Key facts
- MassHousing's BILD program uses public funds as both debt and equity to finance mixed-income housing.
- The program aims to address capital gaps caused by high interest rates and construction costs.
- BILD has funded six projects totaling 605 units and received interest from dozens of others.
- It combines Freddie Mac-backed senior mortgages with MassHousing subordinate debt and preferred equity.
- The Momentum Fund component offers preferred equity with a lower return requirement than market-rate investors.
- Eligible projects must have at least 50 units, with 20% income-restricted.
The persistent housing shortage across the United States, exacerbated by a challenging macroeconomic climate that hinders new project development, has prompted states to seek innovative financing solutions. Massachusetts's two-year-old Bringing Innovation to Lending and Development (BILD) program, managed by MassHousing, is emerging as a potential model.
A report by the Urban Institute highlights the BILD program's success in utilizing public funds as both debt and equity to bridge capital gaps in mixed-income housing developments. This approach has already led to the funding of six projects comprising 605 units, with significant interest from numerous other developers.
MassHousing CEO Chrystal Kornegay explained that the BILD program was conceived to support projects stalled by high interest rates and construction costs. By combining a subordinate loan from MassHousing with a senior mortgage facilitated by Freddie Mac, and adding a preferred equity investment through the Momentum Fund, the program offers a more attractive capital solution.
The Momentum Fund's preferred equity component, estimated to require a 6% return compared to the 12% typical for market-rate equity, significantly reduces project costs for developers. This innovative public-private partnership structure, as described by MassHousing Director Mark Attia, makes projects financially feasible by providing low-cost, patient leverage.
To qualify, projects must have at least 50 units, with a minimum of 20% of units restricted for residents earning up to 80% of the area median income for at least 15 years. The Urban Institute report notes that BILD addresses capital gaps arising from recent macroeconomic shifts, such as the shift from a 75% debt-to-equity ratio to closer to 60% for some projects.
MassHousing has deployed over $189 million in debt and $31 million in equity from its $50 million Momentum Fund. Notable projects include The Residences at East Milton and a 110-unit development in Roxbury, which received joint funding from the state and the city of Boston. Officials believe the program's structure is scalable and replicable in other jurisdictions.