Huntington Bancshares (Stock Quote: HBAN) is one of the first big banks to dip its toe back into the low-income real estate market — and it’s targeting one state that has really taken it on the chin during the Great Recession.
It’s a move that comes with some risk. Low-income borrowers were hit particularly hard by the economic downturn. A study from Harvard University’s Joint Center for Housing Studies concluded that the average declines for U.S. low-income homes were 50% higher than declines in high-end homes.
And developers who build new homes for low-income citizens are struggling to pay back the loans they’ve already received to build new housing units, especially in the hard-hit Rust Belt.
That disparity in home-value declines and the risk in getting housing development loans paid back by builders represent a heightened risk for banks, but that’s not stopping Huntington from plowing $100 million in low-income loans into the Ohio real estate market by 2012.
The money will go primarily to affordable housing for struggling Ohioans, particularly extremely poor families and senior citizens. The press conference that announced the housing finance deal was held at the St. Rita Senior Apartments at the Jennings Center for Older Adults in Garfield Heights, Ohio. The housing complex, completed earlier in 2010, holds 63 units and is being billed by the bank as a model for the financing program.
Much of the money is going to jump start new housing development projects that were sidelined due to the flailing economy. The bank has already earmarked $3 million to complete a housing project initiated by the YWCA of Canton. The $6.9 million project will offer new homes to homeless people who will pay lower-than-market rents based on their annual incomes. Another $3.2 million is going to finish a $7.2 million family-housing unit renovation in Cadiz, Ohio.
“We wanted to do something very impactful to help jump-start stalled housing," said Reza Aghamirzadeh, Huntington Bank’s senior vice president and director of community development, in an interview with The Cleveland Plain Dealer. "There were a number of critically needed projects in various markets, Cleveland including, that were stalled, that needed investment."