Shaping A Multi-Billion Dollar Industry
A Spotlight on Enterprise Community Partners’ Resilient Mission and Holistic Methods
By Abram Mamet
7 min read
By the time the Low Income Housing Tax Credit (LIHTC) was rolled out as part of the 1986 Tax Reform Act, The Enterprise Foundation was already in a position to become a mission-driven leader in the fledgling LIHTC industry. Founded four years prior, in 1982, The Enterprise Foundation—now known as Enterprise Community Partners—was initially focused on “developing tools to get more affordable homes built, rehabilitated and preserved,” says Scott Hoekman, president of Enterprise Housing Credit Investments. (Hoekman will be stepping down on April 1 of this year after 30 years at Enterprise; he will be succeeded by Kari Downes, who currently serves as Enterprise Housing Credit Investments’ executive vice president.)
In its earliest years, Hoekman says, Enterprise was oriented towards “finding new ways to finance affordable housing,” with a subsidiary—The Enterprise Social Investment Corporation—serving as somewhat of an incubator for sourcing and testing new methods for bringing affordable housing to the market.
Such preparation meant that the organization was uniquely situated to embrace LIHTC, says Hoekman, and upon the program’s enactment, “Enterprise went right to work.” While many organizations may have been founded to serve a specific side of the LIHTC industry (as syndicators, owner/operators or underwriters, for example) Enterprise was explicitly oriented towards being a holistic platform assisting organizations working in community development to construct and preserve affordable housing.
“From the earliest days,” Hoekman says, Enterprise “provided technical assistance, training and expertise to support folks who were trying to do community development work. That was the founding DNA of Enterprise.” Components of that early work included: developing a robust syndication platform; rolling out capacity-building technical assistance programs; and providing low-cost acquisition bridge lending, which would eventually lead to the creation of Enterprise Community Loan Fund, Enterprise’s Community Development Financial Institution (CDFI), one of the largest of its kind in the country.
All the while, Enterprise began to establish itself, alongside the Local Initiatives Support Corporation (LISC) as a mission-driven nonprofit with the capacity to shape what would quickly become a multi-billion-dollar industry.
Today, Enterprise Community Partners operates as a large entity with three categories of subsidiary groups – solutions, community development and capital. This wide-spectrum structure with focused subsidiary groups is what makes Enterprise tick, says Downes, and allows the company to “bring a full array of options and opportunities to our partners. And so, I think that is how we differentiate ourselves and our partners.”
Though the company has experienced the same turbulence as the rest of the market in the past 35-plus years of LIHTC, Downes says that Enterprise may be at its strongest in the face of challenges. “The story of Enterprise, and our Housing Credit Investment group, is that we answer the call every time there is a headwind.”
Take, for example, the Great Recession, which became a major challenge for the LIHTC industry to overcome. “The LIHTC market collapsed in 2008,” says Hoekman. “By 2009, the size of the market had shrunk by 50 percent. And our investment volume went way down as well.” In response, Hoekman points to a focus on re-establishing Enterprises’ multi-investor funds, which had nearly disappeared in the aftermath of the financial crisis. To do so, Enterprise introduced the “tiered multi,” a now-popular structure whereby the fund “has multiple yield tiers to meet different investor needs.” This structure helped “power the comeback of the multi, not only for Enterprise but for the industry, and has made it possible for there to be a more robust pool of investors.”
The company’s resilience has a foundation in what Downes calls a “conservative” approach to resource allocation. “We don’t take a bunch of product and place it on the line, and just hope that we can find placement for it. We are intentional, and this creates a reliable execution for both investors and developers.”
Industry-Wide Inclusivity with an Equitable Path Forward
One of Enterprise’s more impactful recent initiatives is Equitable Path Forward (EPF), a $3.5 billion, five-year program launched in late 2020 to help developers of color access capital and technical assistance for long-term and sustainable growth.
EPF was a product of Enterprise’s strategic planning process in 2019, says Lori Chatman, president of Enterprise’s Capital Division. During that time, Enterprise’s internal discussions yielded three pillars that would guide its next five years of growth: “increase housing supply, advance racial equity and build resilience and upward mobility of both places and people.”
It was “very clear” at that time that the second pillar, advancing racial equity, should be included, says Chatman, who helped craft EPF and continues to serve as its executive sponsor. “We forced ourselves to step back and ask, ‘How are we operating to perpetuate some of the racial divides in terms of who owns real estate and where the power lies?’”
Enterprise worked with a cross-section of internal team members and external developer partners of color to craft a program that would both elevate experienced developers, as well as lay the groundwork for the next generation of industry leaders. One of the guiding questions Chatman says her team sought to address was, “Where are we saying no, and why?”
Mirroring Enterprise’s holistic orientation, EPF does not focus on one single component of the racial development gap; rather, it consists of three main buckets—growth capital for entities, advisory services and a training program for younger developers of color—to address many components of the industry that have contributed to historic inequity.
The first two pillars are geared towards experienced firms that are doing deals and have a deep knowledge base but are simply lacking access to deep capital to take on larger, more impactful community development projects.
The third pillar seeks to address the root problems of the racial equity gap, Chatman says, by “bringing young people into the space in a way that begins to change what real estate development looks like in the future.” This training is unlike any other in the industry, Chatman says, as it draws on Enterprise’s uniquely expansive community development platform. “It reflects the fact that within our roof, we do generally every aspect related to community development and community development finance, advocacy, policy, programmatic solutions, the whole nine yards.”
Almost immediately upon launch, Chatman says that the response from investor partners was “tremendous.” According to the organization’s 2022 annual report, EPF had already leveraged $2.3 billion for programs in support of 100 different developers. These developer partners represent a diverse group of organizations in different stages of growth and different positions in the market, with some operating as for-profit nationwide ventures, while some are locally focused nonprofits.
No matter the structure, Chatman says that across-the-board EPF looks to support mission-driven developers who not only provide housing but also seek to build the backbone for a resilient community. “For a community to be sustainable, it has to be well-loved, have a mix of incomes, and has to have housing, small businesses and other amenities that we all want in a particular place.”
Since many of Enterprise’s developer partners, particularly its nonprofit partners, come from the communities in which they are working, EPF has the added benefit of providing development and economic uplift to areas with organizations sensitive to those communities’ histories. This is squarely in line with the original vision of the EPF, says Chatman. “I want that community and those blighted buildings to have economic use for that community, but I don’t want the people who have lived there for 30 years and fought it out when it was at its worst to have to leave. That takes intentionality.”
Though the program has a five-year target date, Chatman emphasizes that the goal is not a one-and-done infusion of cash, but an embodiment of practices towards industry-wide equity. “If we’re still talking about this as an initiative, we have failed. We must be thoughtful about how we are changing the way we do business to be more inclusive.”
