As people across the country struggle with financial concerns ranging from increasingly high gas prices, a battered housing market, and a weak economy, local community development organizations aren't exempt from these challenges. Most neighborhood-based CDCs do not have resources on hand to pay the "pre-development" costs necessary to get a project to the point where construction loan funds become available.
With help from State Farm, the Regional Housing and Community Development Alliance (RHCDA) will now have additional capital to help more families find adequate housing.
Stephen Acree, President of RHCDA, announced on Thursday that State Farm has approved a $5 million line of credit for RHCDA's Predevelopment Loan Fund Program. Organizations eligible to apply for an RHCDA predevelopment loan include not-for-profit organizations in St. Louis County and City, plus Madison and St. Clair Counties in Illinois.
RHCDA's Predevelopment Loan Fund provides neighborhood-based community development corporations (CDCs) with a source of funds to pay for early stage costs for projects in their neighborhoods. Conventional financing from banks is generally not available to pay for these costs. These organizations rarely have reserve funds to start the projects they hope to develop. That is the purpose of this fund; to accelerate the time from project inception to construction start-up.
State Farm has been RHCDA's biggest Predevelopment Loan Fund partner since 1995, when it extended a $500,000 line of credit to the program. The line was increased to $1 million in 1998.
Acree stated that "RHCDA's strategic objective is to increase our lending capacity to allow us to lend on larger scale, higher impact residential development projects that have greater potential to create long-term, sustainable change to currently distressed low-income communities in the St. Louis area. The higher credit line from State Farm will allow us to achieve this objective."
Since starting the fund in 1993, the average size of RHCDA's predevelopment loans has grown from just over $20,000 on projects averaging 5 units in size to over $675,000 on projects with an average size of 35 units. The program has made $15.8 million in loans, leveraging over $400 million in housing investment for the development of over 2,400 homes and apartments in St. Louis area urban core neighborhoods.
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