As someone trying to transition from a state housing finance agency to the development side of the business, thanks for starting this thread. If you don't mind saying, which region of the country are you in?

 
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pudding

Ozymandia can you discuss why fee structures differ across the country? Does each state have a different structure under LIHTC for development fees? Could you also discuss profitability of these deals? I've heard dev fees could be upwards of 10%. Is this true?

I've been told recently that my posts are too long, so apologies*!

Fee structures are set at the state level.  For example, in NYC, it's 10% of acquisition costs and 15% of hard costs (well, qualified costs, but lets just equate them for the moment).  In a high cost of land, labor, and materials municipality like New York, that means fees can be enormous.  In NJ, it was 4% on acquisition and 15% on construction (though in certain circumstances you can exceed that).  CT has a weird sliding scale based on TDC which I do not remember off the top of my head, but the upper level tops out at like 3%, I think.  Those are the only places where I've read the QAP within the last handful of years.  All of this is subject to your ability to actually pay that fee - federal regulations dictate that all developer fee must be paid back by Year 15, so if you are so overleveraged that you don't have the cash flow to pay back the fee, it'll get scaled down.

To address what @BigMoneyPlays said, the expectation is that large portions of the fee will be deferred.  However, most LIHTC developers treat this as implied equity, so obviously it's cheaper to fund that from deferred fee than actual equity dollars.

*Obviously that is sarcasm.  Anyone complaining about word count in a post isn't actually interested in learning anything.

 

Anyone have a guess on how much a developer with 10-15 years of experience might make at an affordable NYC shop?

I would think you'd clear 500k pretty easily with that kind of experience.  Depending on where you work, there's a good chance you'll get some carry as well

Knowing scope of work is very different between developer vs lender, does anyone have any arguments for one might be "better" than the other? Owning your own shop being the top "reason" 

Entrepreneurship is definitely the best reason to be on the developer side.  But they're different businesses.  If you find lending interesting and aren't much concerned with the larger process of putting an affordable deal together, that is a good fit and better than development.  If you want to touch a lot of parts of the process, you might prefer development.  You'll probably make a higher cash comp at a bank, but your total upside might be higher with a developer.  They're just very different lines of work

 
FunnyUsername

Just curious, is there any room for a merchant builder in LIHTC deals? or do you have to hold & manage the property for it to work?

I can't imagine there are nonprofits who would buy a deal at cost, but just wondering

You basically are a merchant builder.  Once you sweep NOI to pay deferred developer fees, there is almost no cash flow and little residual value in the assets.  You've basically sold it to your tax credit investor, if you want to think about it in those terms, in return for a very healthy fee.  And since you're on all the recapture guarantees... yeah, you have to operate

 

I am interested in the LIHTC space, specifically development, and am thinking about taking a associate role at a developer. If in a few years I realize dealing with the governments BS and all the other nuances of affordable development are not for me, how hard would it be to move jobs to a market rate multi family developer?

 

Could someone shed some light on non-profit developers? Are there significant differences between them and say L+M, Related, etc? I would think it would be strange if they paid less, given their fees should be the same? Organizations like Enterprise Community Partners and the NHP Foundation? If they do pay less, is there rationale? 

 

Could someone shed some light on non-profit developers? Are there significant differences between them and say L+M, Related, etc? I would think it would be strange if they paid less, given their fees should be the same? Organizations like Enterprise Community Partners and the NHP Foundation? If they do pay less, is there rationale? 

As with everything, it depends.  I think you have to draw a distinction between the "professional" nonprofits that are, at heart, affordable housing developers (NHP, Phipps, etc) and the ones which are effectively community organizations that dip a toe into housing as part of their mission.  As you might suspect, the former are far closer to the big for-profit shops, and generally speaking do a great job.  The latter... not so much.  Especially on the operations side, where collections tend to lag, work orders tend to pile up, and there isn't much impetus to fix it, either internally (because evicting deadbeat tenants is against the mission statement) or externally (because public officials are far more hesitant to go after nonprofits than their for-profit counterparts).

I cannot speak to pay in general, but I would imagine it's similar at junior levels and has a hard cap, whereas for-profit shops offer a higher level of advancement and the possibility of carry.

 

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