Could anyone familiar with the LIHTC space comment on the differences in dynamic of being a developer vs lender in this space?
Anything would be helpful in terms of comparison of interesting scope of work, pay progression, culture, etc.
I have been hearing conflicting things about affordable developers. For example, I heard that Related Affordable might not have the best culture.
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I’m familiar with Related Affordable. They’re very demanding of their lenders but still respectful. Not sure what comp is. But they definitely have to be in office 5 days a week if that sort of thing matters to you. Their deals are more so about acquiring Class C/D multi, rehabbing them by using tax credits, and knowing how to leverage subsidies offered by municipalities + using complex/creative financing structures. They also typically are able to get Section 8 contracts for their properties. Objectively, the formula works and it is pretty lucrative. They’re also great at property management. Personally, I find it boring because the deals I have seen with them only make sense because of their ability to secure Sec 8 contract. Without the Sec 8, a lot of their properties are not high-quality assets in terms of location, condition, and long-term potential.
On the lending side, a lot more players are entering the space because of the long-term fundamentals. Nonbank players like Berkada and W&D are powerhouses. There are also strong bank agency lenders like Wells Fargo and KeyBank. PGIM is pretty good too from the lifeco side.
If you do acquisitions at a shop like Related, you’ll learn a ton on A to Z on how to get deals done. In affordable housing, the barrier to entry is high because you need to know A LOT about esoteric topic such as bond caps, bond financing, tax compliance, regulatory agreements, etc. So if you learn the right info, you could start your own shop with very minimal capital (relatively speaking).
On the lending side, you’ll see a lot of volume and interesting structures. You can make comfortable money and it’s more easy going. It won’t teach you A to Z on how to go out on your own though.
Thanks a ton for the detailed response, super helpful.
It makes sense that they're demanding of lenders. Have you heard the culture to be generally good with that in mind? It seems like likely pretty buttoned up, but I've heard bad things about the culture at Related, but not specifically Related Affordable.
So it seems like you would learn more at a developer as you're doing the entire process, versus a lender who really is just caring about the financing/construction. I guess development has a higher pay ceiling, assuming you start your own shop. Curious what the pay comparison is if you were to just work at a good developer (not on your own) versus working at a good lender (like you said wells, key, citi, etc.)
I work in affordable lending
It’s a good gig I think - the deals are always pretty unique and come with their own challenges. I’ve worked with Related - they’re all nice. Maybe more serious than others?
You can definitely learn a ton doing lending for LIHTC, but you won’t have the same depth as a developer who has to be on the ground floor securing S8 contracts, working with the local gov, etc.
I haven’t heard anything positive about working for Related on this forum to be honest. There’s tons of small to large LIHTC developers so I don’t really see a reason to focus on them.
2 YOE at LIHTC Lender like $115k all in I’d say? Lot of growth, pay cap is lower but you won’t be working as much as a developer.
From what I have seen/heard, I don’t think any LIHTC developer pays well. There is not really a promote/carry component to LIHTC development since you typically make most of your money from the fees. The idea is to learn enough to start out on your own.
I have also heard Related has a cutthroat environment and it is not friendly but that was for the development team at Related, not the affordable.
I get that LIHTC developers make their money in developer fees and that carry doesn't apply as much, but isn't it a profitable business that would still need to pay about the same for talent? I don't get the sense that it makes significantly less money than market rate, just in different form?
I mean money is definitely made in LIHTC from fees but it’s not trickling down to the analyst/associate level the same way it would at say an acquisitions shop. I think that’s just a function of development as a whole though. Remember for development, you have 0 cash flow until tenants occupy the space and even then it’s not a substantial amount of cash until the property stabilizes. So basically you’re surviving off borrowed money + equity for 3-4 years (breaking ground to stabilization). LIHTC dev has no long-term upside but you can charge a hefty dev fee (think as much as 15% in some states). On market dev, your dev fee (no more than 5% from what I know) is not a whole lot but you can realize multiples of your equity in promote.
What are you comparing it to? Junior project managers (like... 1-2 years of experience) seem to be making 100-150k with a 10-20% bonus at LIHTC developers. I don't know what regular market rate firms pay, so maybe that is below market... but it seems competitive.
And while there is no traditional "promote" affordable developers proxy it by assigning proxy profits interest. Ends up being similar in effect
Same as anywhere else. Lenders see a lot more deal flow on any given day, but only deal with a tiny part of the process. Developers do far fewer deals, but are shepherding it along the land acquisition, entitlement, financing, construction and lease up process, and everything in between there. You'll engage more with local politics, with the horsetrading that comes with getting zoning and density approvals, with negotiating loan docs, etc.
What you find interesting is going to be personal; for myself, I think development is unquestionably more "interesting" if only because you see every facet of the deal instead of the least important part, which is the financing process. Lenders will see many different assets and financing structures, but only that one facet.
This is a little silly. Every developer, every lender, every single company in every industry, is going to have a differing work environment and corporate culture. Affordable housing is going to be a microcosm of that, with some shops paying really well, or having great hours, or neither. For what it's worth, Related Affordable the workhorse profit center of the entire firm, but gets little attention because it isn't doing the sexy megaprojects, so I wouldn't be surprised if people there have a bit of a chip on their shoulder - I do happen to know that the branches of the Related "tree" (e.g. shops founded by former Related folks) is pretty extensive, so there are a lot of smaller places to go or the ability to go on your own. Which, incidentally, is the huge benefit for being in affordable housing development - it's a knowledge barrier to entry, not capital, so if you spend 5-10 years getting experience, it's generally pretty simple to go out and do your own deals on a large scale, whereas trying to buy Class A office buildings requires a lot of people to give you a lot of money on faith.
All that being said, there definitely seems to be a real changing of the guard in the affordable housing space, certainly in NYC but also anecdotally in a lot of other markets as well. A lot of the folks who really figured this shit out in the late 80s and 90s are starting to retire and pass over the reins to the next generation, or wrapping up their firm entirely, or just slowing down the pace of new business they do. So the culture and focus for a lot of these shops may change drastically.
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