Inside a LIHTC Investment with Ben Stevens - S2E5

Welcome to the A.CRE Audio Series! On this episode, I am here once again with the creators of the Adventures in CRE website, Spencer Burton and Michael Belasco. Today we are joined by Ben Stevens to talk about the birth of a LIHTC building.
00:00 - Introduction
02:24 - Discussion on Affordable Housing: Definitions, Concepts, and Economic Questions
03:48 - Government Involvement and History of Public Housing in the US
05:21 - Quality vs. Affordability Debate and Evolution of Public Housing
07:50 - Design and Operational Challenges in Public Housing; Changes in the 1960s
10:02 - Challenges in Modern Public Housing and Shift to Private Solutions
11:45 - Role of Large Developers and Introduction to Low Income Housing Tax Credits (LIHTC)
13:10 - Financing Structure and Development Process of LIHTC Projects
16:30 - Importance of Qualifying Allocation Plan (QAP) in LIHTC and Site Selection
18:50 - Eligible Costs, Calculations, and Role of Financial Institutions in LIHTC
20:51 - Timing and Process of Buying Tax Credits; Installment Receipts During Construction
23:44 - Debt Sizing, Service Coverage, and Gap Funding in Affordable Housing Projects
27:01 - Financial Modeling Challenges and Diverse Funding Sources in Affordable Housing
30:00 - Project Size Limitations and Differentiating Between 9% and 4% Tax Credits
33:10 - Combining Tax Credits for Financing and Investor Benefits in Affordable Housing
36:04 - Evaluating Affordable Housing as a Business Venture and Invitation for Further Discussion
Ben Stevens is a project manager for a real estate development firm in Chicago. He holds an MBA in Real Estate and Urban Land Economics from the University of Wisconsin at Madison. On the side, he hosts The Skyline Forum. He is also the author of the new book, The Birth of a Building. Ben lives in Chicago with his wife and two children.
Today we are starting a two-part episode with Ben. We are specifically talk about LIHTC-supported investments. We also jump into a variety of other topics based on Ben’s knowledge, including lessons he has learned and how allocation is set up.
View show notes for this episode: www.adventuresincre.com/audio...
Watch other episodes: www.adventuresincre.com/audio...
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[@christianstill.6654]

Interview Alvin Hope Johnson next. Incredible guy!
Maybe even make his version of underwriting too!?

[@georgerobertsiii]

Great history lesson at the beginning. Great way to set up the topic!

[@kirshaudlyons6396]

Spencer I wouldn't mind joining Ben & yourself for the next episode. I am a young affordable housing professional and graduate of Madison as well. Really enjoyed Bens perspective & expertise. Its always a good day when Badgers shine!!

[@Mr.Nyashty]

Check out earn your leisure interviews with Brandon Rule and Chris Senegal

[@shelbytownsend3511]

interesting topic! There needs to be an actual case study to follow the data visually. I like to see the model and a few case studies that would help....good topic but the content was all over the place. I suggest having Ben break down the data so its simple to understand and follow - hint, hint, the use of a PowerPoint deck could help and or using excel to model a few case studies. I would also like to see how Ben resolved a few project risks most common in this project and or how to resolve funding gaps, grants used and an example on applying a few methods on several multi-million dollar projects.

[@danrosario2888]

Amazing interview. Def didn’t talk enough about the book. Great job 👍🏼

[@robertcarpenter8077]

One statistic in the GAO report which absolutely floored me concerned the disparity in per unit construction costs and maybe someone can figure out whether its a misprint. On page 20 in footnote 38, the report indicates per unit construction costs range from a low in Texas of $74,000.00 to a high in California of $738,000.00. The Heritage Foundation report on LIHTC criticizes the program on just such extraordinarily high costs, pointing out that affordable housing is affordable only in terms of the low rents tenants are charged NOT AT ALL in terms of the the actual costs of construction.

[@sonicyouthfan92]

What's shocking about the variation? Clearly building housing in land-abundant rural Texas will be cheaper than constructing new housing in permit-heavy, developable-land-scarce San Fransisco.

[@robertcarpenter8077]

Keep in mind that Frisco once grew so rapidly because it was once such a free market free society free locality. Yet by the 1970s imperious government flunkies in Frisco began intervening AGAINST this free market society. It is the interventions of these flunkies which have made housing 10X more expensive than elsewhere in the US, a multiple which seems extreme to me but not to you provoking the question of what multiple would it take for you to be shocked. Is it 20X ? 50X ? 100X ?

[@sonicyouthfan92]

@@robertcarpenter8077 I agree with everything you’re saying, but the cost of housing will be always be higher to some extent in SF because of high land costs. Even affordable housing in the Bronx (more permissible, but by no means perfect) in NYC is $500k/unit. Does that mean you shouldn’t build housing in the Bronx? Of course not since it’s so close to multitudes of jobs and is one of the places best situated for social mobility in the country.
I think more needs to be done to address the situation (I’d even argue for larger eminent domain from the federal government to take private land), but we have to be realistic.

[@brendanbrown3922]

Does one have to be under contract to apply for LIHTC? I understand that you cannot be compnesated for land purchases. For acquisition / rehab, how do justify going under contract with the plan to utilize LIHTC if I can't apply until I own it?