An innovative loan program is being used to help a pair of Twin Cities nonprofits expand housing options for low-income renters and home buyers who can't find housing.

The F.R. Bigelow Foundation in partnership with the St. Paul Foundation is providing $1 million in loans and grants to both CommonBond Communities and Habitat for Humanity through what is called a program-related investments (PRIs) loan.

"This is absolutely game-changing," said CommonBond CEO Deidre Schmidt.

CommonBond will use the money to support its Housing Opportunity Fund, which will be used to purchase rental properties that are affordable without subsidies to families and individuals whose earnings exceed government subsidy housing qualifications, but who can't afford market-rate rentals. The fund specifically targets renters with an annual income of $33,000 to $48,000.

Demand for affordable rentals far exceeds supply in the Twin Cities and beyond in part because construction costs make building the rentals cost prohibitive. The Twin Cities is one of the 25 biggest U.S. metros where the poorest renters paid more than 45 percent of their income on housing, according to a recent study by

Nationally, renters spent a median 29.1 percent of their incomes on rent, up from a historical average of 25.8 percent. Homeowners, however, spent 15.9 percent of their income on their mortgage, down from 21 percent in pre-bubble years.

"The need to preserve low-to-moderate income housing is increasingly urgent in the Twin Cities metropolitan region," said Ann Mulholland, vice president of Community Impact for the St. Paul & Minnesota Community Foundations.

The $1 million loan will help CommonBond exceed its annual $2.5 million fundraising goal for the Opportunity Fund, which aims to raise $20 million over the next several years to acquire rental properties, and to leverage other donations. So far this year the organization has commitments worth about $3 million, and has acquired three apartment communities that will remain affordable to working-class families.

Twin Cities Habitat for Humanity plans to use its loan to double the number of first-time buyers it can serve, according to Sue Haigh, president and CEO of Twin Cities Habitat for Humanity.

The funds will be used primarily to acquire properties that need light repair and can be sold to low-income families using affordable Habitat mortgages. Haigh said the goal is to help 500 families become homeowners during the next four years; about half of those home buyers are expected to be in the east metro.

"We are currently looking for other social-impact investors to partner with us in this way," said Haigh.

Though PRI loans aren't new, they are a somewhat unusual tool that foundations and other philanthropic organizations are using to help nonprofits achieve their goals. Aside from helping the nonprofits, these below-market rate loans benefit the foundations and nonprofits that offer them because they are able to reinvest the payments and modest interest gains in other philanthropic projects and organizations. The foundation is also providing grants that will provide organizational and technical support for the newly expanded programs.

"PRIs are an effective tool to help preserve and expand affordability," said Mulholland. "Access to affordable housing is critical to individual and family economic well-being, and helps stabilize communities."

Jim Buchta • 612-673-7376