This article, authored by Carol Cahill, communication and analytics consultant, Center for Community Health and Evaluation, Chris Kabel, senior fellow, Kresge Health Program, and Emily Bourcier, senior evaluation and learning consultant, Center for Community Health and Evaluation, was first published in the Grantwatch blog from the journal Health Affairs. 

Where we live matters. Over the years research has consistently shown that a wide range of community resources, from early childhood education to safe parks to affordable housing, play an important role in our health and well-being. However, traditional means for financing projects meant to improve the quality of life for people living in low-income communities were designed for different purposes at different times and were not intended to reinforce each other. What can we learn from efforts to interweave financial mechanisms in ways that support the stability, mobility, and ability to be healthy for individuals and families in low-income neighborhoods?

Between 2012 and 2019, the Healthy Futures Fund (HFF)—a collaboration of The Kresge Foundation, the Local Initiatives Support Corporation (LISC), and Morgan Stanley—invested $180 million to finance projects that embed health-enhancing features and services in real estate development. The fund experimented with combining two existing tax credit programs to finance these projects: Low-Income Housing Tax Credits (LIHTC) for affordable housing developments incorporating health care services and New Markets Tax Credits (NMTC) for constructing and financing federally qualified health centers (FQHCs).

The LIHTC program was established in 1986 and is administered by the US Department of Housing and Urban Development (HUD). This program is the primary financing vehicle for multifamily affordable housing in the nation. LIHTCs are typically distributed by state-level housing finance authorities, which get a fixed allocation from HUD based on population. Affordable housing developers—often nonprofit community development corporations—apply to their state housing finance authorities if a development meets certain criteria related to subsidized rental rates based on area median income. The tax credits incentivize private investors to join development partnerships by allowing them to offset part of their federal tax liability. The covenants of the new housing units—that is, the below-market rents—are enforced for a 15-year term, after which the property usually needs to be refinanced.

The NMTC program was established in 2000, is administered by the CDFI Fund within the US Department of Treasury, and can be used to finance a wide range of projects in low- and moderate-income communities, including FQHC construction. Community Development Financial Institutions (CDFIs), community development credit unions, and others can apply for NMTC allocations and then sell those tax credits to for-profit corporations such as banks, which use the credits to offset their federal tax liabilities. Community development entities that succeed in obtaining NMTC allocations then use the resulting equity, often leveraged with debt, to finance the construction and renovation of businesses, homes, and community facilities in low- and moderate-income census tracts.

Through these tax incentives, the HFF was able to provide loans to community developers at more favorable rates and terms than traditional financing options. In addition, the HFF awarded grants to support project development and integration of services after construction.

In 2016 Kresge engaged the Center for Community Health and Evaluation (CCHE) to assess whether and how the HFF achieved the funders’ vision of addressing both health and social needs to improve the lives of people with low incomes. In this evaluation, the CCHE examined nine HFF-financed projects in depth: four that received LIHTC equity, four with NMTC allocations, and one project that received both types of tax credits. Five of the nine partnerships include an FQHC and affordable housing organization, generating a total of 475 units of affordable housing co-located with health care services.

The other four partnerships involve an FQHC and a social service provider and offer onsite services such as employment training, legal services, and a community kitchen with an array of nutrition strategies, in partnership with a full-service grocery store next door. The evaluation illustrates what is possible with HFF-like investments and harvests lessons for funders that currently engage in social financing or may do so in the future, including CDFIs, foundations, and health care organizations that are investing in housing.

Factors Linked To Success

Successful co-location of health and social services is tied to thoughtful site selection, effective coordination among partners, and providing services that the community trusts. The nine HFF sites had existing relationships with their partners, served the same communities, and were mission aligned. Having the LIHTCs and NMTCs ensured that the projects had the capital to develop inviting and modern facilities for the communities they serve. Moving forward, the co-located partners are proactively planning for joint programming and culturally responsive services.

Though not implemented at the pace and scale that the HFF originally envisioned, these sites have increased access to health care (including specialty and dental care), affordable housing, healthy food, social services, employment, and attractive community spaces, all of which would have been impossible without HFF financing and technical assistance. Almost all of these facilities have been financially successful since completion, and nearly all continue to collaborate with co-located or external partners to improve the health and wellness of people in their communities.

Potential Stumbling Blocks

Challenges encountered along the way include issues around power dynamics that resulted from just one of the co-located partners taking on all of the HFF debt, often because other partners lacked sufficient funds to contribute an equity stake. In addition, lack of interoperability of data systems hindered the ability to track client/patient outcomes, and relatively informal collaboration arrangements limited accountability and potential for sustained joint programming.

Looking forward, CDFIs could offer technical assistance to borrowers, including estimating total costs and thinking through sustainable funding for operations, especially for projects that do not involve a housing developer. Foundations and other funders could consider ways to make partnerships more stable, including funding sustainable joint programming and developing incentives and methods for CDFIs to quantify social and financial impact.

Lessons Learned And Considerations For Funders

To better understand benefits for patients, clients, and residents, there’s an ongoing need for data integration in co-location partnerships, especially across patient and residential records. Including a technical assistance provider with in-depth knowledge of electronic medical record systems, privacy law and policy, and Community Information Exchanges^TM could facilitate data sharing and help investees understand the impact of their partnerships on health and social outcomes. Funders also should consider actively engaging investees in evaluation planning, including prioritizing activities that seek and incorporate the local community’s voice.

Recommendations for partner relationships include exploring a dispute resolution process for working through disagreements during the application period and formalizing guidelines for making decisions. When planning a co-located facility, it is important to keep in mind that services must be responsive to intended residents’ needs and changing circumstances. For example, older adults moving into a facility that co-locates affordable housing and primary care may already have a medical home and not want to use the onsite clinical services. Or, if a resident’s family situation changes, the flexibility to move to an apartment with more bedrooms could help ensure housing security while retaining community supports.

This evaluation of the HFF is particularly timely given the increasing number of hospital systems and health plans that are investing in affordable housing and other forms of community development. The HFF experience demonstrated that building upon existing real estate financing mechanisms, such as LIHTCs and NMTCs, for co-location projects can make a positive difference in communities. Future social investment initiatives can align the interests of managed care organizations and hospitals and health systems with community housing and health care access priorities.

To read the original post, visit https://www.healthaffairs.org/do/10.1377/hblog20201209.484996/full/.