Q&A: From funding adaptive reuse to giving communities a seat at the planning table, BlueHub’s Karen Kelleher on the tools and techniques that are moving the needle.
By Christopher Williams
Karen Kelleher prides herself on being a problem solver. As the new president of the BlueHub Loan Fund, the self-described “recovering lawyer” is counting on every ounce of that skill — and more — to tackle one of the main tasks on her agenda: devising solutions to expand affordable housing, mainly in low-income communities.
In July, BlueHub Capital, a Boston-based community development financing organization, tapped Kelleher, a graduate of Boston College and Georgetown University Law Center, to grow the fund’s development loan portfolio across the firm’s 23-state footprint. BlueHub Loan Fund, a CDFI, boasts a portfolio of $670 million in community development loans and lends more than $100 million a year.
Kelleher, who lives in Boston, has spent much of her 30-year career fighting economic inequality — a social ill she recognized at a very young age while growing up in a middle-class Connecticut neighborhood. Before joining BlueHub, Keller spent five years at LISC Boston as deputy director, where she doubled the CDFI’s revenue and programs to increase housing affordability. She also served on the mayor of Boston’s housing advisory committee.
Next City talked with Kelleher about how CDFIs, government, developers and other partners must work together to address the housing crisis.
Some think CDFIs might not be getting enough credit for their role in tackling the housing crisis. But are they doing enough to put a real dent in that seemingly intractable problem, with the resources they have?
I see CDFIs doing a lot. I see CDFIs with innovative projects and pilots.
BlueHub, for example, began financing and developing solar panels on affordable housing and community facilities in 2007. And now we’re making electric vehicles affordable to low-income people through a vehicle-to-grid program. Bidirectional chargers at affordable housing buildings allow the building to rely on the car batteries for power during power surges, making the electric grid more resilient and paying the building for the power, thus reducing the cost of installing the charger.
I see CDFIs advocating for resources and regulatory change. I see CDFIs bringing a wider group of actors into the conversation about housing, economic opportunity, social determinants of health and racial wealth gaps. To be honest, that might be our biggest impact: bringing government, banks, corporations and large institutions to the table as investors, partners, allies and advocates.
… [It’s important] to really be engaged at the community level so that we're giving community members, low-income people a voice at all the tables we're at. It’s [also important] to build relationships with people who have power and money. Being a trusted ally on both sides of that equation is part of what CDFIs do — leveraging those relationships to build solutions that actually move the dial.
Are developers playing much of a role in expanding affordable housing?
Affordable housing developers drive the creation of affordable housing to the extent that public leaders make subsidies available. Increasingly, market-rate housing developers are contributing because they are required to make 10% to 25% of their developments affordable by inclusionary zoning laws.
There’s more attention to innovation in the construction industry to reduce the cost of building. That is overdue. I don’t think there’s been a sea change, but you have modular construction happening now and some really interesting things like 3-D printing of housing.
Many CDFIs, including BlueHub, are investing in reuse projects. What makes those promising?
I love these projects because there's been a lot of history of mill buildings being redeveloped as housing. But we're really starting to see a different type of adaptive reuse. We're financing a conversion of a shopping mall in Memphis to a public charter school. We've seen a bunch of conversions of motels to permanent housing. We are talking to developers in other communities about office-to-residential conversions. There’s an obvious synergy between post-pandemic office vacancies and the need to provide much more housing supply, but office buildings are often very expensive and impractical to convert to housing. In Boston, Mayor Michelle Wu is proposing a tax abatement to make some conversions more financially feasible.
Are there any regulations coming down the pike to help assuage the housing shortage in the region?
One of the key tools is inclusionary zoning. That’s a very powerful tool that they use in Boston to get (affordable) units in market-rate projects. Sometimes the developer has a right to pay into a fund rather than build the units. Those funds are used to build affordable housing elsewhere. Boston’s had inclusionary zoning for years, but we’re seeing more communities in Massachusetts and other states embrace inclusionary zoning. I’d be remiss not to mention a law signed by (former Massachusetts Gov. Charlie Baker) and being implemented by Gov. Maura Healey that requires communities served by transit to rezone to include some areas where multifamily housing can be permitted as a right. It applies to 177 communities, and it is hoped that it will unlock substantial additional housing construction.
Also, permitting accessory dwelling units is opening up. I don't see it at scale yet anywhere, but it's a conversation that's happened in some communities in Massachusetts. There's a statewide proposal from (Gov. Healey) to make it legal.
Tenant protections are also proposed in many places, including Massachusetts, where pending legislative proposals include a right to counsel in eviction cases and a tenant right to purchase their building — similar to the one afforded to tenants in Washington, D.C.
This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is developed in partnership with Next City.