Originally published on Forbes Business Councils by Seth Gellis, President of CPP.
With the continued urgent need for more affordable housing across the country, industry experts and academics are looking for solutions, whether they involve preserving existing communities nationwide or creating additional units where they are needed most.
According to a recent study by the National Low Income Housing Coalition, there is a shortage of 7.3 million available affordable rental homes for the lowest-income renters in the U.S. While it’s a complex issue, one overlooked path to financing is the option to increase the use of private activity bonds (PABs), which pair with 4% low-income housing tax credits (LIHTCs).
Volume cap, a “use it or lose it” resource provided by the federal government to the states based on a per capita formula, allows tax-exempt financing to be issued for affordable housing at a lower interest rate. The lower interest rates offset the lower net operating income that debt is sized from as a tool to help keep project sources and uses in balance. This ensures a greater level of capitalization, reducing the need for other sources and increasing the funding available for construction activity.
This important resource is allocated and awarded by state finance agencies, some of which unfortunately do not use all the resources made available to them. This means that if a state agency has unused volume cap and a deal is unable to make it through the funding cycle for that state in a timely manner, the resource and accompanying economic and social benefits are lost for good.
So, what can affordable housing professionals and organizations do to ensure the volume cap does not go to waste or to use it in the most efficient manner possible?
One solution is to work with local bond issuers and agencies that support them.
Local bond issuers play a major role in identifying the projects most impactful for their community and often can reduce the overburdened load that housing agency staff must deal with.
At my company, we find that an average deal may take nine months to close, plus an additional year to complete the development or preservation of the property (with a few more months of time tagged on for an IRS Form 8609 to be issued). We consider that a quick turnaround. But when entities do not use a local issuer for the deal, the acquisition or renovation timeline can extend for an additional one and a half to two years—sometimes making the deal untenable.
Across the U.S., many affordable properties are in immediate need of preservation; and many of these deals use LIHTC as a part of their financing. Completing these deals as quickly as possible is integral to reducing the loss of affordable units and preserving options for communities.
According to a 2024 report from Harvard’s Joint Center for Housing Studies (JCHS), there was a loss of 2.1 million units with rents below the maximum amount affordable for the lowest income group since 2012. While creating new affordable housing units is a part of the solution, new construction alone won't be able to keep up with the need, especially if communities are losing more units than are being created.
I've found that when local leaders, community advocates, developers, lenders and agencies can work together, it creates efficiencies and the strongest outcomes in affordable housing development and preservation. Communities should have a say in their local housing choices. Local leaders and community advocates have the best understanding of residents’ needs and where and how to invest, and good developers will listen.
Working with local issuers increases the ability for local jurisdictions to control the terms and circumstances that preservation or new development must follow in addition to minimum state provided standards. When deals and terms are localized, it creates the largest impact for the community. Specific benefits may include:
• The community is empowered to decide the priorities they wish to address. Developers should foster dialogue with local housing advocates and community leaders to discuss and outline their wish list. Unsurprisingly, the goals are often the same.
• Related improvement projects (e.g., street, sewer, LEED), social service requirements, crime prevention programs, prevailing wage, are benefits that are, by and large, staying within their community (should they choose). This autonomy also relieves pressure on developers by having an equal partner in the myriad decisions.
• Locals control within the development what is done, where it’s done and who does it within the community. For example, they may have checklists or requirements (e.g., Section 3 that requires a local workforce) that directly benefit the local community and economy.
Affordable housing developers looking to finance their deals may have the opportunity to work with a local issuer to get the deal done. I recommend you keep these best practices in mind:
Just like when working with any financial partner, organization is paramount. As a developer, that means having the deal structure solidified, financial documents in place and a single point of contact for the local issuer identified. The more streamlined you can make the process, the better.
Developers likely understand that one of the key benefits of working with a local issuer is the ability to help impact the local community in specific ways. But, for that impact to be felt in the biggest way, developers must take the time to truly understand the local community and its needs.
Developers need to reach out early in the process to understand if the issuer has sufficient volume cap, and what their processes may be. Creating a relationship early makes the processing, organization and understanding of their needs much easier.
Ultimately, the ability to work with local agencies carries many benefits and can make developers and investors nimbler in their work solving the nation’s affordable housing crisis.
CPP (Community Preservation Partners), a mission-driven affordable housing preservation developer has announced the acquisition and planned renovation of Canoga Park Apartments, an affordable housing development in Los Angeles, Calif. This is the fifth community in the greater Los Angeles area for CPP and the 60th in the state.
Built in 1983, Canoga Park Apartments is comprised of 14 walk-up units across three stories, the first of which is tuck-under parking. Located at 6824 Winnetka Ave in the Canoga Park neighborhood of Los Angeles, the 14-unit development consists of 12-two-bedroom units and 2-three-bedroom apartments designated for individuals and families earning 60 percent of the area median income (AMI) or below. CPP’s total development investment is approximately $11,350,000, which includes the purchase price of $6,000,000 and an estimated per unit renovation cost of $142,000.
“Canoga Park is a unique opportunity for CPP to provide needed capital improvements to a project that would otherwise be overlooked by developers due to its smaller size,” said Evan Cramer, Assistant Development Manager at CPP. “This project is truly a mission-driven development for us, and we are proud to renovate and improve the property while preserving its affordable status for its residents.”
Many of the original building systems are still in place, underscoring the need for modernization and development. CPP’s renovation will include replacement of HVAC systems, water heaters, lighting, appliances, interior and exterior paint, countertops, cabinetry, flooring, and seismic upgrades, along with ADA upgrades throughout the property.
