Should I Get Into Affordable/Workforce (LIHTC, Middle Income, ETC)?
I'm currently working at a class A institutionally backed market rate development firm, and I genuinely enjoy my day-to-day responsibilities. At the end of the day, we’re building apartment buildings, not launching rockets. However, I’ve always had a strong interest in affordable and middle-income housing. While it might not be as glamorous, I appreciate the idea of going home a few times a week knowing I’m making a positive impact on people's lives.
That said, I've heard that compensation in the affordable housing sector doesn’t come close to market rate, especially for W2 employees who are looking to climb the ladder and potentially earn profit sharing or development fees. I'm curious if anyone can shed light on the pay discrepancies between market rate and affordable housing roles.
Regardless of political views, there’s a growing recognition that affordable housing is crucial. So, why not embrace that challenge and excel in this field? I’m not planning to start my own firm just yet, but I’m open to the possibility down the line. For this purpose, let's say I work for an affordable developer and work my way up to a senior position over 20 years. How much can you realistically make?
If you find the right shop, those affordable guys make an unbelievable amount of money
If you really want to learn the affordable business I would go to a non profit or a very active housing authority that develops their own projects. People don't talk about it enough on WSO but private developers in this space are cutting people left and right. The threat of downward adjuster in tax credits and supply issues have private developer running with a skeleton staff until projects are half baked and the need is secured. Non profit developers and housing authorities will give you the space to learn and yes make mistakes, which is going to happen because the QAP for each state is always changing and up for interpretation. I always joke working in affordable housing feels like Hunger Games. The non profits and housing authorities will rely on you heavily for most task, so it will make you more well rounded. This may be the most important piece, affordable housing is extremely political. This is very important piece if you look to go out on your own. People will need to know you and work you've done in the community. Like market rate it's definitely about relationships but on another level.
What’s the pay like at a non profit developer? I see the salaries are public but they make way more in net income.
Doesn't even need to be their own projects. Working at a housing authority is worthwhile experience on it's own and will position you really, really well to jump to the private sector.
This does not reflect my experience at all. Quite the opposite, most affordable housing firms are and have been on a massive hiring spree despite the overall adverse conditions in the market for real estate as a whole. I'd be very curious to hear who you've seen cutting, if you care to DM me about it
This is sort of true... but no more so than any other time. Developers always run lean, and supply chain issues have eased up enough that it's easy to forward project. I don't doubt there were some people running tight timelines who got burned by downward adjustors... but that's why you give yourself room. Expecting the unexpected is part of the job, and anyone who thinks they can finish a job in 12 months if everything goes just right has no cause to complain where it takes 15.
Again, fair, but more of a generic point than one relevant to today's conditions.
One thing I notice is that when nonprofits work with agencies, the agency tends to take the lead in most cases in terms of problem solving and hand holding, whereas with for profit developers it is the reverse. That's a question of preference and not better/worse, however.
Amen. The number of times I've seen market rate developers try to break into affordable housing and just not understand that it's a totally different world, that the politics are different, the constituencies are different, the goals are different, the language is different... well, I'd have to use two hands to count.
It's lower but not meaningfully more so. There simply isn't a lot of room for W2 pay growth at development shops in general - at some point you get carry, because at some point it becomes extremely difficult to carry massive annual overhead in a business in which revenue is inherently lumpy.
If you want to work for someone else, and pay is the only consideration, market rate is going to be more lucrative (though probably less stable in that you are more likely to lose your role in a downturn). If you want to eventually do a deal on your own, it's far, FAR easier in affordable to make money doing that, and make a lot of money doing that. And you can do it quickly, because you don't need much equity at all.
I can think of multiple affordable developers who have started up within the last ten years and are under 40 who are running multi-billion dollar asset companies. I can think of several more who are a little older (under 50) who dipped a toe in the space after being on the market rate side and are now effectively only doing affordable. Once you understand the business a little bit (and for people like those on WSO, shed a lot of the prejudices around the industry) it suddenly starts to look really stupid to spend time on anything else. From a risk adjusted return standpoint, nothing comes close to affordable.
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