Last week, Microsoft revealed it pledged $500 million to fund the construction of affordable housing in the Seattle area.
And while the tech company’s generous donation is causing a lot of noise, Microsoft’s venture into housing finance is what’s really noteworthy, according to an article written by Henry Grabar for Slate.
“Over three years, the company says it will commit $25 million in grants and subsidies to address regional homelessness. It will also lend $250 million to low-income housing developers and another $225 million at below-market rates to workforce housing developers. Then, as that money is repaid, Microsoft will make more loans.”
The article states that in order to support a new local homeless agency and fund legal aid for tenants, Microsoft plans to issue grants.
“Microsoft is basically starting a housing trust fund—an idea that’s become the go-to city- and state-level affordable housing tool as Washington has steadily retreated from housing policy.”
“The approaches of the country’s hundreds of housing trust funds vary, but they mostly include some combination of grants and loans. Counties, cities, and states generate nearly $1.3 billion in revenues for housing trust funds every year.”
According to Grabar, portions of this money are either given to affordable housing developers or distributed as grants for low-income families or those who were formerly homeless.
“So, if you’re a developer trying to build low-income units, you might look to your local housing trust fund for financing. You’ll probably get it on better terms than you would from a bank, which would permit you to select a slightly more expensive site for the project or open up apartments to lower-income tenants.”
Interestingly, Grabar points out that housing trust funds leverage contributions heavily, meaning that for every $1 in fund investment can be matched by $7 from other sources.
“That appears to be Microsoft’s vision: that knocking the debt service off a bunch of loans can open up a whole new range of housing possibilities.”