UnitedHealth Group Inc. said Thursday that it is putting $50 million into a fund to construct hundreds of low-income housing units in Minnesota and the Upper Midwest.
While the investment brings financial benefits, officials at the nation’s largest insurance company said it also aligns with a corporate belief that stable housing is a key component of better health.
“It’s a way to build healthier communities and healthier lives,” UnitedHealth spokeswoman Lynne High said. “It fits with our mission perfectly.”
The insurance giant is working with the Greater Minnesota Housing Fund, a 17-year-old nonprofit that recently created a new program to attract “socially motivated” Minnesota companies as investors.
The businesses provide the equity capital to finance low-income housing projects, and, in return, are awarded federal tax credits for 15 years.
Minnetonka-based UnitedHealth is the first and largest investor in the program, known as the Minnesota Equity Fund, and the insurer’s participation is expected to draw other businesses. Discussions are underway with half a dozen other companies in Minnesota interested in “mission-related investing,” said Warren Hanson, CEO of the Greater Minnesota Housing Fund.
“They get an economic return … and the community gets housing for the homeless and families, at a time when there’s a dire shortage of affordable rental housing,” he said.
Four projects worth $18.5 million are complete or nearing completion, adding 118 rental housing units. Three of the projects are in Minnesota and one is in Illinois. A number of other projects in Minnesota will be announced in coming months, officials said.
Kris Thul, recently on her own with her sons, 17 and 13, watched as the Seasons Townhomes went up in her north suburban neighborhood in Ramsey, and became one of the first to move in this fall.
The 50-unit, $8.9 million development was built with the Minnesota Equity Fund, and offers rental space for low-income and formerly homeless families and individuals.
Thul has worked at a medical device company for nearly six years, and had been living in a cramped space with her growing boys and dog. After hitting “difficult times,” the 43-year-old Thul sees a more stable future for her family, at a rent she can afford.
“It’s just beyond beautiful,” she said. “It’s a dream come true. I’m so blessed.”
National studies show that those without stable homes are sick more often, have more undiagnosed illnesses and are more likely to wind up seeking expensive care in emergency departments. Health insurers and their foundations are increasingly playing a role in addressing homelessness, often centering around helping pay for services in transitional or supportive housing.
Minnetonka-based insurer Medica is in the early stages of a partnership with the Hearth Connection, in which it offers rental assistance, health care services and case management to Medica members with histories of homelessness. The program now serves 47 people in the Twin Cities and two in Duluth, with a goal of reaching 90 people.
UnitedHealth’s partnership with the Minnesota Equity Fund offers a different approach because it offers an investment in bricks and mortar.
Until 2008, banks were the main investors in affordable housing developments financed with tax credits. But the foreclosure crisis and recession dried up bank profits and sapped plans for capital investment.
As the economy improved, unlikely partners stepped in. Google invested $86 million in low-income housing tax credits in the West and Midwest in 2011.
UnitedHealth likewise saw an opportunity with fairly low risk and an opportunity for decent returns. It launched a program in December 2011 with three affordable housing projects in New Mexico, and has since invested $150 million in a dozen states.
The funds come out of the corporate coffers, but are meant to complement the work of the company’s charitable foundation, said Tom McGlinch, UnitedHealth Group vice president of investment management.
The insurer seeks housing projects in which 20 to 25 percent of the units offer supportive services, including those aimed at giving stable housing to homeless people and onsite care for those with mental and physical disabilities.
“UnitedHealth is a dream partner because they share the same civic agenda we do,” said the Housing Fund’s Hanson, who initially pitched a $10 million investment to the insurer. “They came to the project with those priorities and commitments, not because we sold them on it.”
McGlinch said that UnitedHealth has the “room to do more” projects.
“We’re looking to find more opportunities to be involved in these types of projects in places where UnitedHealth has a significant number of employees and is doing business,” McGlinch said.
The Greater Minnesota Housing Fund was formed in 1996 by the McKnight and Blandin foundations to address an urgent need for decent affordable housing in outstate Minnesota.