Authored By: Steven Spears
SVP and CFO 

At Mercy Housing Inc., we have created a funding tool to help combat the country’s ongoing affordable housing crisis. The Gap Note Program fills financing gaps to pave the way for affordable housing to be developed quickly and efficiently nationwide, providing new and renovated homes to thousands of residents.

The creation and financing of affordable housing is complex and requires capital from multiple sources, both public and private. Funding is competitive and the number of worthy developments far exceed available resources.  Unfortunately, this funding shortage often leaves projects with a financial gap that can be a major barrier to the development of more quality affordable housing. For example, filling the last $1M of capital can delay a project from moving forward by at least a year (a funding cycle) and may mean that the project cannot be done at all.

Mercy’s new Gap Note Program provides critically needed low-cost, subordinate debt to help fill that financial gap in affordable housing projects developed by Mercy Housing and our affiliates. By providing capital that leverages private and public resources, our program enables projects to come to fruition which otherwise could languish for years due to insufficient resources. For example, Mercy Housing Southeast recently began construction on a 117 unit project in the historic Sweet Auburn neighborhood near downtown Atlanta. Due to rising construction costs and shortage of funding sources, this project used a $1.9 million Gap Note to move the project forward to closing and construction!

Additional examples of our projects/locations that have benefited from the Gap Note Program include:

DENVER: 8315 E Colfax:

• New construction of 82 affordable apartments for families and ground floor early education center (Mile High Early Learning)
• Construction begins Fall 2021; scheduled to open Fall 2022

CHICAGO: The Carlton:

• A renovation project that will renovate 70 existing units for supportive housing/formerly homeless
• Construction begins Fall 2021; scheduled to finish Summer 2022

GREENVILLE, S.C.: Mauldin Center:

• New construction of 46 units for families
• Construction began in February 2021; scheduled to finish February 2022

SEATTLE: Barkley Family Housing:

• New Construction of 77 units for individuals and families
• Construction began in July 2021; scheduled to finish November 2022

This program furthers our ability to provide housing not only to working families, but also to seniors, veterans, the formerly homeless and people with special needs as they cope with the pandemic and economic fallout.

Currently, we have 343 properties with over 42,000 residents, and we are resolute in developing and preserving 9,000 affordable homes by 2024, which will be in addition to the more than 24,000 affordable apartment homes we already own and manage. We recently reached our goal of creating a $45 million pool that will be used to accelerate our affordable housing production. Our goal is to invest in approximately 25 projects over the next four years. The leverage of these dollars is approximately 25 to 1, with every $1 million investment making a $25 million project possible. To date, six investors have committed over $47 million. Key partners include: CommonSpirit Health, The Opus Foundation, Mercy Investment Services, Truist Bank, PNC Bank, and Wintrust Bank.