Capital Magnet Fund

Capital Magnet
Fund
T
he Capital Magnet Fund (CMF) provides flexible funds to attract private capital investment into affordable housing proprieties. Since 2008, the number of homes that are affordable to renters with incomes at or below
30 percent of area median income decreased by more than 1 million units and a recent Harvard Joint Center for
Housing Studies revealed that there is currently a national shortage of nearly 5 million housing units affordable and
available to extremely low-income renters. Lack of affordable housing is one of the biggest problems facing the
United States today, and the CMF, by leveraging private sector capital, can help lessen this problem.
Local Initiatives Support Corporation
What is the Capital Magnet Fund?
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The CMF provides a source of funding for Community Development Financial Institutions (CDFIs) and
nonprofit housing developers to finance affordable housing and related economic development activities. It is
administered by the Community Development Financial Institutions Fund (CDFI Fund) of the Department of the
Treasury.
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The CMF was authorized by Congress through the Housing and Economic Recovery Act of 2008 (HERA) , and
was to be funded with an assessment placed upon Fannie Mae and
Freddie Mac. This funding stream never materialized, however, after
Fannie Mae and Freddie Mac were placed into conservatorship.
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In FY 2010, Congress provided a one-time appropriation of $80
million for the CMF.
»» How the CMF works:
o Through the CMF, the CDFI Fund provides grants to certified
CDFIs and nonprofit organizations to support the financing
of affordable housing and, in some instances, related
community development activities.
o CMF awardees may use their award to (1) provide loan loss reserves; (2) capitalize a revolving loan fund; (3) capitalize an
affordable housing fund; (4) capitalize a fund to support
economic development activities or community service
Neighborhood Services Organization, Bell Building; Detroit, Michigan
facilities; (5) provide risk-sharing loans; (6) provide loan
guarantees; or, (7) support operations pertaining to the administration of the CMF award (no more than
five percent of an award may be used for operations).
o An organization must leverage its CMF award with other sources of capital; the leveraged amount
must be at least 10 times the amount of the award.
o The CMF funds must be committed for use within two years after the allocation of the award, and all
projects must be completed within five years.
What are the outcomes?
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In the FY 2010 round, the CDFI Fund received 230 applications from organizations serving 49 states, the
District of Columbia, and Puerto Rico, and selected 23 awardees.
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Applicants in FY 2010 requested over $1 billion to fund projects with projected eligible project costs of over
$23.4 billion
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The 23 awardees from FY 2010 are comprised of 13 non-profit housing organizations and 9 CDFIs, including 14
organizations that are serving non-metropolitan areas.
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The awardees will be using the $80 million of allocated CMF funds for new multifamily construction, singlefamily mortgage programs, multifamily rehabilitation, single-family rehabilitation, new single-family construction,
and multifamily housing preservation projects in 38 states.
2013 - 2014 LISC Policy Briefs
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Through July 2013, 78 percent of 2010 allocations have been committed ($62mm), with an average leveraging
of 1:12.
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The 2010 CMF awardees have already created or refurbished 6,803 affordable homes, creating in the process
5,771 full-time and construction jobs.
What has been LISC’s involvement?
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LISC received a $5 million CMF award, which, combined with funds from Morgan Stanley, was used to create
a $23.75 million Neighborhood Revitalization Loan Fund focused on supporting affordable rental housing
development.
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Since 2010, LISC’s CMF award has:
o Supported 7 projects
o Created/preserved 526 units of affordable housing
o Produced approximately 74,000 square feet of supportive service and educational space
o Leveraged $138.4 million of total project costs for a total leverage ratio of 28:1
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Some examples of LISC’s CMF work include:
o LISC provided CMF dollars to Ability Housing of Northeast Florida, Inc in Jacksonville, Florida, to finance
the rehabilitation of Oakland Terrace, an affordable
housing development for low-income and very low
income individuals and families. With the help of LISC’s
$990,000 CMF investment, Ability will replace all
its mechanical systems, kitchens, bathrooms, flooring,
windows and doors, repair its roofs, and provide several
green improvements, in addition to improving its
community center and opening a playground accessible
to children with disabilities.
o LISC provided a $722,593 loan to finish the financing of
Bickerdike Redevelopment Corporation’s Zapata
Apartments in Chicago, Illinois. Zapata Apartments is a
$25 million, 61-unit, four building mixed-use development
that will provide safe, healthy housing affordable to
families earning less than 50% of Area Median Income.
Bickerdike Redevelopment Corporation, Zapata Apartments; Chicago, Ill.
What can Congress do?
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When it was created, the CMF was intended to be funded by an assessment on Fannie Mae and Freddie Mac,
but because Fannie Mae and Freddie Mac were put into government conservatorship in 2010, the assessments
were never collected to fund the CMF.
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Now that Fannie Mae and Freddie Mac are profitable again, the Federal Housing Finance Agency (FHFA), which
oversees the two entities, should immediately lift the current suspensions of contributions to the CMF.
o Over 30 Senators sent a letter to Mel Watt, Director of the FHFA, in January 2014 supporting the funding of
the CMF by the FHFA
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As Congress considers housing finance reform legislation, they should be encouraged to maintain a funding
stream for the Captial Magnet Fund as part of their efforts.
LISC is a national nonprofit housing and community development intermediary with offices in 30 different cities and a national rural
network of 60 organizations. For more information about the CMF, please contact Matt Josephs at [email protected]

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