How non-profits can do well by doing good

Developing affordable homes for senior citizens does two things for non-profit entities. First, it gives them an independent, unrestricted program revenue stream to fund their activities. Second, it provides a critical service to the people the non-profits were founded to serve.

First, if a non-profit can get land for affordable senior housing donated, they get the value of this property as soon as the project is closed on.

Second, when the project is built and ready to be placed into service, the non-profit can earn up to 15% of the project’s cost as a development fee. While some of this fee must be used to pay for the non-profit’s own staff time and the fees of any development advisers, the rest can be considered unrestricted program revenue.

Third, when the limited partner is retired (usually after 15 years), the non-profit owns the project. Any value of the project over the mortgage can be taken out of the project during a refinancing process. This value can be reinvested into the project to ensure it can continue to serve senior citizens’ needs, or some can be taken out as cash to fund other initiatives. Alternatively, the project can be sold to another party, and the non-profit can use the difference as unrestricted program revenue.

There’s another way that the non-profits can earn money in this model: managing the apartments themselves. The non-profit’s leadership may be hesitant to do this if it isn’t their core competency, but Accord Management (a sister company to Community Building Partners) can take on the management with the intention of training the non-profit’s own staff to gradually take over. After a few years, Accord can hand over the reins entirely to the non-profit’s management arm, and the non-profit can keep their costs under control by “shopping from their own store.”

About Laura

Laura Recchie is the Director of Strategy and Project Development for Praxia Partners
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