February 2021 — Multifamily Properties Quarterly — Page 35 Affordable Housing T he Great Depression led to the passage of the National Housing Act in 1934.That act included the mortgage insur- ance programs of the Federal Housing Administration as a stimu- lus to construction and sale of new homes with long-term, fixed-rate financing that offered a low down payment to cash-strapped Americans. The void that remained for renters without the capacity to buy a home resulted in the passage of the U.S. Housing Act of 1937, which created the United States Housing Author- ity (interestingly enough within the Department of the Interior) and the subsidy programs for local public housing authorities.The Denver Housing Authority was formed in 1938 and was one of the first to receive subsidy funds.Those funds were used to build the Lincoln Park Homes (designed by famed Denver architect Temple Hoyne Buell) at the foot of the Colfax viaduct. Until the early 1970s, most afford- able housing in America was devel- oped by housing authorities, with often disastrous results (see Cabrini Green in Chicago and Pruitt-Igoe in St. Louis). At about the same time that the 33 buildings of the Pruitt-Igoe complex were imploded, Congress amended Section 8 of the Housing Act of 1937 to create a system for production of housing by the private sector with rental subsidies provided by the federal government. The initial program featured 40-year subsidy contracts for units in rental projects financed with loans insured under the 40-year FHAmortgage programs with equity from investors taking advantage of the accelerated depreciation avail- able at that time. It was a great pro- gram for a while – until the failure of faulty actuarial projections and the realities of the mar- ketplace kicked in. Operating expenses increased at a rate faster than anticipated, gov- ernment funding of the rental sub- sidies lagged behind those increases, FHA-insured loans began going into default and the annual federal bud- get process couldn’t predict what the impact of the subsidies would be.That imperfect storm forced the government to shorten the terms of the subsidy contracts and create new programs to prop up the old one. Those problems, along with other market dynamics, led to the creation and passage of theTax ReformAct of 1986 which ushered in the low- income housing tax credit and private activity bond programs.With legis- latively mandated limits, structures and stricter controls, those housing programs are administered by the Treasury Department. Because of the built-in limits, they have a totally predictable budgetary impact and have created a system of true public- private partnerships that are the primary drivers of affordable housing production today. Administered by the Colorado Housing and Finance Authority, the LIHTC and PAB programs in Colorado are among the most equitable and transparent in the country.That, the growth and stability of the economy, the quality of life and the political will that recognizes the need, have drawn profit-motivated developers from around the country here – also creat- ing a highly competitive environment. This issue’s spotlight will shine light on the for-profit private-sector devel- opers of affordable housing who are now playing a prominent role in the sector that was once the exclusive domain of public housing authorities (who are now becoming more entre- preneurial – but that’s a story for a future issue. In this issue, you will hear the stories of private-sector developers who have been successful in doing commercial development and have added affordable housing to their already considerable portfolios, as well as stories from some who began doing affordable development and have moved into market-rate proper- ties and some who focus exclusively on creating affordable housing.They explain why they are involved in that space and answer the question of is it possible to do well while doing good. They share what they have taken from one area to another – real estate is real estate and numbers are num- bers, right? As well as why they keep at it, and what they predict is next for affordable housing with a new administration.You will hear from local, national and regional develop- ers and get their perspectives, which, while different and unique, share many commonalities. Read on. It will be remarkably inter- esting. I promise. s From the desk of Rodger Hara: A review of private sector’s impact on affordable housing Rodger Hara Principal, Community Builder Realty Services, rodger. 36 36 37 37 Contents Master plan developers’ crucial role in affordability Kenneth Ho Work worth the rewards: Affordable development Carl Koelbel Tackling considerable but worthwhile challenges George Thorn Navigating 4 issues private - sector developers face Charlie Woolley Workforce & affordable proje cts offer many rewards Kimball Crangle Creating homes for people, regardless of income Ryan Zent An accidental journey into affordable development Arthur McDermott Beauty of LIHTC is in its public-private synergy Patrick Stoffregen and Ryan Rodgers 38 38 39 39 Adam has extensive experience in affordable housing and finance, he previously was the Lending Manager at the Mercy Housing Commu- nity Capital division of Mercy Housing (one of the nation’s largest affordable housing organizations.) Mr. Kopp has his Master of Science in Real Estate and Construction Management from the Daniels College of Business, University of Denver. Mr. Kopp will be joining the team of Michael Thomas, a Managing Director in the Denver office, and (2018-2019) Co-Chair of the Housing Colorado Annual Conference. Gershman Investment Corp. Denver is pleased to welcome two new team members with affordable housing expertise: Adam Kopp + Amanda Musgrave Amanda has over twelve years of experience in af- fordable housing finance and contract and program compliance in affordable housing. Prior to joining GIC she worked at Signet Partners, a real estate and investment management firm, specializing in underwriting and closing that restructured 900 “Mark-to-Market” affordable properties for HUD including (223(a)7, 223(f) and 221(d)4’s) and the Green Retrofit program (grants and loans) while managing the Signet’s HUD Contract. She has joined the Closing team of the Denver Office. “ We are very much in a growth mode and pleased to have increased our in-market talent pool with the hire of Adam and Amanda. As one of the few direct HUD/FHA lenders with local originating and underwriting in Denver, their addition means we can help more clients achieve their goals. ” - Managing Director, Michael Thomas