Courage Housing
An interactive guide

Projects are won in predevelopment. It gets the least money.

Every affordable housing project crosses the same stretch of months, where risk is highest and almost no capital is priced for it. Walk through it in six short steps: see where the risk sits, who runs out of cash, and what gets a project to the closing table.

Interactive guide: risk and capital across the development timeline

Before you start

Where is a housing project most likely to die?

Timeline of an affordable housing project in five stages with a risk curve and the sources of capital available at each stage.

Where you are
Concept3 to 12 months
Risk
High
Next gate
Site control
Has to go right
Find a site and a reason to build

Durations, risk levels and capital availability show typical national conditions for illustration. They are not advice for any specific project.

i.Who gets shut out

The sponsor does the hardest work first and gets paid last. Predevelopment is paid for, in effect, by a developer fee that arrives only when the construction loan closes, and part of that fee is often deferred into the building's future cash flow. Until then the sponsor funds the studies, carries the risk, and signs the guarantees the lender requires.

Only developers with large balance sheets can wait that long and sign. Small, local, rural and nonprofit sponsors run out of cash, or they cannot pass the guarantor test, and they drop out. That is the national story. It is why the projects communities most want, from the groups closest to them, so often do not get built.

ii.The second gap, at takeout

There is a smaller gap at the end. A permanent loan repays the construction loan at conversion, and it is sized on the building's real rents and on interest rates at that moment. If rates rise or rents come in low, the permanent loan can be smaller than the loan it has to repay. The sponsor has to fill the shortfall right when they think they are done. A good plan sizes for that from the start.

iii.What fixes it

None of this needs a new subsidy program. It needs capital and help aimed at the stretch where risk is highest.

  • Patient predevelopment capital. Priced for the risk, and repaid when the construction loan closes.
  • A shared guarantee or credit enhancement pool. Small sponsors can borrow without a national balance sheet behind them.
  • Community notes alongside predevelopment loans. Local, subordinate money that can stay in through the permanent loan and beyond.
  • Senior help. Someone who has closed these deals, getting the team, the numbers, the approvals and the capital right at the same time.

These are choices that states, foundations, community foundations and banks can make now. Money placed here moves projects that would otherwise be lost, and most of it comes back at closing.

iv.How we work

Courage Housing works in this stretch. We take sponsors from site control through the construction loan closing, because that is where projects are won or lost. Once the loan closes, the hard part is over.

At The B in Spokane, site control to groundbreaking took about nine months, with no tax credits. A comparable tax credit project often needs two to three years for the same stretch.

Our pre-development practice Begin a conversation Read the essay on Substack