The opportunities and challenges of building affordable housing were the focus of an extraordinary lineup of commercial real estate, government and housing professionals leading interactive discussions at Auburn CityBuilders’ annual symposium, “The Future of Affordable Rental Housing and Real Estate Development—Innovation, Capital, and Partnerships.”

Attended by 100 real estate professionals from the region, the third annual symposium was held March 25 at Truist Park, home of the World Series Champion Atlanta Braves. Following the panel discussions and Q&A sessions, attendees enjoyed a unique networking opportunity at the stadium’s Back Porch venue while watching the Braves deliver a win over the visiting Philadelphia Phillies.

CityBuilders is an outreach initiative of the Auburn’s Master of Real Estate Development Program (MRED), an executive graduate degree offered jointly by the Harbert College of Business and the College of Architecture, Design and Construction. CityBuilders creates shared learning opportunities that benefit students, alumni and real estate professionals in the region and across the country. 

“See what others don’t. Build what others can’t.”

That’s the motto of Auburn’s MRED program, and it applies particularly well to affordable housing development, according to Greg Winchester, head of Industry & Alumni Relations, MRED. “Addressing the challenges of building much-needed affordable housing requires a certain combination of expertise, drive and innovation,” said Winchester. “The phenomenal panelists at this year’s symposium made that abundantly clear. More importantly, they offered valuable insight and specific, practical recommendations for overcoming the myriad roadblocks facing affordable housing developers, financiers and the communities they endeavor to serve.”

Panelists and attendees were welcomed by Winchester; Kim Kuerten, executive director, Graduate Executive Programs at Harbert College; Dr. Justin Benefield, MRED faculty director; and Damon Duncan, CEO, Clesia Ventures, LLC, and an MRED  instructor. Moderators of the three panel sessions included Duncan and Robert Chiles, president, Regions Affordable Housing, LLC.

Inequities Abound…

The first panel discussion, “Partnerships and Industry Leaders,” was headlined by Jose Alvarez, southeast regional administrator, U.S. Department of Housing and Urban Development, and included leaders of local housing authorities in Fort Wayne, IN, and Houston, TX.

Alvarez encouraged attendees to “think outside the box and get creative” when it comes to securing financing for affordable housing projects, citing funding programs such as Choice Neighborhoods and Opportunity Zone legislation which, while promising, are often either overlooked or may seem cumbersome to implement, despite their potential value. He and the other panelists also decried the continuing practice of real estate appraisers setting lower valuations for black-owned properties than those set for comparative white-owned properties. These inequities are often compounded by insurance redlining, which according to the panelists, “is very real, even today.”

Complicating these challenges, said the experts, is “NIMBY”— Not In My Back Yard— the persistent and loudly vocal opposition from homeowners and property managers to proposed affordable housing developments in their neighborhoods. Panelists also cited the lack of public transportation as another obstacle, noting similar opposition from local residents to any efforts to extend bus and rail systems to accommodate the transportation needs of affordable housing residents.

…Yet, Solutions Exist

The second panel, entitled “Capital and Credit Providers” and moderated by Chiles, focused on financing solutions, including the value of leveraging state tax credit programs— which, according to the experts on the panel, are not as well known or as well understood as they could be. As Chiles puts it, “everyone on this panel is engaged in the financing and development of affordable housing using low-income housing tax credits,” yet the need to better educate affordable housing developers and the communities in which they intend to build remains.

Rob Walton, managing director, Trimont Real Estate Advisors, which specializes in the asset management of complex performing and non-performing credit on behalf of commercial real estate lenders and investors, pointed out one misconception standing in the way of progress in affordable housing— the perceived default rate on affordable housing development loans. According to Walton, one program that has been in effect since 1986— the Qualified Allocation Plan (QAP), which delivers much-needed financing assistance to projects targeting the lowest ends of the income spectrum – has default rates that rival other real estate projects.

“What ultimately gives me comfort,” said Walton, “is that for the 35-plus years that QAP has been in operation, the default rate of QAP projects has been just a little north of zero.”

Another longstanding affordable housing development financing program cited by panelists is the Low-Income Housing Tax Credit (LIHTC) program, one of the most important resources for creating affordable housing in the U.S. today. Created by the Tax Reform Act of 1986, LIHTC gives state and local LIHTC-allocating agencies roughly $8 billion in annual budget authority to issue tax credits for the acquisition, rehabilitation or new construction of rental housing targeted to lower-income households.

Jenny Wilkerson, director, Affordable Housing for Walton Communities, sought to “rekindle the flame for this credit—often taken for granted—because it works out really well, like the federal credit,” said Wilkerson. “The way that the state credit works is that it's an incentive for private investment into low-income housing tax credit developments, but the difference is that they provide a dollar-for-dollar credit for investors against state income taxes. It's a very good way for individuals or entities with liabilities to invest in affordable housing.”

One other recent development that offers new opportunities for affordable housing has been Big Tech’s investments in this arena. As Walton points out, “one thing that's also worth noting right now is the entrance of three very big players into affordable housing—notable names that aren't financial institutions, specifically, Amazon, Google and Microsoft. They are investing sizeable amounts of capital in affordable housing in the communities surrounding their expanding operations and the amounts that they're investing are not just token amounts.”

Panelists agreed that the success of this relatively recent additional source of affordable housing will be something to watch going forward.

Innovation – Beyond Building

The third and final panel delved into the importance of thinking beyond the financing of affordable housing projects to embrace factors that might not be top of mind, but which can be critical components in getting projects approved, let alone completed.

One of these oft-overlooked factors is relocating the families that will ultimately live in these developments. According to Duncan, “a lot of our non-affordable housing practitioners probably don't understand the significance of relocating families, particularly in public housing and some other multi-family developments.”

Theresa Walton, president, The LouWalt Group, where she is engaged with housing authorities to manage large scale relocation activities related to affordable housing developments, cited one project she’s involved with where the cost of relocating residents displaced by the project as being indicative of the very significant “hidden costs” involved.

“In one deal I have going on now in the state of New York, I think I stacked 13 different funding sources in order to make this small, 85-unit, deal work,” said Walton, “and I have a $1.9 million relocation budget. Yes, $1.9 million for relocation. That is because all 85 of those households have a right to return.”

Summarizing a key take-away of the session and the symposium itself, Duncan concluded: “What I really want the audience to understand is that, at the end of the day, to improve communities, to improve the lives of families living in the communities we build, we have to involve the people aspect of it,” said Duncan. “A lot of times, the development community wants to run the performance analytics, they want to do the market studies. They want to manage construction costs, all that stuff. But if we focus on these critical concerns alone, we can run the risk of obscuring the why – why we are in the affordable housing space to begin with.”

“As one of our housing authority panelists today reminded us all,” said Duncan, ‘the number one job of housing authorities is to address and help remedy the inequities that exist in housing.’ Those of us in the development and financing side of the affordable housing industry would do well to remember that job as well.”

Support for the symposium was provided by industry sponsors American Community Builders, Apex One, Bear Group Real Estate, The Benoit Group, Coats-Rose, The Cotton Companies, Daniel Realty, Hope Bound Development Corp., Physicians Realty Trust, PorchLight Real Estate, The Providence Group, Regions, Summit Investors, TerraCap Management and Trimont Real Estate Advisors.