Habitat for Humanity Teams Up With J.P. Morgan

Partner Insights spoke to Jacky Cheng, a commercial banker on the community development banking team at J.P. Morgan, about an innovative collaboration between the bank and Habitat Capital, the Community Development Financial Institution (CDFI) arm for Habitat for Humanity International. 

The $82.5 million property acquisition fund will boost U.S. affordable housing production of Habitat affiliates by an estimated 1,000 homes, which equates to a projected 5 percent increase of Habitat’s most recent baseline production of 3,482 housing units. The average home price is projected to be $300,000, and the fund will serve more than 4,400 individuals. The plan calls for 90 percent of the homes to be affordable for families earning less than 80 percent of the area’s median income. 

Commercial Observer: Can you talk about the innovative financing structure being deployed via the recent $82.5 million investment in Habitat Capital? 

Jacky Cheng: It’s innovative because typically, when we work on affordable housing, most of the attention goes to multifamily rentals. But this transaction with Habitat is truly serving a gap in the affordable housing production that’s not currently being filled; it focuses on single-family starter homes that fit lower-income families.

Secondly, we’re scaling Habitat’s sweat equity model that relies on neighbors and homeowners helping each other by building homes together. By doing the construction themselves, the price is much lower than the cost of buying a new house from a traditional developer. 

How did J.P. Morgan become a lender and what role are you playing?  

The relationship started within our corporate responsibility group. We’ve developed very close relationships over the years through various partnerships, which led to the first loan. We are the leading bank in this transaction, and our commitment is $30 million of the $82.5 million, which is 36 percent of the total. 

Other banks are contributing, as are various foundations including the Laura and John Arnold Foundation, the Annie E. Casey Foundation and ImpactAssets, which is a group of high-net-worth individuals. We also worked closely with fund manager Enterprise Community Loan Fund and, of course, Habitat for Humanity. 

What is the current impact of the collaboration and what do you envision for the future?  

This is actually our second loan with Habitat Capital. Our first loan was made by our impact finance advisory team, which used a very similar structure to support Habitat’s affiliates. The first loan was $10 million, and it helped pilot the current model. Thanks to that success, we were able to ramp up the lending and raise this $82.5 million fund.

We’re looking to help solve the housing crisis, especially for starter-home families, because those homes are the hardest to come by and where the need is the greatest. Homeownership is a great way for young families to start building equity. 

J.P. Morgan and Habitat are excited to build upon this fund and explore additional opportunities together.  

“This fund creates opportunities to build wealth through homeownership in low-income communities across the country,” said Daniel Gura, executive director of Habitat Capital and vice president at Habitat for Humanity International. “We are deeply grateful for J.P. Morgan, which has invested significantly in making the property acquisition fund possible.” 

What are the fund’s goals in terms of advancing the core mission of Habitat for Humanity?

The base point is trying to make sure that everyone has a roof over their head. We’re also focused on offering more affordable housing and emphasizing the idea of tapping a peer-to-peer network of neighbors that helps folks by rolling up their sleeves and building a home together. The starter homes are valued in the $200,000 to $300,000 range, in a time when the average home in America is $500,000. 

Habitat is a widely recognized nonprofit and is working to scale affordable housing production in the United States by modeling its comprehensive approach, providing homeowner education, offering low-interest mortgages and developing affordable homes and properties. It operates through a network of more than 950 affiliates nationwide.

What challenges popped up along the way and how were they resolved?  

As this was the first fund of its kind, the time frame to execute took longer than we estimated, but all involved were very dedicated to the mission and stuck through it. There were a lot of changes along the way to the fund structure, but in the end, folks finally came to a consensus. 

It was all happening at a time of relative uncertainty because as we were structuring the fund, inflation was a big issue. Construction and labor costs were going up, but we had to remember that we were creating a fund that could keep homes affordable to the end users. 

What do you see for future obstacles and opportunities for continued collaboration? 

This kind of project requires a lot of players, not just between the banks, but also between foundations and mission-driven investors. I’m hoping that the focus on the affordable housing crisis remains at the forefront during a time when the news cycle is spinning so fast. We can’t forget about the core issues that everyday Americans face. The most important thing everyone wants is a safe place to live, a roof over their head and a place to raise their children. That’s truly the American dream. 

What’s really great about this relationship is we set it up as a model that can be scaled and replicated. As more people get involved it will ultimately bring more success and stability to the funding program.

“We are grateful to J.P. Morgan, whose vital investment in Habitat Capital helped fund our net-zero development, enabling 16 hardworking New York families to build equity and legacy for generations to come,” said Sabrina Lippman, CEO of Habitat for Humanity New York City and Westchester County. “Supporting affordable and sustainable housing for our working-class neighbors is essential to preserving the vibrancy, stability and affordability of our communities in perpetuity.” 

Is J.P. Morgan or Habitat for Humanity looking for other collaborations? If so, who should they contact?  

We’re always looking for new opportunities within the world of impact investing. Anyone interested in the Habitat project or a related one can contact jacky.cheng@jpmorgan.com. For Habitat specific inquiries, contact dgura@habitat.org.