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Main streets, a vital part of the economy of cities and towns across Pennsylvania, contain many buildings with stores on the street level and apartments on upper floors. In response to the challenge of financing these mixed-use buildings, the Pennsylvania Housing Finance Agency (PHFA) has begun to make loans for the rehabilitation of residential portions of vacant properties while banks provide first-mortgage loans for the remaining financing needs of the properties. The banks may also provide working capital or other loans to owners of businesses located in the properties.
In April, as part of PHFA’s mixed-use financing initiative, the agency awarded $1.9 million for the rehabilitation of mixed-use properties in eight communities. This amount included $750,000 provided by the Pennsylvania Department of Community and Economic Development.
Robert F. Bobincheck, director of PHFA’s office of strategic planning and policy, said that PNC Bank, N.A. has agreed to consider loans for vacant properties that are approved for PHFA loans in the mixed-use initiative. The PHFA loans are made at 2 percent interest for 20 years, while the bank loans are made at market interest rates, he said.
Amy Lempert, a vice president with PNC Bank, N.A., said that the need for public subsidy to complement bank financing on mixed-use projects surfaced at a meeting of the bank’s community development advisory committee about two years ago. The discussion involved Lempert, representatives of Philadelphia Local Initiatives Support Corporation (which had started a program to assist eight commercial corridors in Philadelphia). The Philadelphia Association of Community Development Corporations, and Mark Schwartz, executive director of Regional Housing Legal Services. Schwartz, a member of PHFA’s board, began discussions with PHFA that led to creation of the program.
Mixed-use buildings have long been regarded as a financing challenge because of the distinct housing and commercial components. Last year, Back to Prosperity: A Competitive Agenda for Renewing Pennsylvania, prepared by the Brookings Institution Center on Urban and Metropolitan Policy, recommended a coordinated state approach to support the development of mixed-use properties.
A request for proposals for the next mixed-use funding round is expected in March 2005, with proposals due in August 2005. The initiative is part of PHFA’s homeownership choice programs.