In the 1970s and 1980s, the City of New York responded to the housing crisis by foreclosing on the thousands of abandoned buildings and vacant lots and transforming them into guaranteed affordable housing. However, by 2006, the last of the tax-foreclosed lots had been sold, and the city faced yet another shortage of affordable housing. In response, Mayor Michael Bloomberg announced his New Housing Marketplace Plan to create or preserve 165,000 units of affordable housing by 2013, thus challenging city officials to come up with new sources of land and buildings to meet that goal. Consequently, the Acquisition Fund—a $230 million, public-private partnership led by the New York City Department of Housing Preservation and Development—was established to assist nonprofit and small, for-profit affordable housing developers by providing the needed capital for property acquisition and predevelopment costs.
Prior to the creation of the Fund, there were few sources of predevelopment loans, with offerings only obtainable at low "loan-to-value" ratios and high recourse levels. This required developers to have significant capital available to complete an acquisition. Public sector grants and loans did exist to cover predevelopment costs, but were approved only through lengthy competitive funding rounds. This process prevented affordable housing developers from responding quickly enough to private owners selling land or buildings. These factors effectively eliminated the ability of nonprofit and small, private developers to compete for property in New York's private real estate market. The Acquisition Fund, in contrast, provides low-interest capital at higher advance rates and lower recourse levels, with a much quicker turnaround time than typical government funding sources. Such services are made possible through a unique collaboration of sixteen major banks and financial institutions and their combined capital commitments of $192.5 million. The funds are managed through a revolving credit facility, six large foundations with a shared pledge of $33 million, and the City of New York's $8 million investment, which together create a secure pool of loans to finance affordable housing projects.
Since the launch of the Acquisition Fund in August 2006, four deals representing 381 affordable housing units and totaling $25.8 million have closed. As of late 2007, there were an additional 15 projects in the Fund's pipeline, representing over 1,000 units of housing for low-to-moderate income earning New Yorkers. One of these projects is the Fund's first preservation loan grant, made to the Fordham Bedford Housing Corporation in the Bronx for $23 million. The loan supports the purchase of six privately owned buildings that will result in 283 individual affordable housing units. The Acquisition Fund has also emerged as a model for other cities, working with city governments in New Orleans, Atlanta, Chicago, and Los Angeles and local foundations and financial institutions to develop similar solutions.