Lessons from a conversation with Philip Payne, Chairman, & Beth Silverman, Executive Director, Lotus Campaign

My key takeaways from the Lotus Campaign in Charlotte:

  • The affordable housing industry does not broadly engage market-rate landlords to make use of existing units for people on the brink of homelessness. This is an oversight that the Lotus Campaign is addressing through their innovative financing model and by fostering partnerships between landlords and nonprofit service providers.
  • Most existing programs do not prioritize housing people on the brink of homelessness. From an economic and psychological standpoint, it is critical to provide housing before people become homeless and/or develop severe support needs.
  • New development is too expensive to solve the housing affordability crisis. Financing tools that are not centered on new development must be created to address the lack of affordable housing.
  • Building trust between atypical partners is a necessary step toward addressing a problem as big as homelessness.

While the Lotus Campaign kicked off in Charlotte in 2018, its model was designed to be replicated across the US. The standard set of All Over the Map questions have been expanded in this post because Lotus is not intended to be location-specific. Learn about the Lotus Campaign’s unique approach to addressing homelessness below.

What makes Charlotte’s story about affordable housing unique? / How did you anticipate that the Lotus Campaign model would work well in Charlotte?

The truth is, Charlotte’s story about affordable housing is not unique. There is a shortage of affordable housing in all communities in the US, both large and small, and the problem is becoming more and more visible. While the Lotus Campaign’s creative financing strategies are being tested in Charlotte first, the model was designed to be replicable and there are plans to expand the model to other cities.

To ensure success in Charlotte, the Lotus Campaign worked with market-rate landlords to understand why they weren’t involved with affordable housing already. Landlords listed a consistent series of legitimate concerns that were not based in ill will. Lotus recognized that they could play an important role as a mediator and translator of sorts between market-rate landlords and mission-driven non-profits to create new opportunities for housing people. Lotus actively invites collaboration between sectors and, in the process, is dispelling myths about the private sector being uncaring, government being too dull, and non-profits being too slow.

Lotus’s approach to tackling the problem of housing affordability is unique in the way it engages the private sector. The housing affordability crisis is too large for non-profits or municipalities to solve on their own, and there’s no use in ignoring the valuable experience and capital that the private sector can offer.

What is the state of affordable housing in Charlotte today? / How is the Lotus Campaign addressing housing affordability and homelessness in Charlotte?

There are approximately 3,052 homeless people in the Charlotte-Mecklenburg county area according to official metrics, but this is inevitably an under-count. Local schools indicate there are 4,400 homeless people within their districts; the 3,052 point-in-time count of homeless people on the streets and in shelters is just the tip of the iceberg.

In Charlotte, as with the rest of the country, homelessness is largely due to a lack of affordable housing. This is a supply issue. Workforce housing (available to people earning up to 80% of the Area Median Income) is diminishing as it ages (being bulldozed or becoming slumlord properties). New development is relatively high-end due to current development costs, making it unaffordable for the workforce housing population. The Low Income Housing Tax Credit (LIHTC) is an important federal financing tool to incentivize new affordable housing development but, with development costs around $350,000/unit and years-long pre-development and construction periods, development cannot be the primary way to solve the housing supply problem. Recognizing this, Lotus developed a new model for providing housing for quickly those in need with much simpler and cheaper financing.

The Lotus Campaign engages landlord/developer owner entities and pairs them with nonprofit partners, providing financial support and services to incentivize landlords to offer leases to people on the brink of homelessness. Thus far, Lotus’s Landlord Participation Program has housed over 275 people for less than $800/year per unit. Sixty residents have renewed leases and some have successfully have moved into other permanent housing. There have also been less quantifiable successes, such as genuine rapport created between residents, non-profit sponsors who provide services, and landlords.

This uniquely designed program supports high-functioning chronically homeless folks and people in imminent danger of being homeless. (In contrast, many existing supportive housing programs are intended to support chronically homeless people with the greatest needs.) A key component of the Lotus model is that nonprofit sponsors provide ongoing support to Lotus-sponsored residents. Residents who opt into this program must abide by strict rules, such as permitting monthly walkthroughs of their units and required participation in services provided by non-profit sponsors. Lotus is not simply providing housing. It is a “housing plus” program.

While Lotus-sponsored residents are responsible for their own rent payments, Lotus provides financial guarantees to landlords. This $800/year per unit is security against a loss of rent, damages, and a year of renters insurance. An upfront “participation payment” of approximately $1,000 (8.5-12% of annual rent) is also offered to landlords for taking a chance on this new Lotus model. After an initial trial with Lotus leases, two out of five landlords are no longer accepting this participation payment due to Lotus’s proven ability to identify and support excellent tenants.

