Type: Affordable housing fund
Date Founded: 2016
First Property Purchased: 2018
Units Acquired in First Five Years: 2,882
Value of Those Units: $660 million
In 2015, Austin, Texas’ mayor at the time, Steve Adler, brought together business leaders, real estate professionals, and housing experts to take on the crisis in affordable rental housing and the risks it posed to the city’s workforce stability and economic sustainability. With insights and research from a ULI Technical Advisory Panel and ULI’s Terwilliger Center for Housing, the Austin Housing Conservancy fund was born, offering a revolutionary approach to preserving workforce housing. Now known as the Texas Housing Conservancy, the fund became the nation’s first to combine a nonprofit investment manager, Affordable Central Texas, with an open-end private equity fund.
David Steinwedell, board chair and founder of the Texas Housing Conservancy, was involved from the beginning in his then-role as executive director of ULI Austin. “In partnership with the Terwilliger Center at ULI and NeighborWorks America, we conducted a marketplace scan of the housing available in Austin,” Steinwedell says. “We found that only a few private equity funds were providing moderate-income housing or workforce housing. If they were, they were using a closed-end fund, and with those, there is no guarantee that the housing will stay affordable in the future.” Most equity owners, he adds, have the obligation to maximize financial returns to their investors, and the only way to do that is to put the property back on the market—usually at market rates.
The Conservancy’s open-end structure, however, allows for continuous capital raising and property acquisition while offering investor liquidity without forcing property sales. The ownership structure focuses on long-term (75- to 99-year) affordability, which provides steady, low-risk returns. Rent increases are limited to the U.S. Department of Housing and Urban Development’s annual regional median family income adjustments.
“We decided to use the open-end fund concept and then create a nonprofit to serve as the investment manager overseeing the for-profit private equity fund,” Steinwedell says. “What that did was to ensure there was an alignment of interest: the nonprofit was always going to be mission driven, providing affordable housing with a massive amount of transparency. That provides a tremendous amount of comfort to investors that we’re actually doing what we say we’re doing.”
Since its inception, the Conservancy has preserved 2,882 units across 17 properties, serving over 4,000 residents with a portfolio valued at more than $660 million. Residents include nurses, teachers, musicians, and others with household incomes that are 80 percent or below the median family income. Beyond providing affordable housing, the Conservancy offers comprehensive resident support through its Texas Together Program, which provides financial literacy training, health care services, and educational opportunities.
“We just launched a one-on-one financial coaching series with a partner, Broadway Bank,” says Monica Medina, president and CEO of the Texas Housing Conservancy. “We have a cohort of 15 of our residents who will meet with a banker to go over financial goals and help with accountability.” If it is successful, Texas Housing Conservancy aims to expand the series to residents across the entire portfolio.
The Conservancy also offers farmers markets and food pantries at all of its properties, partners with hospitals to provide health screenings, and supports families through back-to-school supply drives and educational programming. Programmed events encourage residents to get to know their neighbors. “That really helps with resident retention,” Medina says.
The financial performance has validated the model’s viability: the fund has outperformed both the NCREIF and NAREIT Residential indexes on a five-year annualized basis, returning more than 7.2 percent annually since inception. Its investor base has grown to approximately 73 investors, including banks, foundations, family offices, institutional capital, and high-net-worth individuals. PNC Bank recently committed $10 million—the largest investment to date.
The Conservancy’s successes have shown that combining an open-end fund with a nonprofit manager can result in a self-sustaining financial model. Profits are shared equally between the nonprofit manager and investors. The Conservancy’s approach has earned numerous accolades, including the 2019 Community WINS Grant Program Outstanding Achievement award from the United States Conference of Mayors and the 2023 ULI Austin Impact Award for Next Big Idea.
Ultimately, the Conservancy aims to preserve 15,000 strategically located apartment homes within 10 years in central Texas. Because of strong investor interest and housing needs across the state, the Conservancy is expanding into other cities. “We closed on our first property in Dallas, Texas, in November of last year, just shy of 300 units,” Medina says. “Now we are actively underwriting a few opportunities in San Antonio.”
The Conservancy focuses on acquiring properties close to transit and grocery stores and implements energy efficiency measures when rehabilitating units. By purchasing existing affordable housing, the Conservancy seeks to reduce carbon emissions by preserving structures that might otherwise be demolished and replaced with market-rate units. “In a place like Austin, when you’re preserving affordable housing, it’s generally low-density, two-story wood-construction walk-up properties,” Steinwedell says. “We can build five-story wraps and double or triple the density of a lot of these properties, which means we can double or triple the affordability.”
The model’s success in Austin has attracted national attention. “We have been involved with people across the country who are looking at creating similar funds,” Steinwedell says. “Each fund has to be structured to meet the needs of the local market. It would be very difficult to say one size fits all, because each market has its own needs and its own drivers of affordability challenges, as well as different regulatory or financial levers available to use.”
Steinwedell has practical advice for anyone looking to replicate the Austin model: “If you’re thinking about starting to buy, don’t worry about getting every single ‘i’ dotted first, because markets are moving rapidly and challenges around affordability are just getting more magnified. Our biggest regret is that we waited about a year and a half to buy our first property. We missed a huge amount of opportunities. Use that capital to buy something and then set up some ownership structure that will allow you to move the property into a fund at some future point.”
