By Evan Sparks
In summertime, the boardwalk and beach are crowded in Ocean City, New Jersey, but it’s a different picture on a blustery, chilly day in March.
On this day, the beach is mostly deserted, but a crowd is gathering on 4th Street for a big event. Excavators and mobile cranes are visible from blocks away. They’re about to break ground on what Greg Matuson calls “most ambitious affordable housing project in the city’s history.”
Matuson is president and CEO of Sturdy Savings Bank, a mutual institution based in Cape May, New Jersey, and he grew up in Ocean City, where the bank has a presence as well.
Demand for second homes and investment properties has driven up housing prices substantially in Ocean City. The median home price in the city has reached $1.1 million, according to Zillow data. Meanwhile, many of the workers who keep the city running have been priced out and forced to commute long distances from the mainland. “To provide housing at a reasonable price for folks who can work and live in the community is super important,” says Matuson.
One of the few affordable housing options on the island was Pecks Beach Village, a 40-unit Ocean City Housing Authority complex. But the complex dates to the 1960s and had been badly damaged by Superstorm Sandy in 2012, scattering the families who lived there.
Ocean City was determined to revive Pecks Beach Village, but the $31 million project was a major undertaking. Federal and state recovery funds were available, but it took local banks stepping in to make the tax credit investment to help take the financing across the finish line.
Century Savings Bank, a mutual headquartered about 45 minutes away in Vineland, was intrigued by the opportunity—but because of the project’s scale, it needed to bring in another bank to help. Dave Hanrahan, Century’s president and CEO, called Matuson. Neither bank had much experience with LIHTCs. “It’s not a space that community banks are known for,” says Hanrahan. “But it’s so important to both of us that we help solve affordable housing issues in South Jersey, that we were determined to figure it out together.”
Together, the banks put together $11 million in low-income housing tax credit, or LIHTC, investment. Because the equity is going toward a low-income housing project, it provides credits against the bank’s income tax liability, in addition to delivering an acceptable return on the investment.
Hanrahan credits Stephen Modzelewski, leader of the Century Bank’s commercial loan underwriting team, with mastering the details. “You need somebody really smart and diligent who can manage an investment that’s complicated by nature,” he says.
The banks’ mutual ownership structure helped provide impetus for pursuing the LIHTC investment. “One of the risks that we take by doing a project like this is we have to look 10 years into the future at what our income tax liability can be,” explains Hanrahan. “And the future gets really fuzzy past a year or two. But mutuals truly have a long-term view of their organization, and therefore what they can do for the community.” For this reason, he adds, the banks weren’t afraid to take on a long-term commitment—in this case, a 15-year compliance period for this LIHTC investment. “We’re running a forever model at Century Savings Bank, and this sort of investment aligns very nicely with that.”
The homes are being built for the long haul too. Unlike the old Pecks Beach Village, which was built at ground level, the new homes are being built on elevated posts to manage flood risk. The 60 duplex-style units—50% more than were previously available—will blend in more seamlessly with the surrounding Ocean City streetscapes. “These are beautiful homes and they are built to last,” says Matuson.
Investing in Pecks Beach Village through LIHTCs “achieves all the things that are so important to us: serving our community, a project that’s in our backyard, affordable housing,” remarks Hanrahan. “It’s so, so good for the community.”
Hanrahan would love to see his fellow mutual and community bankers explore LIHTCs. “One of the things I love about being a community banker is every day you stick your nose in something and you figure out if it’s going to be the right thing for your bank or not,” he says. “If it’s something that can possibly work, you talk to other bankers who have done it. You don’t have to blaze a trail here.”
