Healthcare Builds Housing

6 min read

Six Oregon companies invest in supportive living 

Six giant health companies are contributing millions of dollars to help build housing in Portland, OR.

“CareOregon’s support is an investment in preventive healthcare and our members’ futures,” says Eric C. Hunter, president and CEO of CareOregon.

The six companies joined together to invest $21.5 million to help Central City Concern (CCC), a Portland-based affordable housing developer and social service provider, address Portland’s challenges with affordable housing, homelessness and healthcare. The investment will help CCC build three new affordable housing developments totaling hundreds of units of housing.

“We’re very excited – it’s the largest expansion in our organization’s history,” comments Sean Hubert, chief housing and employment officer for CCC.

A gift that will keep on giving
The biggest part of the $21.5 million investment will be $20 million in soft financing to Eastside Health Center, a single building that will combine permanent supportive housing with a first-floor clinic that serves medically fragile people and people in recovery from addictions and mental illness.

The remaining $1.5 million will help CCC build two less complicated developments. The Stark Street apartments in East Portland will provide 155 units of workforce housing. The Interstate apartments in North Portland will provide 51 units of housing for low-income families.

These six healthcare organizations are all nonprofit companies – but include some of the largest networks of hospitals and health clinics in the country:

  • Adventist Health Portland
  • CareOregon
  • Kaiser Permanente Northwest
  • Legacy Health
  • OHSU
  • Providence Health & Services – Oregon

These six companies dove deeply into the supportive housing business because many of their hospitals and doctors in their networks may already work with chronically homeless people who come through their clinics and emergency rooms. Bringing chronically homeless people into supportive housing may cut down on the amount of emergency room services they use, costs which can sometimes strain the healthcare system.

“Housing not only improves health outcomes, but helps reduce the overall costs of healthcare,” says CareOregon’s Hunter.

The six-story Eastside Health Center building starts with a health center on the first two floors, including wellness services, primary care, substance use disorder treatment and domestic violence counseling. The site includes programs relocated from Central City Concern’s current Eastside Concern location.

The plan for the top four floors includes housing for 176 people with 34 studio apartments on the top floor and 80 single-room occupancy apartments on the fourth and fifth floor. The third floor provides beds for up to 62 patients receiving services at the clinic, including 45 for medical respite and palliative patients and 17 for people transitioning from a mental health crisis.

A variety of financing
The mix of different kinds of real estate in the Eastside building will require very different kinds of financing.

The top floors of rental apartments can support a fairly conventional tax-exempt bond mortgage supported by rental income from the apartments, plus equity from the sale of 4 percent Low Income Housing Tax Credits (LIHTCs).

However, the health clinic at Eastside would require something different. “When trying to fund health clinics like this one, there is no regular source of funding,” continues Hubert.

The $20 million investment from the six healthcare companies goes a long way towards solving that problem – especially since the equity could potentially be used to generate New Markets Tax Credits (NMTCs), bringing a few more million dollars in funding to the property.

It will cost a total of $40.5 million to develop the Eastside Health Center. But Hubert says that the hardest part of finding the money to build Eastside is already finished: convincing the healthcare companies to contribute their $20 million.

Now CCC is engaged in structuring the deal. The single building will include two separately owned properties under one roof – one financed with LIHTCs and the other financed with NMTCs. Since the rules of the NMTC program don’t allow the tax credits to be used in a property owned by a LIHTC partnership, the ownership of the building will be split into two separate condominiums.

CCC has a lot of experience in creating buildings with both LIHTCs and NMTCs.

Experience has taught the developer to take care how it allocates costs, like the price of land between the two halves of the development. “We probably lost a little equity,” says Hubert.

Though the financing for the Eastside building is not scheduled to close until August 2017, much of the funding for the planned development is already in place. The developer identified its tax credit investor and the community development entity that will allocate NMTCs to the deal – though it has not announced their identity yet.

“We have all of the funding committed – with the exception of $7.4 million in county funds,” adds Hubert.

Stark Street and Interstate
The other two developments that benefit from the $21.5 investment of the six healthcare companies will also help CCC bring chronically homeless people in off of the streets, homeless shelters and emergency rooms.

CCC could transition more people out of homelessness if there were more affordable apartments available for people to transition into.

Portland is suffering from a steep shortage of affordable housing, as rents rise in many neighborhoods. “Rents have tripled for many housing units,” says Hubert. “The affordability crisis has really affected our ability to transition people out of our program.”

CCC is building its 151 units at Stark Street Apartments to help. The affordable units are targeted to people transitioning out of CCC’s programs. “You have to be able to offer low screening, so that you are not screening out the people who are most in need,” says Hubert.

CCC’s third project to receive funding from the $21.5 million investment also aims to both ease Portland’s shortage of affordable housing and create housing that may help the clients of CCC’s service programs. The 50 affordable housing units at its Interstate Apartments project are targeted to people with ties to its North Portland neighborhood, which many people served by CCC call home, and are gradually being priced out of.

“The health systems have been more aware of the intersection of housing and health,” says Hubert. “It’s very hard to affect long-term outcomes with homeless people if they don’t have a safe place to sleep.”