is affordable too niche?
current undergrad student who has two internship experinces in the affordable housing world, one experience with a MF and the other with a MF subsidiary company.
looking long term, i’m worried that i’m pigeon holing myself to this industry only given its uniqueness.
was hoping you all could shine some light as to how i could market myself for the future and how i can leverage this experience to look elsewhere. thanks!
Do you want to do affordable or not?
If so, do more affordable. If not, don't.
Affordable is the most complicated asset class to master. Easier to go from affordable -> free market than free market -> affordable
I wouldn't worry about it. First off, affordable housing is vastly more complex than any other form of real estate development/acquisitions. Those skills will transfer. Second, and more importantly, you don't need to have your entire career figured out on Day 1. Get a job where you can. See what you like and don't like about it. Then adjust. Worrying about being pigeonholed out of your first ever job is ludicrous.
That being said... affordable housing is the best place to be.
Agree with Senior VP. I'm not an affordable housing developer, but it would seem to me that the only real difference between affordable and market rate is the bureaucracy, red tape, and LIHTC financing of affordable housing. Other than that, market rate and affordable are more or less the same. If you want to build market rate one day, most of the bureaucracy and red tape is gone and financing would just be using a capital advisory firm like JLL instead of some boutique LIHTC capital advisory firm.
However, one major difference between LIHTC and market rate development is risk assessment and management. LIHTC is essentially development for a fee. As long as you follow the rules and build within budget, you get paid. You don't really need to worry about lease up or sellout at your proforma projections, but this matters A LOT in market rate. I remember debating with a LIHTC developer on here a couple months ago and it was clear that the guy has never taken real risk because he essentially gets paid regardless of how the development performs because the development is subsidized by the government. He seemed to measure the success of his project based on how many units he could develop, which makes sense because as a LIHTC developer you are, to a degree, paid based on the size of your construction cost, so the larger the construction, the more money you make. However, as an analyst/associate you don't really need to worry about these things as you just listen to the guy above you.
But aren't they still on completion guarantees and if the budget blows they're on the hook? Also don't they have to manage it for the next 15 years until the credit recycle where there is almost no cash flow so if they blow over they're on the hook? I could be wrong, but not sure it's fully risk off...
Maybe, as I said I'm not a LIHTC developer. However, all the risks you've listed are risks that a market rate developer also has to take and much more. Also, I'm pretty sure LIHTC development fees are a percentage of the construction cost and the construction cost is subsidized by the government, LIHTC developers would be heavily incentivized to pad the shit out of the construction budget.
Regardless the point is that as an analyst/associate, OP should not have much of an issue moving from LIHTC development to market rate.
Yes to all this. There is still plenty of risk, as there always is in development. And there is occasionally cash flow to these properties, so it's not all that bad.
I guess a good way to think about it is that you de-risk the revenue side of things. You have a lot of certainty money that'll be coming in from Day 1. You still have to manage the expense side just the same as any other developer.
Have to give a different perspective that keeps it real. If you're a lily white male that went to any decent school or better yet school with prestige, market rate is the way. It's often a "good ole boys club." If you're are a woman and/or a minority I definitely go into affordable. The knowledge barrier and honestly outright difficulty to get projects developed will be better in the long run if you learn affordable. Market rate is a commodity. Anyone can learn it, especially if they have enough money to weather mistakes. If you're someone with family money or has family already doing development, I'd also say affordable. You get to hedge against downtimes. As mentioned above you can always pivot to market rate in a favorable market but it's good to have the affordable housing experience in your pocket to weather turbulent times. I also see world where more municipalities will require an affordable housing component to achieve true "mixed income" in the future. I also forgot to mention this "Big Beautiful Bill" has bipartisan agreement on affordable housing that will lower 4% deals to 25% Test, make the 12.5% increase in credits permanent from Covid times, and automatic 30% boost on all rural deals. This should be a boon to affordable deals and push deals forward that have been stalled. Lastly, if you go the affordable route you can act as consultant when you're not finding deals that pencil. Affordable side is so inefficient in so many ways exploit it even when you're not working on your own deals.
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