By Celia Hack/KMUW
Steve Feilmeier, the former chief financial officer of Koch Inc., opened the social impact fund Wichita Affordable Housing LLC in 2024.
When Greg Thompson’s home was being built, he stopped by the construction site so much that some began calling him “the superintendent.”
Often, Thompson peppered the construction crew with questions.
“I was always … asking the builder, ‘And what’s that there?’” Thompson said. “‘Yeah, that ain’t big enough for a room.’
“That’s actually – they filled that in. And that’s my front porch.”
His palpable excitement stemmed from years spent doing construction work – and the fact that, in his 60s, this would be Thompson’s first time buying a home. The nonprofit HOPE Community Development Corporation built and sold the home to Thompson for $105,000, about $75,000 less than it cost to build.
“It’s a different feeling when you can say it’s mine. I own it,” Thompson said.
Kevass Harding – who is also a reverend at Dellrose United Methodist Church – established HOPE in 2017. Thompson’s home, the nonprofit’s first house, didn’t get built and sold until 2023.
HOPE built two more in 2024. Harding says securing construction loans from banks as a small nonprofit is a major challenge to scaling up.
“Coming to them with your financials, asking for a million dollars to do a couple of houses, like, ‘Oh, my God, no,’” Harding said. “So, I got a lot of no’s.”
Yet, Harding is scaling up. He just put in a bid to buy 13 former public housing properties from the city of Wichita, which he plans to renovate and rent to people who receive government rental assistance.
His secret weapon? Wichita Affordable Housing LLC, a social impact fund that offers low-interest construction loans to developers providing housing for low- to moderate-income families.
Social impact fund?
Steve Feilmeier, the former chief financial officer of Koch Inc., created Wichita Affordable Housing last year. He did so after realizing Wichita needed thousands of affordable units yet didn’t have many developers building them at scale.
Feilmeier said that’s because developers typically net a larger profit by building more expensive homes.
“These are people that are still in the middle of their careers, builders or developers, and they want to make money like anybody else does and prepare for their own retirements,” Feilmeier said. “And so they work where they’re more adept. And that’s working on $500,000 and up homes.”
The average new home in Wichita sold for $380,000 in 2024.
Feilmeier began brainstorming a solution. He has connections with many high net-worth families in Wichita, but he worried they wouldn’t be enthused at the prospect of simply giving away large sums of money to affordable housing construction. Instead, he raised $10 million from individual donors and local banks for a fund that would offer a return on investment.
The fund works like this: The money Feilmeier raised is loaned to nonprofits like Harding’s HOPE at a 5% interest rate – lower than most banks offer.
“Without him, I’d probably be at some other bank trying to get 8%, 7%, you know,” Harding said. “But yet he gives it at 5%.”
The nonprofits pay the loans down using rental income or mortgage payments. The investors themselves get their money back, plus 5%.
Meanwhile, Feilmeier said his family office is covering the cost of administering the fund at about $200,000 a year. That philanthropy allows his interest rates to stay low, he said.
Local banks chip in
Feilmeier said local banks are interested in investing in Wichita Affordable Housing because the federal government encourages lending to low- to moderate-income neighborhoods. Regulators even evaluate banks to ensure they’re fairly providing loans.
“The problem is, when there’s nobody developing the houses, there’s no demand from the banks for their mortgages,” Feilmeier said. “And so the regulators are looking at these banks saying, ‘You’re not doing your job, so you have to do more.’”
Feilmeier said that encouraged local banks to invest in his social impact fund for affordable housing – even when they may not make as much money.
Aaron Bastian is the president and CEO of Fidelity Bank, which invested $1 million into the fund over a 20-year period. He described the move as a “hybrid” of investment and philanthropy.
“It is a loan, truly a loan, but it is at a below-market rate,” Bastian said. “And so it’s kind of a mix of lending and philanthropy because we’re giving up additional return. If I made that loan to one of our business customers, it would be at a higher rate.”
Public housing
Feilmeier’s efforts coincided with the city’s move to sell off its single-family public housing stock because many of the units need rehabilitation.
“It was fortuitous,” Feilmeier said. “… Here I retire at age 63 and after 75 years, the federal government finally decides to get out of the housing program.”
This winter, Habitat for Humanity purchased 16 former public housing units in northeast Wichita, which will be renovated and sold to low-income homeowners. Feilmeier’s fund loaned them low-interest dollars that helped them buy the homes.
Wichita made a second batch of homes available in January. Habitat bid on about 13, as did HOPE, Feilmeier said. Harding said he and Feilmeier are also working on a duplex.
“I went from one door to 15 doors in three years because of Steve’s help and his team,” Harding said. “… I praise God that I have such a team.”
The homes Harding is working on will likely start out as rentals to people who receive government rental assistance, called housing vouchers. Feilmeier was initially nervous about building rentals that would rely on vouchers to pay rent because the federal government gives out a very limited number.
“I quickly learned from the city, it’s like, ‘No, there’ll be no new vouchers.’ I’m like, ‘Well, don’t you think I’m taking a big risk if I go build new inventory?’” Feilmeier said. “And they’re like, ‘No, no, no, no, no. … Of the 3,000 vouchers that the city administers, they would say maybe a thousand of those people are in not great places.”
Still, Feilmeier wants to scale up, build more – maybe 200 to 300 homes if he can raise the money. But to do so, he needs people to lend to.
“I need more developers. I need more Kevass’ and Habitat’s,” Feilmeier said. “You just have to do it with people that want to do it nicely versus, ‘I want to maximize my margin as a slumlord.’”
This article was republished here with the permission of: KMUW