Firms Create Tax-Break Investment to House Homeless

ONE drizzly summer day two years ago, Richard Wilson saw a group of homeless people congregating in a bus stop. On impulse, the financial adviser went in and started talking with them. What he found surprised him. ``A lot of these people could exist on their own if they only had place to stay,'' he says. ``Not even a big place, just a single room, like the lodging houses we used to have.''

In the early '60s, there were 26,000 Single Room Occupancy units in Boston, or SROs; today fewer than 2,300. Today, an estimated 3,500 are homeless in Boston, according to Pine Street Inn, a shelter for homeless people.

Out of that ``lightbulb'' encounter came the idea to create an attractive investment product that would also allow people to do something about the homelessness problem.

``The concept that came to mind was, if we can do syndication for large complexes for upper-income people and offices, why can't we use the same tax law and do it for lower- or no-income individuals?'' says Mr. Wilson.

So three organizations joined to form a syndicate: Pine Street Inn; The New England, a life insurance and financial services company; and Boston Capital Partners, a real estate investment firm specializing in affordable housing. Wilson works for Baystate Financial Services, a subsidiary of The New England.

The syndicate sponsored an offering, approved by the Securities and Exchange Commission last Wednesday, that will fund renovation of three buildings that will house nearly 100 people. Almost a third of the offering has sold, says Richard DeAgazio, president of Boston Capital Services. Individual investors plunk down a minimum of $5,000; corporations $100,000. The syndicate hopes to raise at least $3 million by Christmas.

Investment in low-income housing has been problematic but profitable in the past. But investing in small projects has been costly. This syndicate has overcome that problem by dedicating part of a larger $200 million low-income housing program, so investment costs are lowered. The program's sponsors say that this kind of investment offering can be replicated in other states.

Its backers say it's got something for everyone.

``Yuppies get tax credits and do good at the same time, profitmaking corporations look to it to make a contribution and take advantage of federal tax credits; it's a way for financial institutions to fulfill their Community Reinvestment Act commitments, and the homeless get housing,'' says Wilson. Federal law requires financial institutions to prove that they're investing in the community they serve.

Charles Pearce, chairman and Chief Executive Officer (CEO) of Quincy Savings Bank, which was one of the first to sign up, says that the rate was ``attractive enough to make it possible. We did not do this to win Brownie points.''

``Government funding and altruism have practical limits,'' says Ralph Verni, CEO of The New England's holding company for its investment subsidiaries. ``If you want to attract serious private money to a social ill, then make it profitable to do so,'' he says.

The new residents will pay 30 percent of their income, and will receive federal housing certificates.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK