When it comes to Miami’s affordable housing crisis, we need to follow country singer Toby Keith’s advice and get “A little less talk and a lot more action!”
We have become Ground Zero for the nation’s affordable housing crisis. Although other big cities like New York and San Francisco have very high housing costs, their incomes are proportionately high. Unfortunately, Miami has one of the nation’s highest poverty rates.
Growing up next to the Orange Bowl and living here most of my life, I tried to do something about this problem. Rather than turning to the government for help, my preference has been to focus on the private sector — where the money is — in our banks.
I therefore launched The Community Development Fund three years ago, an SEC-regulated mutual fund (ticker CDCDX), to help banks finance affordable housing and also get favorable regulatory consideration under the Community Reinvestment Act (CRA). All invested funds are recycled back into the investing bank’s local community. To date, it has resulted in over $50 million of funds supporting single-family and multifamily affordable housing.
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While every bank and thrift in South Florida was made aware of this new fund, there were only a handful of what I call “Affordable Housing Heroes,” that practiced what they preached about supporting Miami-grown community development initiatives.
City National Bank of Florida, our state’s largest community bank, quickly stepped forward and became the lead sponsor locally. This was not surprising, as they are one of the few banks nationwide that received continuous “Outstanding” CRA ratings from federal bank regulators; in fact, they created their own affordable housing fund.
Several community banks, like Grove Bank and Center State Bank, also became initial investors in this new fund, along with Florida Community, Gibraltar, Homebanc, and Sabadell United, all of which were later bought by large out-of-state banks.
To their credit, each of these out-of-state purchasing banks, namely First Citizens, Iberia, and Synovus, maintained the fund investment of the banks they bought, thus showing their commitment to helping our affordable housing crisis. While these and other Affordable Housing Heroes who are committed to this cause must be commended, there are unfortunately a few Miami banks that have done little to nothing (“Affordable Housing Zeroes”?) to address this critical problem. Rather than make the extra effort to lend to low-and moderate-income borrowers, they lend exclusively or near-exclusively to upper-income borrowers.
They will tell you it is easier and more profitable to make a single $5 million loan on a bayfront residence than say 20 home loans for $250,000 each in our working-class communities. But, if they are truly community banks as most of them claim, they need to make loans in all of South Florida’s communities, including low- and moderate-income neighborhoods.
If our Dolphins can pull off a “Miami Miracle,” maybe all of our banks can help our affordable housing crisis… with a little less talk and a lot more action.
Kenneth H. Thomas, Ph.D., is president of Miami-based Community Development Fund Advisors. He taught banking and finance at The Wharton School of the University of Pennsylvania for over 40 years.
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