Among the most pressing problems we are facing, most critically but not exclusively in core urban markets, is the rising cost of housing and the inability of middle- and lower-income families to afford to live where jobs, quality schools and health care are easily accessible. As the search for housing has become more challenging, families are living in more crowded conditions, in lower quality housing, or moving further and further away from where they can find suitable work. The move away from job centers creates its own problems, increasing the cost of housing in those surrounding communities, and increasing traffic for everyone with the correspondent environmental issues that increased traffic causes.
As a general rule of thumb, we should not be spending more than 30% of our income on utilities and mortgage payments or rent. Spending a higher proportion of income on housing can leave families, particularly those at lower income levels, without enough money for food, medication and other basic needs. Yet, approximately 20 million American renters spend more than 30% of their income on housing, and half of those families spend more than 50%.
Richard Gerwitz, a Managing Director of Citi Community Capital, has been financing affordable housing projects for over 30 years and is acutely aware of the challenges that make it difficult to increase housing supply, particularly in the most desirable communities.
One simple reason is household growth has been outpacing the rate at which housing units are being built, creating a supply and demand problem. Gerwitz says, "A combination of restrictive zoning and NIMBYism – Not in My Backyard – has limited the construction of new units at the pace necessary to house our increasing population. The lengthy and costly approval process typically necessary just to start construction and high labor and materials costs have made it so expensive to build a unit of housing that the housing that is being built is targeted to the higher end of the market. In other words, the economics just do not work. Very few units are built for the lower- and middle-income segments of the market without significant amounts of public subsidy to encourage their construction."
Citi Community Capital (CCC), the community lending and investment arm of Citi, is helping developers and local governments fill the housing production shortfall by providing a full range of specialized debt and equity products that utilize existing Federal, state and local programs. Originating, processing, closing and asset managing its portfolio, CCC is involved with every stage of the life cycle of each project it finances. It has been a leader in the industry, recognized as the largest affordable housing lender in the United States for 11 years in a row according to Affordable Housing Finance Magazine. In 2021, CCC financed over 200 affordable multifamily rental projects that include just under 33,000-units in 34 states and the District of Columbia.
As part of the Action for Racial Equity initiative, Citi has worked with diverse partners in innovative ways to help expand affordable housing for communities of color and advance anti-racist practices in the financial services industry. According to The Department of Housing and Community Development (HUD), the majority of people who live in the type of affordable housing that CCC finances are people of color, with Black families making up the majority of that population. That same population, however, is significantly underrepresented in terms of their participation in the industry that builds and finances those projects.
Last year CCC solicited proposals from Black-owned development companies throughout the country, selecting four to invest $40 million with each to facilitate their investment in affordable and workforce new construction and preservation projects. The goal of the program is to help these developers develop the track record necessary that will allow them to continue to attract third-party capital and become competitive forces in the industry.
CCC is also leveraging Citi's longstanding relationships with Minority Depository Institutions (MDIs), bringing them in on affordable housing loan opportunities to extend our support for the communities they serve. In partnership with five MDIs – Citizens Trust, Industrial Bank, Liberty Bank & Trust, Optus Bank, and Unity National Bank – Citi closed $28 million in affordable housing loan participation opportunities in 2021. These loan opportunities enable MDIs to generate revenue and build their capacity to invest in larger transactions, which are key steps to Citi's approach to deepening MDI engagement.
By combining the talent of people like Richard Gerwitz and the capabilities of our institution through units like Citi Community Capital, Citi continues to make progress toward closing the racial wealth gap and increasing economic mobility in the U.S.