Other unique components of the Lotus Campaign model include the following:

  • Landlords are required to give Lotus thirty days notice prior to filing an eviction so that Lotus can try to mediate with a resolution and prevent any realized eviction filings. Under this agreement, the Lotus Campaign offers to pay landlords’ court fees if an eviction is realized. Through now, there have been no evictions of Lotus-sponsored residents.
  • The goal is not to have a building with 100% Lotus-sponsored residents; diverse neighborhoods and buildings are important. The Lotus Campaign has up to 10% or, in one case, 20% of units in a building reserved for their residents, who would likely be homeless if not for Lotus.
  • Legal liability matters. Lotus does not ask that landlords waive criminal record checks. Thus far, only one potential resident has failed a criminal record check.

Landlords have found that the Lotus Campaign’s model is cheaper, faster, and better! One landlord entered the Landlord Participation Program with only one or two units rented to Lotus-sponsored residents, skeptical of its promise. Now, seeing the success that is built by collaboration between the Lotus Campaign, non-profit sponsors, and residents, they’re planning to expand their partnership from one to five properties! Lotus-sponsored residents have made for great tenants. As an additional benefit to landlords, the Lotus Campaign’s housing outreach, application, and move-in process is 1.5 weeks faster than the standard landlord-driven move-in process.

If you could wave a magic wand and change any one policy at any level of government to improve affordable housing in Charlotte, what would it be and why? / How is the Lotus Campaign creating solutions for problems that stem from government affordable housing policies?

The affordable housing market lacks a financing tool that is both catalytic and easy to implement. LIHTC catalyzes much of the affordable housing development in the US but, as discussed, new housing development only addresses one piece of the puzzle and is a costly solution for homelessness. The Lotus Campaign intends to address this identified gap in the industry and create new housing opportunities for people on the brink of homelessness by providing straightforward financing directly to landlords for units that already exist.

Another policy issue in the affordable housing industry is that municipalities are hyper-focused on long-term affordability. With so many people worried about where to sleep tonight, municipalities have been misguided by prioritizing perfectly formulated 30-year (or longer) housing affordability commitments between building owners and government funders. If the private market can secure 7-year financing terms for affordable housing, that should be welcomed. In contrast, Lotus understands the practicality of shorter-term successes for both residents and landlords. The Landlord Participation Program secures leases for tenants for one year at a time, which has proven to be a successful strategy for all parties involved. Any policy that speeds up somebody’s ability to be housed is positive. With the services provided by Lotus’ nonprofit sponsors, residents can gain stability they need during that one-year period to be able to transition into stable housing.

Lotus is also challenging industry norms around who support-oriented housing programs can help. Existing supportive housing models focus on providing housing and services for chronically homeless people with the greatest needs. Lotus recognizes that there are many people who need both housing and support, but are not served by the supportive housing models designed for people with more severe challenges. Lotus’ nonprofit partners provide relevant support to Lotus-sponsored residents, who are often left to fend for themselves while navigating economic, health, emotional stressors.

What makes you hopeful about housing in Charlotte? / What next steps does the Lotus Campaign looking forward to in Charlotte or beyond?

The Lotus Campaign offers an inexpensive way to keep people out of homelessness compared to costly homeless shelter systems or new construction. Nearly 300 people in Charlotte that might have otherwise been homeless have secured housing through their model. Landlords, non-profit partners, and -most of all- Lotus-sponsored residents have all benefited from life-changing successes through Lotus’ pilot in Charlotte. The Lotus Campaign plans to expand in Charlotte throughout 2021, serving an additional 400 people and engaging more non-profit sponsors. A pilot in another community is likely to begin this year, too. A necessary step for expanding this work is raising additional philanthropic money.

What are effective ways to include the people most impacted by affordable housing issues in government-level decision making? / What will it take to foster more creative solutions to homelessness like the Lotus Campaign model?

Often, the topic of housing affordability and homelessness does not include much discussion about solutions. Real problem-solving begins with dialogue. Through their own professional experience, founders of the Lotus Campaign knew that it was rare to invite developers to the table for problem-solving within the affordable housing industry. It’s also rare for developers, non-profits, government, and low-income people to interact in spaces that foster collaboration. Decision-makers must be educated about who homeless people truly are and what their needs are to be motivated to brainstorm and implement appropriate solutions.

Knowing this, an important and strategic part of the Lotus Campaign’s work is focused on education. Lotus is well-positioned to shift the dialogue toward innovative solutions due to their unique collaboration with the private, public, and non-profit sectors, and their deep understanding of their residents’ situations.