This story is part of a collection of long-form essays by the Build Healthy Places Network designed to illustrate the deep connections between neighborhood and health.

Investing With Health in Mind

By Kathleen Costanza

When Maggie Super Church and her colleagues from two Boston housing groups started putting together the Healthy Neighborhoods Equity Fund (HNEF), they quickly learned two things: high-net-worth investors invest for either maximum financial return or they invest philanthropically.

If they want to invest philanthropically in health, they tend to direct money toward a local hospital or send it overseas for, say, a clean water project, rather than dedicating it to an underserved neighborhood.

The sponsors of HNEF want that to change. The fund, which is jointly managed by the Conservation Law Foundation and the Massachusetts Housing Investment Corporation, was designed to give investors a new option for doing social good while earning a return on their money — the elusive “double bottom line” investment.

By pooling money from several different sources, including foundations and high-net-worth individuals, corporations, and banks, HNEF makes equity investments in mixed-use development projects near transit (referred to as Transit-Oriented Development, or TOD). These investments are designed to bolster struggling neighborhoods and reduce the stark health disparities across Massachusetts. By improving the neighborhood and improving health, the fund is essentially bringing forward the long-term value of healthier neighborhoods — better physical health, higher real estate values, walkability, new jobs, and more.

“That’s a story that’s new for people,” said Maggie Super Church, who is serving as the health strategy and metrics consultant for the Conservation Law Foundation.

Indeed, it might not be business-as-usual for investors, but the timing for new investment products like HNEF is ripe. As the Affordable Care Act continues to take shape, it is creating new incentives for hospitals and health care providers to lower medical costs by preventing poor health. For funders in the community development field who share that goal, investment models like HNEF can help turn neglected neighborhoods into model healthy communities.

HNEF’s First Investment

The Chelsea Flats. Photo/The Traggorth Companies

The Conservation Law Foundation and Massachusetts Housing Investment Corporation (MHIC) originally created HNEF to supplement the limited funding for TOD (defined as higher-density housing and retail clustered around a transit hub). They soon widened their approach to consider the community, environmental, and health impacts of the projects. As part of the due diligence process, HNEF considers only those neighborhoods that have historically seen little investment but that show early signs of development, like business expansion, new housing, transit, and infrastructure. Doing so increases the odds of payback for investors but also gets ahead of gentrification by investing in mixed-income housing and commercial space for local businesses — both important for helping to prevent displacement.

The fund draws from three “levels” of investors, in a structure referred to as blended capital. Class C investments, derived from public grant funds from the Commonwealth of Massachusetts and MHIC, require no financial return. Class B investments, from philanthropic foundations, are comfortable with below-market returns. Finally, Class A investments from private investors like high net-worth individuals, banks, or universities project an 8 percent return on their investments, bolstered in part by the Class B and C capital, which helps balance the risk. More traditional private equity funds can provide returns of 20 percent for investors, but with higher returns come more risk. HNEF’s blended capital reduces the risk for investors — an acceptable trade-off for a smaller return.

The profit is earned in two ways. As an equity fund, HNEF owns a portion of the developments it invests in (an apartment building, for example). It receives income from rents and after an agreed upon number of years, the fund sells its share of ownership to either the owner of the building or a new investor. By then, the building will hopefully have appreciated in value because the surrounding neighborhood has improved.

Most funds that support community development do not work like this. It’s much more common for a fund to loan money to a project and expect the loan to be paid back over time with interest. Private equity is not typically part of the transaction.

As of October 2015, HNEF has raised nearly one-half of its $30 million funding goal, and has approved its first three projects for investment,. With each investment that is committed, says Super Church, other Class A investors are more likely to become interested.

A Focus on Health

The Boston region is home to some of the country’s most prestigious medical institutions, including Harvard Medical School and Massachusetts General Hospital. Massachusetts has more doctors per resident than any other state, and spends the most on health care per resident. Yet only a few miles or transit stops mean an enormous difference in life expectancy. In the mid-2000s, life expectancy varied as much as 33 years between two census tracts in Boston only about two miles apart, according to data from Virginia Commonwealth University.

When developing HNEF, it was clear to the fund managers that location matters to people’s health. But they wanted to know what drives a neighborhood toward better health as a whole. They asked the Massachusetts Department of Public Health to conduct a “health impact assessment,” or HIA. Like an environmental impact assessment, an HIA is a means of assessing the potential health impacts of projects.

HNEF’s scorecard for evaluating future investments.

With the recommendations from HIA in hand, the fund created a “scorecard” to evaluate the need and opportunity for healthy development in the neighborhood. The scorecard measures elements such as access to transit, healthy food options, green space, the effects of displacement, and other “social determinants” known to affect well-being, including economic opportunity and housing affordability and quality. A project must earn a minimum score of 50 to be considered for investment.

Chelsea Flats, which were already underway at the time the scorecard was created, received a score of 73 out of 100, qualifying the project as “high impact.” About 20 miles from downtown Boston, the City of Chelsea was once an industrial center for the region. Today, the city has the highest percentage of immigrants in the state, 38 percent, and 23 percent of residents live below the poverty level (more than twice the rate for Massachusetts as a whole).

Because Chelsea Flats scored highly on aspects such as community safety and transit-supportive development, it was the right fit for the fund’s first investment. Plus, the city had recently completed $3 million in infrastructure improvements in the area. All were conditions that HNEF typically considered before investing.

Photo/Deborah Addis

Today, 26 of the 96 units are priced for, and limited to, households earning from 30 to 80 percent the area’s median income. Super Church said the flats have been “performing beautifully” and exceeding financial expectations.

