Resources for Learning How to Finance Affordable Housing - LIHTC Course

Thanks for sharing. It's great to know that something like this could be helpful to you.

I can relate to much of what you're feeling.

I also faced similar challenges when trying to get up to speed, and I felt that the existing content was more suited for people already working in the industry rather than those trying to enter it. The reference to 10-15 year old Novogradac YouTube videos reminds me of a manager I had earlier in my career who would print all his emails to read on paper—outdated and in need of some modernization.

Thanks for your response! I was able to supercharge my learning when I was looking to break into banking, so was a little disappointed to see I couldn't do the same with LIHTC.

Being on the AM side, what are some things you don't get enough exposure to that you would want to learn more about? 

What about DiscoveringCRE? I don't see much LIHTC covered on the podcast.

stivkbuilt

I lead in structuring two large LIHTC deals and mannn, hundreds of hours digging through resources and calling hmfa. There really needs to be better resources out there to guide the development process - specifically mixed-income projects. It's still not completely clear to me the exit strategies affordable developers take 10-15 years down the road of a development.

Usually resyndication.  Depends on the municipality and how they went about financing projects.  Older deals actually have an exit into deregulation, but housing officials are getting smarter about this as that first wave hits and now structure the sub debt so that it balloons at the end of the term, which precludes repayment (and thus deregulation) and forces a new owner into extending the regulatory regime in return for restructuring the debt.

I think it would be incredibly useful to break down in a concise matter how affordable developers complete the capital stack with tax credit equity, construction financing, equity bridge, local subsidies, deferred dev fees, etc. Also a simpler explanation of how these developers measure returns on these properties - in terms of developer fees or cash flow and sale proceeds. Given the dire need for affordable housing in this country, this would be a phenomenal resource to put together.

I'm happy to chat about this with you or anyone else, but part of the issue is that the affordable housing as an asset class is incredibly atomized, both at the state and municipal level.  Part of the reason it is a lucrative business to be in is because it's nearly impossible to put together a comprehensive primer like this: knowledge and experience are the barriers to entry, rather than capital.

To take one example you asked about, deferred developer fees.  We could talk for hours about the relative benefits of deferring more or less of your fee up front, about how to pay more of it down, about who is driving that level of deferral (housing agencies?  tax credit investor?  QAP?), about whether it's statutorily mandated to defer a certain percentage of them.  Even bring it down to the individual level - what if I have a huge loss from some other project, does it make sense to pay more fees (income) and invest dollars instead, knowing I can write off the tax hit?

None of which is to say that regular market rate MF is "easy," but there is so much complexity in affordable that it becomes difficult to condense it into something easy to read.  This is made a million times more true by the fact that you're dealing with a whole new set of stakeholders, in terms of housing officials and local electeds, who have their own priorities to impose on a project beyond what a lender or equity investor wants.  Sure, all you "need" to do is make sure all your units are at 60% of AMI to qualify for 4% LIHTCs... but if your issuing agency is going to demand lower affordability bands, then the fact that the "rule" is 100% @ 60% AMI isn't worth the paper it's written on

Appreciate the detailed feedback. Hundreds of hours sounds like an understatement. I agree that it can be a painful process to get up to speed.

I've noted your comments on the capital stack, exit strategies, and return metrics. Thanks 👍🏼

This is the problem with affordable housing and why I don't consider it a profession anymore and is doomed to move the needle in a meaningful way. The lack of standardization is a real issue. It is truly experiential and everyone does it differently depending on the locals initiative from year to year.  It's really holding back the ability for housing to be built in a meaningful way. 

I think you're confusing local zoning and politics with affordable housing.  New York City is one of the most anti-developer municipalities in the country, has one of the most byzantine and expensive approvals process, and has the highest cost of construction... and yet they manage to reach their volume cap allocation every year.  The complaints here are in regards to right development, not the ability to close on subsidized housing.

And the fact that it's so dependent on being experienced is exactly what it is a profession.  A business in which any idiot with a couple million dollars can come and do well for a time (before it all crashes down, see Tides Equities) isn't a career, it's a casino.  People will do well in affordable housing precisely because they make it their career; you can't just buy a Yr 15 re-syndication project and expect to magically profit the same way that plenty of people seem to think they can buy a luxury rental building and make a fortune when rents go up.

Thanks for your feedback. Hadn't heard of the NDC certification before.

Heavy demand sounds like some good idea validation. Thanks.

For my part, the most helpful would be detailed sources and uses. S&U to include debt, equity, bridge, tax equity, local subsidy, TIF financing, developers fee etc. Of particular interest would be how the developer fee is actually capitalized and structured in practice. 

I've your request to include content on the S&U, thanks. 

Yep, Novogradac seems to be the default for anyone looking to learn more.

What's your experience with the affordable industry? Are you on the development or financing side?