MELISSA BLOCK, HOST:
This year is the 50th anniversary of Lyndon Johnson's war on poverty. And we're using the occasion to explore some challenges facing today's poor. One is a lack of affordable housing. Today, millions of poor families spend more than half of their income on rent, leaving little money for anything else. NPR's Pam Fessler reports some nonprofit groups are trying to change that with a new business-like approach to real estate.
PAM FESSLER, BYLINE: Christopher LoPiano's job is to buy and operate housing for low- and moderate-income families. So it was frustrating when he made offers on eight properties in Virginia and got the same answer every time.
CHRISTOPHER LOPIANO: No, thank you. That's what kept happening to us. No, thank you.
FESSLER: It wasn't the price. LoPiano's group, a nonprofit called Community Preservation and Development Corporation, was competitive on price.
LOPIANO: What we're not competitive on is closing quickly because we're dependent upon public financing, and public financing just takes longer.
FESSLER: He's talking about getting approval for government bonds and tax credits often used in these deals. It can take months, even a year.
LOPIANO: And sellers in today's market are not willing to wait that.
FESSLER: So, LoPiano's group and something called the Housing Partnership Network decided it was time to get creative, to do what private investors have done for decades. They formed what's called a real estate investment trust, or REIT. It allows investors to pool their funds to buy property and collect dividends. The nonprofits figured they could offer a modest return, 5 to 7 percent. And they got several big investors, like Prudential and Morgan Stanley, to chip in $100 million. LoPiano says it's made all the difference.
Late last year, the Housing Partnership Equity Trust successfully closed on a 300-unit garden apartment in Norfolk, Virginia. It's called Woodmere Trace, where workers now are busy fixing things up.
GEORGIA PITRONE: This is the renovated kitchen.
FESSLER: Georgia Pitrone is the property manager. She shows me one unit where the 40-year-old kitchen has been updated with sleek, new appliances, cabinets, and floors. The bathrooms and decks are also being redone.
PITRONE: We found when we took everything out that there was a lot of dry-rotted wood and a lot of issues at poor repairs. So we're addressing all of that before they put anything back.
FESSLER: And that's what the housing partnership hopes to achieve, fixing up moderately priced apartments that might otherwise fall into disrepair or be purchased by developers who jack up the rents, forcing existing tenants to move. Drew Ades runs the housing trust. He says they're here for the long haul.
DREW ADES: What we're trying to do is, you know, keep rents affordable, but also really invest in the property, really invest in the community and really invest in the residents.
FESSLER: Who, for the most part, are low-income working families or retirees. Many have jobs at nearby military bases or retail stores and make as little as $30,000 a year, just the kind of people being squeezed out of today's rental market, sometimes into homelessness - people like 80-year-old Frank Spicer.
FRANK SPICER: Please come in.
FESSLER: Spicer moved to Woodmere Trace two years ago after he sold his house nearby. He says other apartments in the area were too expensive.
SPICER: Everything was 1,000 or $1,200 if I wanted to move in. I just couldn't really afford to that.
FESSLER: Here, he pays about $800 a month for a one-bedroom.
Did you know what you would do if you couldn't find an affordable apartment right here?
SPICER: I would go live with my daughter, I think.
FESSLER: But he says, to be honest, he'd rather live on his own. So far, the Housing Partnership has purchased three properties like this around the country. CEO Drew Ades says they're hoping to raise an additional $250 million. Keven Lindemann, who analyzes the real estate market at the firm of SNL Financial, thinks the nonprofit's plan has promise. He says the challenge will be attracting new investors.
KEVEN LINDEMANN: I would guess that their ability to do that on an ongoing basis will be determined by how successful they are with this first $100 million.
FESSLER: And by successful, he means balancing competing demands - keeping rents low and the property in good shape, while also satisfying investors who could be making more money elsewhere. Lindeman thinks the housing groups will have to appeal to investors' desire to do something good for society. Pam Fessler, NPR News.