coalition (NCRC), and its principal partners Chicanos Por La Causa (CPLC), the AFL-CIO Building and Construction Trades Department (BCTD), commit to returning at least 4,100 units of single-family housing to productive use while creating job training and placement opportunities for local residents. NCRC's unique approach combines the best of existing housing and workforce development practices with new approaches to financing and partnerships with nonprofit developers who understand both the problems and opportunities of redeveloping vacant and abandoned housing. This project expands on NCRC's success in creating similar funds and workforce training partnerships in over 40 states that have successfully placed over 10,000 workers, primarily in union apprenticeships jobs.
This four-year Commitment will start in Maricopa County, AZ, and in the first year, expand to seven states with high concentrations of real estate owned (REO) inventory. Construction teams will be led by CPLC, a longtime NCRC member, and its local affiliates. In partnership with the BCTD, NCRC will implement a nationally acclaimed standardized pre-apprenticeship curriculum and make living wage jobs available through nonprofit developers and their contractors that support quality jobs. The national workforce development partners will assess training capacity at each site; and implement a standardized 120-hour introduction to construction curriculum, (OSHA-10, blueprint reading, applied math), augmented with hands-on skill training. During the training, participants will join work crews conducting the renovation and will receive standard, escalating, increases during their tenure. CPLC and local partners will recruit at least 1000 residents to participate in the training, including young adults seeking employment and workforce development opportunities.
Recruitment will occur in conjunction with local community-based and labor organizations, and, where applicable, community colleges. NCRC has assembled a set of financing partners including Royal Bank of Canada Global Asset Management (RBC) and Community Capital Management (CCM) who will advise the creations of the investment vehicle for property acquisition and renovation. The National Association of Latino Community Asset Builders will bring its member development partners, who have been working with CPLC on Neighborhood Stabilization Program2 (NSP2) projects and help coordinate the multi-state roll-out of this initiative. Additional partners include Asian Real Estate Association of America, National Association of Hispanic Real Estate Brokers, and the National Association of Real Estate Brokers.
July 2012: Utilizing $10 million in program revenue from its NSP2 project, CPLC will acquire and rehabilitate 84 properties in AZ at an estimated cost of $120,000/unit (acquisition costs $80,000/unit, rehabilitation $40,000 unit). Properties will be acquired from Fannie Mae, who is offering properties at a discount (approximately 25 percent) for non-profit developers such as CPLC. NCRC and BCTD collaborate on workforce development and training for all sites, incorporating 'fast track' training in basic trades and office skills. Potential homebuyers will be identified through members of NCRC's Housing Counseling Network and CPLC. RBC and CCM will work with NCRC and its partners to create a property holding entity and an investment fund registered with the SEC and structured according to SEC requirements.
October 2012: Utilizing program income from the sale of 84 homes, an additional 42 homes in AZ will be acquired, rehabilitated, and sold utilizing process above. Prospectus developed for potential investors of Fund under development.
January 2013: Acquire and rehabilitate 21 properties in AZ. Acquire and rehabilitate 147 properties in six additional states at an estimated cost of $136,000/unit (increase reflects additional site costs). Program revenue will support some of the acquisition and rehab costs. Launch workforce training program in additional sites. Investment fund begins to solicit and accept investments. Large banks, union pension funds, and mission-focused investment funds will be targeted.
April 2013: Investment fund makes first acquisitions (75 properties in total) in CPLC cities. In combination with program revenue, 150 properties are rehabilitated in total. Fund targets $50 million for the quarter.
Total houses renovated in Year 1: 444. An expected 668 jobs will be created, including 133 trainees receiving job placement.
July 2013-July 2014: Expand fundraising, acquisitions, renovations, and training to renovate 800 homes across eight sites. Project expenditures approximately $110 million from investment fund and program income. BCTD and NCRC develop additional training sites and housing counseling agencies continue to identify homebuyers.
In Year 2, the partners project 200 homes per quarter will be renovated. The new fund will invest $27.2 million in the first quarter, and an additional $13.6 million in Quarters 6-8. Assuming a 50 percent recapture through sale of the new investments made by the fund for the entire length of the project, total new funding of $68 million combined with re-captured funds of $40 million will finance this year's production.
Similarly, in Years 3 and 4, the partners will further expand, renovating 365 homes per quarter, (1,460/year) utilizing approximately $10 million in recaptured funds from Year 2, and approximately $40 million in new funds in the first quarter of year 3. The 50 percent recapture rate is very conservative on the funds being expended, and a higher recapture rate means less new funding for renovations will be required.
The Government Accountability Office reports that non-seasonal vacant properties have increased 51 percent nationally from nearly seven million in 2000 to 10 million in April 2010, with NV seeing increases over 100 percent, AZ at 91 percent and Colorado at 78 percent. Vacant and abandoned units lack ongoing maintenance, are vulnerable to vandalism and depress local economic and community development. The foreclosure crisis has also fueled a rise in unemployment, particularly in the construction industry where unemployment rates have hit 40 percent in many regions of the United States. To address the foreclosure crisis, communities are responding in novel ways by land banking some properties and establishing innovative financing mechanisms such as lease-to-purchase and shared appreciation models to restore properties to productive use.
At the same time, however, new economic activity around rehabilitating distressed properties has missed the significant workforce development opportunities for unemployed and underemployed community residents, some of whom have experience in the construction industry. Work on these properties varies from the light cosmetic changes to full rehab and renovation. Most localities that address unemployment in the construction industry rely primarily on 'first source' hiring policies (local hiring requirements), which are often ignored when planning single family residential construction and rehab. These challenging circumstances present a unique opportunity for innovative approaches to purchase, rehab, sell or rent properties, while creating jobs and workforce training programs in communities with high foreclosure and unemployment rates.