How many units do you need
to restrict?
The Heart Fund wires your full construction interest carry as a buy-down. You restrict a small number of units at 60% AMI. You repay every dollar at permanent financing close. The city's only cost is the time value of money.
Restricting 2 units at 60% AMI for 12 years unlocks a $2,240,000 interest-rate buy-down.
PV of interest carry saved (at your ~15% marginal cost of last dollar) minus PV of the 12-year rent-gap cost (at LGIP rate).
Full construction interest carry eliminated on your bank loan over the build period.
Only the time value of money at the LGIP rate. You repay every dollar at perm close.
| Metric | Without Buy-Down | With Buy-Down | Spokane Impact |
|---|
The difference between the city's low cost of capital and your marginal cost of the last dollar of construction capital (~15%) is what makes the program work powerfully for everyone. The Heart Fund wires your full interest carry as a buy-down. You repay 100% of principal at permanent financing close. The city's only real cost is the time value of that capital for ~24 months.
• Heart Fund wires the full interest carry as the buy-down. Developer repays 100% principal at permanent financing close (hard event, recorded subordinate deed of trust, no forgiveness).
• Interest carry uses average outstanding balance of 55% (standard S-curve draw schedule). You are not paying interest on 100% of the loan from day one.
• Number of restricted units = city's opportunity cost (time value of wired amount) ÷ NPV of 12-year 60% AMI rent gap.
• Developer net gain = PV of interest carry saved (at ~15% marginal cost of last dollar) minus PV of rent-gap cost (at LGIP rate).
• Compliance via existing 12-year MFTE. All figures illustrative and for planning purposes only.