After more than five years of planning, the Pittsburgh Downtown Partnership is launching a $3.5 million loan program that it hopes will spur the creation of new, affordable apartments on the vacant upper floors of Downtown midrises.

The partnership formally announced its "Vacant Upper Floors" project at its annual meeting yesterday at the Doubletree Hotel & Suites, Uptown.

Partnership head Mike Edwards said the loan program was big enough to fund 10 projects, creating about 80 new housing units. The loans, to be between $350,000 and $500,000, will provide "gap financing" for building owners.

It's a departure from the partnership's usual activities -- marketing, advocacy and coordination. As of this year, the partnership will play an active role in financing construction -- getting its hands dirty, so to speak. Or "straight, hard-on economic development," as Mr. Edwards put it yesterday.

But given the hundreds of housing units already under construction Downtown and the hundreds more in the planning stages, is this really the partnership's role, especially considering the loans will be market-rate?

Couldn't the building owners interested in converting upper floors to residential units just go to a bank and get the same loan?

"We don't think it would happen without the money," Mr. Edwards said. Many of the buildings have been owned by the same family for years, and they are accustomed to operating an office on the second floor, and retail on the street level.

"They don't have the expertise to go to the bank and lay something out for them," he said. The Downtown rental occupancy rate seems to bear out that line of thinking -- despite the addition of hundreds of units over the last few years, Downtown rentals are running at roughly 95 percent capacity.

That means Downtown is, or certainly appears to be, underserved by housing. And yet there are hundred of buildings under eight stories -- 265 of them, to be exact -- with vacant upper floors that could be converted to rentals. Mr. Edwards expects that some of these building owners are simply unaware of the potential for housing, or unsure of how to go about it.

That's why the partnership has been walking some of the building owners through preliminary schematics to see which of them have the best potential for conversion. (A building that already has an elevator and a sprinkler system has more potential than one that doesn't, for example.)

The partnership hopes to identify the best of the best soon, and issue half of its available loans by the end of 2008. Units should be priced around $1.25 per square foot; an 800-square-foot pad might rent for $1,000 monthly.

The project money -- which will be used to leverage larger loans from banks that might otherwise view the conversions as "marginal projects" -- came from the Heinz Endowments, the Urban Redevelopment Authority and the McCune Foundation.

The availability of "gap" financing becomes especially important as the lending atmosphere becomes less free-wheeling and more risk-aware. In 2006 or 2007, a developer might have been able to secure a loan with less than 20 percent down. Today, some lenders want 30 percent or more.

Allegheny County Chief Executive Dan Onorato, keynote speaker at yesterday's annual meeting, said it was important to keep Downtown healthy -- and part of that prescription is more housing options.

"We can't let Downtown fall apart. If the core starts to crumble, it's just going to roll out to the county," he said.