Harvard's recently announced commitment to fund affordable housing with $20 million in loans and a $1 million grant could eventually create up to $400 million for the Boston area--an unprecedented contribution, according to local housing non-profits.

The $20 million loan will be administered by three intermediary non-profits. In their hands, the money will "revolve"--be loaned out, paid back and loaned out again--multiplying its effects up to 10 times.

In addition, Harvard's example will encourage other private institutions and the government to contribute to affordable housing, according to Mathew A. Thall, senior program director of Boston's Local Initiatives Support Corporation (LISC), a nonprofit organization which will dispense $10 million of the loan.

"We rarely get money available to us for such a long time at such a low rate," Thall said. "It just opens up tremendous opportunities."

The potential of this funding makes Harvard's initiative--announced Wednesday by University President Neil L. Rudenstine--a uniquely powerful one-time allocation, Thall said.

"As far as we know, there is no [other] private, nonprofit institution that has made this kind of commitment," he said.

Boston and Cambridge officials attending the announcement at the Kennedy School of Government praised Harvard--once seen as a brazen, self-serving neighbor--for taking an active role in community development.

"This announcement puts another building block in the foundation of a strong relationship between Harvard University and the city of Boston," said Boston Mayor Thomas M. Menino at the press conference.

"What Harvard University has done today is step up to the plate to help us and give us the tools to provide affordability," he added.

Both Menino and Cambridge Mayor Francis H. Duehay '55 said creating more affordable housing was their highest priority. They blamed escalating rents on a shortage of housing stock, the end of rent control in 1996 and the area's booming economy.

Prices of homes in Massachusetts have risen 233 percent since 1980, more than twice the national average, and Cambridge and Boston have lost over 20,000 units of affordable housing over the past five years, creating what Menino termed a "crisis in housing."

And while local politicians and activists said Harvard's contribution will not resolve this crisis, all agreed that it is a major step in the right direction.

Money Making Money

Combined with funds generated by "revolving," Harvard's commitment to providing a $20 million loan--over 20 years at 2 percent interest--will provide housing developers upward of 20 times that amount. Intermediaries will use University money to encourage additional giving from public and private institutions.

Three nonprofit institutions selected by Harvard--LISC, Boston Community Capital (BCC) and Cambridge Affordable Housing Trust (CAHT)--will dispense the loans to development groups building new units and renovating existing housing to increase affordability.

Thall predicted that the $10 million Harvard loaned LISC will attract $150 million more. Overall, Harvard's loan will allow LISC to create about 4,000 new units of affordable housing over 20 years, he said.

DeWitt C. Jones '79, the president of BCC, estimated the $4 million that his organization will receive would eventually draw $40 million more in contributions.

In addition, both Thall and Jones said their organizations typically revolve their loans every two to four years, allowing them to put Harvard's money to use multiple times.

"We want to make sure that the money gets out on the street and does double, triple and quadruple duty," Thall said.

CAHT, a nonprofit organization run by the city of Cambridge, will distribute the remaining $6 million of Harvard's loan.

By using these intermediary groups, Harvard will be able to take its personnel out of the day-to-day work of distributing the money.

"Harvard doesn't have to look at a specific non-profit and one building campaign," said Jones, who is a Crimson editor. "We're spreading the money around to a whole series of projects and recycling that money many times."

All three intermediaries said they hope to put the money to use as soon as possible, probably within the next few months.

Grassroots housing organizations said they have an immediate need for the money.

The Cambridge and Somerville Cooperative Apartment Project (CASCAP), a housing development group founded at Phillips Brooks House in 1973, said two of its projects face immediate funding shortfalls.

"We'd love it if CAHT would come in and fill those gaps [using the Harvard money]," said CASCAP Executive Director Michael Haran.

Problem Solved?

While Harvard's contribution is significant, it will not solve the housing shortage in the metropolitan area, housing advocates said.

"The housing problem in Cambridge and Boston is so massive that you'd have to be talking hundreds of millions over long periods of time to solve it," said Bill Cavellini, housing organizer for the Eviction Free Zone, a Cambridge group.

According to Massachusetts Representative Michael E. Capuano (D-Somerville), the area's housing shortage is a "bottomless pit" that has been exacerbated by the loss of federal and state subsidies over recent years.

Capuano said Harvard's action will help to compensate for the lack of government funding.

"It won't do everything, but it is an important step," he said. "The fact that Harvard stepped in to fill the void is a real show of leadership."

Setting an Example

Fund managers said Harvard's $21 million housing allocation could spur other universities and community institutions to take similar steps.

"This is the first time that a major civic institution has taken part of their financial assets to support community development," BCC's Jones said. "Other universities and institutions in Cambridge and across the country will look at this as a model."

Although no other area college has made such a large, single outlay, area colleges said they are already doing their part.

"I think MIT has a very strong track record in affordable housing," said Sarah E. Gallop, co-director of government and community relations at MIT.

Harvard Vice President of Government, Community and Public Affairs Paul S. Grogan said the University's location distinguishes its efforts from those of colleges in other parts of the country.

Because Cambridge and Boston are "in robust health," the University does not face the immediate problem of an unsafe or economically downtrodden location, according to Grogan.

"[Community development] tends to be in places where there's a lot of adjacent blight, and the institution realizes that this is jeopardizing its ability to attract students and faculty," Grogan said.

Grogan cited Yale University and the University of Pennsylvania (Penn) as schools faced with this kind of declining neighborhood.

According to Penn's vice president for government, community and public affairs, Carol R. Scheman, her university focuses its effort on its neighborhood of West Philadelphia by offering loans and grants to Penn affiliates moving into the area.

"We focus on our neighborhood where we can work and have the most impact," she said.

Harvard's initiative distributes funds to the entire Boston and Cambridge community, unrestricted by neighborhood.

"We're not pre-targeting places where Harvard has a real interest," Grogan said. "That distinguishes what we're doing sharply from what other universities are doing in their communities."