Nashville's next big public project could be an affordable housing bond

State of play: The $7 million affordable housing loan fund proposed by O'Connell is minuscule in the context of a $3.8 billion budget.

• But O'Connell's top finance aide says it's a baby step toward a more ambitious approach that could take shape in the years ahead.

How it works: Affordable housing developers walk a financing tightrope to get their projects off the ground.

• They often have to cobble together several revenue streams to build an affordable housing development instead of market-rate housing.
• The new tool would be a subordinate debt loan program, administered by the Metro Development and Housing Agency. It's the first phase of a possible affordable housing bond, which would leverage millions more taxpayer dollars for loans, which are paid back over time.

Threat level: The city's Affordable Housing Strategy calls for 20,000 affordable units over the next 10 years, or 2,000 per year, to address the housing crisis.

What she's saying: "This is one of the tools we are missing," Metro finance director Jenneen Reed tells Axios. "The reason it's at the $7 million level is we want to test the waters ... make sure it's the right tool for Nashville before we go out and issue larger bonds."

Zoom out: O'Connell separately proposed allocating $22 million this year to the Barnes Fund to provide competitive grants to affordable housing projects.

Yes, but: Advocates are critical of the O'Connell administration for being slow to take this on.

• They say Metro has the strong credit rating and ability to use its bonding capacity — taxpayer-backed debt used to pay for public projects — to greatly increase Nashville's affordable housing stock.

Between the lines: Former city official turned affordable housing executive Matt Wiltshire, who ran for mayor in 2023, has been pushing for a bond program like that behind the scenes.

• "Metro pays for things that last more than a year or two with bonds," Wiltshire argues. "Peer cities, when faced with the reality of the affordable housing crisis, have chosen to meet the moment with bonds."
• "We've had study after study of this issue in Nashville over the last decade. Now is the time for action."

The other side: Reed says Metro needed to start small before expanding the program.

• "This is the first step in the evolution," she says. "We are looking at an overall financing plan for affordable housing that the city would support. There's a lot of push on this."
• "I've been asking a lot of folks, 'Give me time and y'all be patient.'"

The intrigue: One reason the city hasn't created an affordable housing bond yet is the Music City Center, according to Reed.

• Metro served as the backstop for the convention hall's debt in 2010. That meant bond rating agencies counted the $623 million convention hall on Metro's balance sheet, even though the project had its own tourism-related taxes and fees to pay the debt.
• The city is pursuing a refinancing of the MCC debt, which removes the obligation from Metro's books. Reed says that would then allow Metro to serve as a backstop for affordable housing bonds.

The bottom line: The initial $7 million initiative could foreshadow the next large-scale Metro project.

• "We're going to get there. I promise," Reed says. "We have to do it in a very systematic approach."