“This is a ‘proof of concept’ fund,’” Super Church said. “For our private investors, it shows you can make these kinds of investments and get a solid financial return, but also see the impact you’re having on health.”

In fact, the fund’s managers took stakeholders from the Robert Wood Johnson Foundation and the Kresge Foundation to Chelsea, where they saw the ground-level impact of the new buildings, streetscape improvements and green space.

“We’ve been saying we need to bring every prospective investor to these neighborhoods,” said Super Church. “It’s almost hard to explain to people how profound that kind of change is, and what it feels like, unless you’re standing right there.”

The Brockton Neighborhood Health Center and Vicente’s Tropical Supermarket. Photo/LISC

Connecting Health and Housing

Vicente’s Tropical Grocery. Photo/LISC

Manuel Vicente founded his first store 21 years ago, and today his son, Jason Barbosa, runs two locations with his three brothers. When Barbosa was looking for the second location, he said he felt an “obligation” to invest in the city and chose a spot near the entrance of Brockton’s downtown area, on a plot that had been vacant for nearly 30 years.

Next to the supermarket is the new Brockton Neighborhood Health Center, which was developed in partnership with the grocery store. At the health center, residents receive medical care and can attend cooking and nutrition classes that use Caribbean and African ingredients from customers’ home cuisines.

Financing the expansion of the store and health center together was not easy. But like Chelsea Flats, it too received a unique form of investment, including backing from a new fund called the Healthy Futures Fund, or HFF.

Senator Elizabeth Warren and owner Jason Barbosa (center) at the opening of Vicente’s last June. Photo/LISC

HFF is a $200 million partnership between the Local Initiatives Support Corporation (LISC), a large, national community development financial institution, or CDFI, the Kresge Foundation, and Morgan Stanley. Formed in 2012, the fund aims to break the link between poverty and poor health by bringing together nontraditional partners who together can bring opportunities for better health to low-income neighborhoods.

Of that $100 million dollars, $50 million is for affordable housing that co-locates with health care services, with Low Income Housing Tax Credits providing the funding. The other $50 million funds community health centers that link up with affordable housing or other services and is a combination of New Markets Tax Credit loans and equity and grants.

Last November, the fund’s partners announced they are putting together another $100 million in funding for a second iteration of the fund — Healthy Futures Fund 2.0. Like the first fund, it will include $50 million in Low Income Housing Tax Credits. But the other $50 million in New Market Tax Credits will be directed to community health centers that co-locate with wider variety of services that could include education, job training, or nutrition.

The fund’s first 10 investments now span eight states and include a renovated department store in Michigan that was turned into affordable housing with onsite health services, and a health center in North Carolina whose new facility offers workforce development and literacy classes. HFF recently announced a $34 million investment in the $90 million Conway Center in Washington, DC, which will provide more than 200 affordable apartments, as well as health services, job training services, offices, shops, and green space all adjacent to a subway stop.

The key to these projects is thinking creatively using the tools at hand.

The key to those projects, say the organizing parties, is thinking creatively using the tools at hand. That was certainly the case with Vicente’s. In Brockton, approximately 30 percent of children under age 18 live in poverty (nationally 22 percent of children live in poverty). Brockton is a federally designated food desert, meaning its residents lack nearby access to healthy food, and its rates of diabetes and heart disease are well above the state average.

So when the health center approached Vicente’s and they decided to partner, it piqued the interest of a number of investors, including HFF. HFF provided $8 million in federal New Market Tax Credits and associated financing for the health center, which houses the cooking classes within clear view of patients in the waiting room and Vicente’s customers passing by. Separately, LISC invested $3.6 million to open Vicente’s, alongside the Massachusetts Housing Investment Corporation, Boston Community Loan Fund, The Reinvestment Fund, and JPMorgan Chase.

Separately, LISC invested $3.6 million in loans to open Vicente’s, with an additional $5.6 million in loan support from the Massachusetts Housing Investment Corporation, JPMorgan Chase, and The Reinvestment Fund.

The partnership offers much more than the convenience of co-location. Every week, the health center and Vicente’s staff meet to discuss how they can encourage people to eat healthier. One option: a frequent shopper rewards program will let shoppers earn points for healthy purchases.

A nutrition class at the Brockton Community Health Center. Photo/LISC

“We’re both serving the same people,” Barbosa said. “We saw there was an opportunity for us to work together and make a difference in the lives of our community.”

Emily Chen, fund manager at LISC, said the biggest challenge for HFF is to promote the benefits of co-locating health centers with other small businesses or housing providers, all with the aim of improving access to services and community health. Historically, Chen said, the health centers are more used to co-locating with other clinical or health services like dental or behavioral health.

“These [other opportunities] may not be health care,” she tells them, “but they’ll help your patients, and it could help create jobs.”

Photo/Sam Dolgin-Gardner for LISC

For Barbosa, the new supermarket and health center have transformed a corner in Brockton and are already making a difference in residents’ quality of life.

“Now, when you’re driving into downtown Brockton,” said Barbosa, “you see those bright lights, a new supermarket, and new health center. It makes you feel good about where you’re living.”

And for investors, there is a stronger incentive than ever to put their money where it matters.

This article is part of Crosswalk, a gathering place for stories that illustrate the deep connection between health and place, curated by the Build Healthy Places Network.

Sign up for the Network’s monthly newsletter, the Pulse, here.

Crosswalk Magazine

A gathering place for stories about the connection between health and place. Produced by the Build Healthy Places Network at

Build Healthy Places

Written by

By joining forces, community development and health professionals can have a more powerful impact.

Crosswalk Magazine

A gathering place for stories about the connection between health and place. Produced by the Build Healthy Places Network at