SOUTHEASTERN N.C. – As part of its new impact investment initiative, Cape Fear Collective is buying up properties to preserve as affordable housing in the midst of a hot residential real-estate market.
Live Oak Bank has invested $2.5 million in support of the local organization’s new initiative, Cape Fear Collective Ventures. The project focuses on obtaining capital to put toward solutions for affordable housing, as well as workforce development, small business growth and transportation.
The collective will strategically deploy the funds in marginalized communities without many resources readily available.
With its first major investment, Cape Fear Collective Ventures acquired 17 New Hanover County residences, the majority of which are scattered throughout downtown Wilmington, as well as three properties in Pender County. It will engage its nonprofit partners to maintain the properties as affordable housing into the future.
The Pender County locations were offered as part of the portfolio, but Patrick Brien, CEO of Cape Fear Collective, said the nonprofits are seeing affordable housing issues in rural areas and the collective wants to expand its efforts into the neighboring counties.
“We felt that it was important to make sure that we were engaged in those spaces as well,” Brien said.
Some of the properties have current tenants. Cape Fear Collective plans to discuss the living situation with each of those residents and whether they intend to stay. Then they will do an assessment of each rental. Brien said the rents right now are fairly affordable, but the collective still plans to consider adjusting the rental costs to keep the properties below market rates.
Cape Fear Collective may offer to sell some of the residences that are vacant or become vacant to nonprofits that will make sure they are kept affordable and only house people who most need them.
The pandemic’s effects
Since its start, Cape Fear Collective has considered seeking out private sector capital to implement social change, but it sped up the establishment of a platform for that initiative in the wake of the pandemic.
“It became even more apparent that we needed to figure out a way to get additional resources into the hands of nonprofit organizations providing services,” Brien said.
While working in the global health sector, prior to moving to Wilmington, Brien noticed that impact investing was gaining traction. Impact investments consist of funds that are expended with the intent to make social change, while also receiving a financial return.
Once he joined the collective in 2019, he wanted to apply the same financial techniques in Wilmington’s nonprofit community. But it wasn’t until Covid-19 hit that they expedited the launch of Cape Fear Collective Ventures.
The pandemic has caused economic distress nationwide, yet local residential real-estate sales have surged. This is likely due to low interest rates and Covid-inspired buying habits. As values increase, the inventory of affordable homes becomes scarce. Housing prices have risen 22% over the past six years, according to the City of Wilmington’s annual action plan.
The U.S. Census Bureau’s most recent household pulse survey report shows 10% of North Carolinians were behind on rent/mortgage payments in January or unsure whether they’d make their next payment on time. In New Hanover County at least 45% of renters and 29% of homeowners are cost-burdened, meaning more than a third of their income is spent on their housing.
“We’re seeing that economic growth – which is great – but at the same time we’re leaving certain folks behind particularly in the working-class income levels,” Brien said. “You have to make a conscious decision to preserve some of those units.”
The Cape Fear Collective and several of its nonprofits partners met to discuss their “wishlist” for affordable housing. The partners determined that they could make a large impact by purchasing rental portfolios. The group brought the idea to Live Oak Bank, which became the first investor of the initiative.
“We believe that supporting Cape Fear Collective is an innovative way to positively impact our vital, local workforce and advance the socio-economic status of all the residents of our region,” Huntley Garriott, president of Live Oak Bank, said in a press release.
In return, Live Oak Bank will make 2% on their investment. Cape Fear Collective may cycle the funding several times due to the structure of the deal. It anticipates turning the $2.5 million into an affordable-housing impact of $3.5 million to $4 million over several years.
“The idea is, if we’re able to turn some of these properties, maintain them as affordable, put folks into affordable rental or ownership, then we can go out and buy more houses in the next three or four years, and continue to preserve the naturally occurring affordable housing in the community,” Brien said.
Although Cape Fear Collective will manage that investment, it will put the properties to use with the help of nonprofits – such as Habitat for Humanity, the Cape Fear Community Land Trust and Leading Into New Communities, Inc. – who are already working toward solutions the venture is interested in.
“We’re not necessarily trying to reinvent the wheel,” Brien explained. “We’re just trying to add a little fuel to the fire for the nonprofits who are already working in the sector.”
Throughout the initiative, Cape Fear Collective will use its data science to track progress and translate the social return on the investments.
“It’s not just about, ‘Here’s a 2% return based on your investment,’” Brien said, “but also, ‘Here’s all the things that your investment was able to do in the community in terms of economic growth, in terms of opportunity, in terms of affordable housing.’”
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