This post originally appeared at The Edge, an online magazine from the U.S. Department of Housing and Urban Development’s Office of Policy Development and Research.
Recently, the McKnight Foundation has been giving more consideration to what market orientation and scalability mean for our programs, policies, and grantmaking approach. In part this is an adaptive response to the Great Recession, diminishing resources, constraints at the federal level, and persistence of troubling trends. Many of our development partners in the affordable housing field are aware of market orientation because they must work in the marketplace to attract resources for construction and rehabilitation; however, because financing systems for affordable housing rely so heavily on subsidies, these developers aren’t necessarily encouraged to make market orientation a priority. The focus of developing affordable housing is filling the “gap” in the market between total development costs and what can be financed by net operating income. Thanks in large part to Minnesota’s well-developed and sophisticated affordable housing field, however, we are beginning to ask ourselves tough questions about the subsidy per unit cost of affordable housing (see MN Challenge) and if there are alternatives that would require little or no subsidy. We wanted to know if a socially motivated developer could purchase existing unsubsidized housing and create permanently affordable housing with little or no subsidy. Read the rest of this entry »