Using HOME and HTF Funds within Opportunity Zones

Ribbon award icon

Ox Fibre (Frederick, Maryland): A HOME-OZ Success Story

Model image of apartments adapted from a historic warehouse

Affordable housing development efforts combining multiple sources of funding create challenges for grantees, developers, investors, Housing Finance Agencies, and other participants in the industry. For a successful housing development to be effectively structured in an OZ, it is important for the financial partners to understand the motivation and constraints of the other participants. One of the early examples of a successful development effort in an OZ that included HOME funds is the Ox Fibre apartments property in Frederick, Maryland.

The Ox Fibre apartments is an 83-unit adaptive reuse project that will transform a 19th century warehouse into affordable housing for low-income renters. Given the site’s location in an OZ census tract, the developer was able to tap into $830,000 of OZ equity capital to help finance the approximately $27 million historic property renovation. In addition to the OZ equity, the capital stack included a tax-exempt bond financed first mortgage loan from a private sector lender, equity investment available as a result of both historic tax credits and 4 percent LIHTCs available through the tax-exempt bond issuance, $2.5 million of HOME funds, and Frederick County debt.

The conversion of the Ox Fibre warehouse into a vibrant resource for the community has been a priority for years in the Frederick community. The developer of the property, EquityPlus, was a driving force in marshalling the varied financial resources necessary to facilitate the renovation of the property. The designation of the site in an OZ was key to securing the OZ equity capital that helped fill financial gaps and spur the development of this property. The project created a new source of affordable rental apartments for area residents and provided a viable next chapter for this historic structure.

The developer communicated that one of the lessons learned in combining equity made available to the project as the result of the LIHTCs with the equity generated because of the location of the project in an OZ is the importance of understanding the varied motivations of each of the respective equity investors. The motivation of a LIHTC equity investor derives from the tax benefits associated with future earnings, and the investment is dependent on projecting a profitable earning position during the initial 15-year period of project operations. In contrast, the OZ investor’s motivation is dependent on receiving financial benefits from deferring the payment of capital gains generated from a prior investment and generating additional returns as a result of an investment in an OZ property. It is possible that developers of future LIHTC properties located in OZs similarly will have to generate equity investments from investors that have diverse investment needs and motivations, and that such knowledge will be key to attracting capital investment in properties similar to the Ox Fibre apartments.

Ox Fibre Apartments

Units: 83 units
Income Mix: 100% low-income
Project Type: Adaptive Reuse

Capital Stack

Private Sector Debt: $10.5 million
Housing Credit Equity: $7.1 million
Historic Tax Credit Equity: $4.4 million
OZ Equity: $830,000
State and County Debt: $3.4 million
Deferred Developer Fee: $670,000
Total Development Cost: $27 million


Grantee (Public Partner): Frederick County, MD
Developer: EquityPlus

Initial “trail blazing” projects like the Ox Fibre project demonstrate the power of combining the resources available to ensure sufficient financing for a difficult project. As a result of an OZ designation with other capital sources available in the housing industry, this low-income housing development was realized. The developer worked with Frederick County officials to secure County resources and in turn successfully competed for State of Maryland HOME funds as part of the array of capital needed to complete the project. View the Ox Fibre case study for a more detailed description of this project.