In hospitals, affordable housing gets the long-term investment it needs

Ce’Yann Irving, mother of a 1-year-old daughter, pays $990 a month for a two-bedroom apartment on the site of a former dairy processing plant in New Orleans’ Central City neighborhood. She has amenities, such as a 24-hour gym and a private community clinic, within easy reach.

“I’m a first-time mother, so if my daughter coughs for too long I try to take her to a doctor,” said Ms. Irving, 30, a disaster case manager for Catholic Charities. “Here I can literally walk to the clinic, and if there is a wait, I just wait in my own apartment.”

The 192-unit affordable housing complex, which opened in January, is a joint project of Alembic Community Development and the Gulf Coast Housing Partnership, an affordable housing developer formed in the aftermath of Hurricane Katrina in hopes of improving Gulf Coast region to rebuild. The complex aims to be a model for communities across the country by linking stable housing to better health.

Aetna, a managed care organization operating in the region, invested $26.7 million in the $80 million project, called H3C, where the “H” stands for health and the “3C” stands for commerce, culture and community. Tenants and others in the community have access to a medical clinic operated by DePaul Community Health Centers on the ground floor. Researchers from the Louisiana Public Health Institute will study patient health outcomes, and consultants from Health Management Associates will use the anonymized data to determine more effective ways for health care systems to work with developers.

H3C is just one of many examples showing that healthcare systems are beginning to see more and more benefits in building affordable and safe housing, from the improved health of local communities to the extent to which managed care groups benefit financially from those healthier populations. These and other factors, including a shortage of housing for their own workers, have led health care systems to become partners and investors in affordable housing.

Such partnerships are “necessary,” said Peggy Bailey, vice president for housing policy at the Center on Budget and Policy Priorities, a think tank. “It takes so many investors and so many types of financing to deliver affordable housing development.”

Hospitals “reinvesting in the places they serve is important,” she said, especially if they are in underserved communities.

Kaiser Permanente, a managed care giant in Oakland, California, has committed $400 million to finance affordable housing through its Thriving Communities fund, which aims to build or preserve 30,000 units by 2030. And the Healthcare Anchor Network, a national coalition formed in 2017. with more than 70 healthcare systems focused on investing in local economies, the country has poured more of its capital into housing, neighborhoods and commercial projects such as supermarkets. According to the group’s most recent data, the network invested $450 million in affordable housing projects from 2017 through the end of September 2022.

This type of long-term capital, usually in the form of low-cost loans, has become even more valuable during a period of higher interest rates, financial uncertainty and rising costs for builders. The cost of these developments is a huge undertaking. Funded from government and private sources, H3C was valued at $60 million before supply and inflation increased the budget by a third.

However, healthcare systems don’t act like banks, says David Zuckerman, president and founder of Healthcare Anchor Network. “They are filling the gap left by the financial sector not investing properly in affordable housing and the public sector not providing the necessary subsidies to make this all work,” he said.

Affordable housing has become a way for hospitals and healthcare systems to meet their nonprofit needs community benefits requirements and invest capital from their cash reserves, which healthcare nonprofits depend on to cover operating costs and unexpected expenses. (A strong reserve is an indicator of financial stability and helps improve the creditworthiness of nonprofit healthcare organizations.)

There are some early examples of health care systems investing in housing, particularly Catholic hospitals working with groups like Mercy Housing, an affordable housing organization.

But over the past decade, hospitals, health care systems and insurance groups, working with affordable housing developers, have expanded these efforts. They have built temporary housing for the most vulnerable people and established programs to temporarily house the homeless, especially those with serious mental health issues.

A recently expanded pilot program through Medicaid, called the 1115 waiver, allows certain health care providers to use Medicaid money to provide temporary housing. Washington State has used this model, with federal funding for rental assistance and $141 million in state funding, to build new homes as a means to target the population with the most needs.

And a shortage of available housing for hospital staff has also led to more developments. Kathy Parsons, a consultant and former vice president of CentraCare, a health care system in St. Cloud, Minnesota, said it was difficult to move health care workers to the area and that the network had explored ways to work with developers. . Housing shortages can be acute in rural areas. They can lead to longer commutes, significant costs due to overwork, staff burnout and the closure of hospital services in communities that need them most.

There are also more and more projects that want to build homes for people who need special care. In New Jersey, the Hospital Partnership Subsidy Program is beginning to see demand expand from big cities to suburbs, with proposals for specialized housing projects to support people with multiple sclerosis and Down syndrome. The program, which launched in 2018, provides millions of dollars in government grants to lay the foundation for hospital investments in housing projects.

Barclay Place, the first project completed under the state program, opened in Paterson in July. The 56-apartment complex has a wellness center on the first floor and a number of units are reserved for residents with chronic health conditions. The project was developed through a partnership between the New Jersey Community Development Corporation and St. Joseph’s Health, which will provide supportive services to residents.

In Minnesota, the Greater Minnesota Housing Fund, which has built 20,000 affordable housing units since 1995, offers some sort of additional focus on health care in about 20 percent of its projects, said Eric Muschler, the fund’s director of housing and health equity. The organization’s new initiative is to educate healthcare professionals about the importance of housing solutions for healthcare equity and provide loans to developers to help close gaps in a project’s overall financing plan.

“We continually need more capital to build more housing,” Mr. Muschler said. “We have a housing system that is broken, and we need to look beyond subsidies.”

Hospitals can also tap into another important resource: their own land and property. Boston Medical Center and Trinity Health both have plans to build affordable housing complexes on their own properties.

John Vu, Kaiser’s vice president of community health strategy, said this was the first phase in solving the housing problem. In the next phase, he said, data collected from the developments will be used to determine how future partnerships can better address the health and housing needs of communities.

Numerous studies of pediatric researchers and groups like Health watch for children have shown how housing support can help the homeless families that have members with a chronic illness or disability, or who require more than normal health care.

And Kaiser is partnering with Enterprise on the Housing for Health initiative, which connects developers with public health groups to evaluate how housing determines health based on 30 factors.

Stephany De Scisciolo, vice president at Enterprise Community Partners, a national nonprofit developer that has worked with Kaiser on some of its housing investments, said the program has been collecting data for four years.