Federal funds fill financing gap in border economy

McALLEN — In three of the past four years, the city’s largest homebuilder was a nonprofit initiative to provide housing opportunities for low-income families.

Using a combination of federal funds, private investment and mortgage payments, Affordable Homes of South Texas Inc. builds about 100 homes each year for working families in Hidalgo County who wouldn’t have access to affordable housing otherwise, said Robert Calvillo, the nonprofit’s executive director. By financing more than $6 million annually in mortgages, AHSTI creates dozens of construction jobs and stable neighborhoods across the county.

The debt is carried by AHSTI’s homeowners, who complete a rigorous screening process, make a down payment and then pay mortgages like any other homebuyer. But Calvillo said their dreams of owning a home are made possible by gap financing from the federal government that includes small grants and low-interest loans.

“The subsidy is going to come from the federal government in the form of a grant,” Calvillo said Wednesday at a border economic summit in McAllen. “Without that grant, none of it is possible.”

As federal, state and local community development officials examine ways to improve the U.S.-Mexico border’s economy, they point at agencies like AHSTI as examples of programs that work by leveraging federal funding with private capital to improve conditions in the region.

More than 150 people with backgrounds in community development attended a border economic summit on Wednesday organized by the National Association of Latino Community Asset Builders, a group that represents nonprofit community development and asset building organizations. Its executive director, Noel Poyo, said the summit seeks to change the conversation about the border from one focused on violence and drug trafficking to one examining its economic development and job creation opportunities.

Examples of agencies like AHSTI — a group developing affordable housing at a rate outpacing the private sector — are prevalent on the border, where a strong entrepreneurial spirit, access to global markets and economic potential create opportunities for growth, Poyo said. But a common thread that unites those agencies is a need for better access to capital that is crucial for economic growth.

“You can rail about the problems along the border, but until you get the capital to move them, the solutions won’t follow,” he said. “I’m struck by the amount of capital flowing to the border because that’s what we need.”

On the border, nonprofit institutions must carefully plan and strategize the use of capital investments to benefit working families and small businesses, said Mercedes Márquez, the U.S. Housing and Urban Development’s assistant secretary for community planning and development. Under a requirement that the four border states set aside a portion of HUD funding to improve conditions in colonias, about $60 million in community development block grants were invested in those neighborhoods between 2006 and 2010.

Those investments have helped provide basic infrastructure such as water and paved roads. But Márquez said new challenges arise with progression, including a wave of predatory lending and the foreclosure crisis that is most apparent in Texas in border counties.

HUD directed $137 million to AHSTI and other National Association of Latino Community Asset Builder partners to purchase and redevelop homes in neighborhoods with a rash of foreclosures under its Neighborhood Stabilization Program. HUD is also implementing online reports specifically for community development block grants used in colonias so elected officials and community members have a clearer picture of where the money is spent and how to implement best practices.

Although the border economy has been isolated, private industry is increasingly looking at it as an area for growth, said Mark Niero with Citi Community Development, the summit’s sponsor. While economic indicators from the Federal Reserve Bank of Dallas show a rebounding economy in Texas border cities, officials say continued growth must be spurred by nonprofit groups that provide affordable housing, support small business development and build financing capacity in low-income communities.

The Department of Treasury established the Community Development Financial Institutions Fund during President Bill Clinton’s administration to provide credit, capital and financial services to underserved populations. Donna Gambrell, the fund’s director who was among several high-level federal officials to attend the summit, said the CDFI fund has provided more than $30 billion since its inception in grants and new markets tax credits to fill a financing gap that traditional lending institutions won’t cover.

AHSTI is among 10 groups along the state’s border that leverage the federal funding to develop affordable housing, small businesses and community service organizations. But Gambrell, who called the program a jewel within the Treasury Department, said she would like to see more CDFI agencies operating on the border.

“There is so much more work that needs to be done,” she said.

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Jared Janes covers Hidalgo County government, Edinburg and legislative issues for The Monitor. He can be reached at (956) 683-4424.