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John Hamilton

0% investments: another tool helping us meet market challenges

By John Hamilton

While gifts and grants will always provide us ultimate flexibility to deliver what our borrowers need, zero-percent investments are another tool that helps us meet challenging markets.

Things aren’t like they used to be.

Right? Isn’t that a big reason why 2020 has felt so unsettling? So many norms, or what we thought were norms, have been shaken and are still shaking.

Here at the New Hampshire Community Loan Fund, the tremors have made our work more challenging. Soon after the pandemic reached the U.S., we could see the ways that the people we serve—many of whom are considered “essential” workers in restaurants, retail, hospitals, etc.—were becoming even more economically vulnerable. Those with lower incomes were going to hit a financial wall if we didn’t deliver more patience, more coaching, and more technical assistance.

So we created the Borrower Stabilization Fund, and the response, in the forms of grants and donations from our supporters, has been humbling.

One element of the fund probably sounded odd when we asked for it: 0%-interest investments.

Now, we’re already an unusual nonprofit in that we take investments at all. When most nonprofits say, “Invest in (their cause),” they’re really saying, “Donate to us.”

Buyers are offereing premium prices for manufactured-home communities.

Buyers are offering premium prices for manufactured-home parks, making them more expensive for residents to purchase

That’s not us. We like donations, too, but investments into the Community Loan Fund are real, promissory-note, investments for which we pay annual interest chosen by the investor, up to 3%, and repay the full amount at the end of the term. Dollars invested here become the loans we make into N.H. communities.

So why 0% investments?

Well, things aren’t like they used to be.

Changes in specific market sectors and the economy in general are demanding that we lower the interest rates of our loans to continue to help our borrowers adapt and succeed. Here’s what’s driving those demands.

Cash-flush national investors competing to buy manufactured-home parks, which drives up prices

Since 1984 we’ve helped residents in manufactured-home parks secure their affordable homes by cooperatively buying and managing their communities.

In recent years, though, venture capital funds are coming into our state seeking great profits by buying manufactured-home parks and raising the homeowner’s lot rents. Competition among these outside buyers is also driving up the prices of these parks.

Homeowner cooperatives have the right under N.H. law to match those prices and buy their parks. We can help them keep their homes secure and affordable if we lend to their cooperatives at near-zero interest rates. Otherwise, the homeowners can be evicted or driven out by exorbitant rent increases. John Oliver did a great segment on this (segment contains strong language).

New Hampshire’s affordable housing pinch

Over the last five years, rental prices in N.H. have more than doubled. The apartment vacancy rate is less than 2%. Households with low- and moderate incomes are feeling the squeeze.

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Our down payment and closing cost assistance helps renters buy more-affordable manufactured homes.

Many renters would save thousands of dollars annually by buying a similarly sized manufactured home but can’t save enough for a down payment and closing costs. Others who are ready to graduate from social services, like homeless veterans, can’t find any housing they can afford.

So, we provide a stepping stone to home ownership in the form of low down payment, fixed-interest Welcome Home Loans for manufactured homes. For those who qualify as low income, we offer additional financing of up to $13,500 to help with down payment and closing costs. This 0% financing isn’t repaid until the homeowner sells the house.

Our ability to extend these loans totally relies on us getting enough unrestricted gifts and 0% investments to cover them.

Child care, a key to rebuilding our economy

Child care/early education centers have always been labor-intensive and low-margin businesses. As long as the pandemic lasts, keeping kiddos and teachers safe and healthy means more spacing, which means fewer children, which means less income.

At the same time, the availability of child care is going to be a major factor when the economy fully reopens, so we need to do what we can to keep these centers open. Child care facility financing needs to be deferred until things settle and then for rates as low as possible. Again, unrestricted gifts and 0% investments enable us to meet their need.

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Gifts and grants will always provide us ultimate flexibility to deliver what our borrowers need. Providing a 0% investment is another opportunity to help us serve your neighbors in a meaningful way. This is an opportunity to let us use your dollars for a defined period of years to do extra good in these unsettled times.

Since things aren’t like they used to be …

Zero-percent investments are a tool we’re needing more often. In honor of our supporters who are ensuring we have that tool, we’ve started a 100% Opportunity Club. Check out who is in the club, and how you can join them.

John Hamilton is the Community Loan Fund’s Acting President.