Canoga Park Apartments residents will be able to participate in adult education, health and wellness, and skill-building classes and services through a partnership with LifeSteps.
The property’s affordability was set to expire in March 2026. Affordability will be deepened and renewed for at least 20 more years under a renewed Housing Assistance Payment (HAP) contract and 55 years under the new CA Tax Credit Regulatory Agreement that will be implemented post-renovation.
“WNC is pleased to partner with CPP to renew affordability status for Canoga Park Apartments,” said Anil Advani, Executive Vice President of Originations and Finance at WNC. “The Los Angeles market has a historic pattern of inadequate affordable housing options, which we hope to help mitigate.”
Renovations are expected to be completed in December 2024. Partners on the project include the California Tax Credit Allocation Committee (CTCAC), who issued 9% Federal Low-Income Housing Tax Credits and CA State Low-Income Housing Tax Credits. WNC & Associates will be providing tax credits.
Originally published on Forbes Business Councils by Seth Gellis, President of CPP.
It’s no secret that there is a nationwide housing crisis. According to the National Low Income Housing Council, "there is a shortage of more than 7 million affordable homes for our nation's 10.8 million plus extremely low-income families." And that’s just one of many sobering statistics. It’s clear that there is a need to develop affordable housing across the nation. While there isn’t a silver bullet to solve the crisis, I believe a solution that supports reducing per unit cost while also increasing generation of affordable units is a step in the right direction.
Affordable housing tax credits, issued through the Low-Income Housing Tax Credit (LIHTC) program, are instrumental for developers and partners looking to develop and preserve affordable housing nationwide. Qualified Action Plans (QAPs) outline housing priorities of the state and create the rules by which LIHTC applications are scored and credits are awarded. Examples of set-asides include geographic preferences, local housing market conditions, building characteristics (e.g., unit size) and type of project (e.g., new construction, rehabilitation), among others.
LITHC remains an essential part of the housing crisis solution in the U.S. Since 1987, it has helped to place 3.55 million affordable housing units in service. However, the guidelines and scoring mechanisms used to award tax credits for affordable housing projects have remained largely unchanged for decades—meaning that we are consistently evaluating (and funding) today’s affordable housing projects by 1986 standards.
At a high level, the goal of these guidelines is to promote the development of suitable, community-based affordable housing properties. But many of the guidelines are based on antiquated schemas and use cases that don’t factor in how people work, live, and interact with their community today. As a result, the scoring guidelines in the QAPs have the unfortunate and unintended consequence of discouraging affordable development—usually by increasing the cost of the development until it becomes unattainable, even with LITHC.
So, how do we increase affordable housing development while also maintaining a reasonable per unit cost? One key may be for affordable housing developers to take a critical and collaborative look at QAP scoring mechanisms to ensure that LITHC is operating effectively and efficiently. Based on my experience working in this sector, here are three scoring areas ripe for re-examination and collaboration among affordable housing stakeholders.
Many current state QAPs require affordable housing units to be a certain size, with California’s most recent QAP requiring one-bedroom LITHC units to be at least 450 square feet. At the same time, we’re seeing the emergence of market rate micro-units (apartments between 140 and 350 square feet) in urban cores as a solution to the need for more rental units in densely populated areas. Cities like Seattle have incorporated thousands of micro-units in their downtown core housing supply, resulting in high occupancy and more affordable rent.
The video player is currently playing an ad.
Downsizing the square footage requirement for affordable units to reflect trends in market rate units could enable developers to increase the density of affordable units within a property—making the property more affordable to develop and enabling the property to serve more people. In today’s world, where common property amenities and greenspaces may take precedence over primary living spaces, we must ask ourselves if unit square footage matters as much as it did previously.
Today’s tenants are looking for spaces that allow them to live, work, play and thrive in a seamless and convenient environment. Currently, many QAPs provide higher scores to affordable housing developments that are within certain distances of parks, libraries and other community cornerstones. However, many proposed affordable housing developments are looking to create those cornerstones within property lines—making the address’ location relative to existing cornerstones less important.
One example being explored involves including on-property parks, gathering spots, community rooms and social services. By providing your residents with free or subsidized high-speed internet access, they can access library materials online. There is also an opportunity for developers and property managers to subsidize subscription services (like Amazon Prime) for residents, which would allow for access to books and other entertainment media that would otherwise be accessible via library services. Through collaboration and implementation of creative on-site and technological solutions, you can create access to amenities and build community cornerstones within your own developments.
When LITHC scoring was first developed, there were no such things as Uber, Lyft, work-from-home or Amazon. Everyone was required to go to their place of work to get a paycheck—either via personal vehicle, public transportation or walking—and they’d have to visit a brick-and-mortar store to get their goods. Today’s mobile and gig economy enables residents to reap the benefits of a downtown core location while living further out from a city’s epicenter, where land costs for development are cheaper. For example, people can use rideshare services as transportation to work and can order groceries and medications to be delivered directly to their doorstep.
Looking forward, there is an opportunity to come up with flexible and innovative solutions that account for these types of amenities. One solution could be to work directly with cities to expand bus stops and routes further outside of the downtown core. However, there are other creative solutions to the issue to consider. If a property is not on a direct public transportation route, you may be able to work with rideshare companies to provide ride credits or reduced rates for their services to create affordable transportation options for your residents. Similarly, credits or partnerships with major retailers like Amazon, Target and Walmart could be explored for groceries and medications.
I believe looking at the affordable issue from a modernized lens will be an important first step in beginning to solve the nation’s affordable housing crisis, and that exploring creative options that allow developers to increase densification and unit creation will be foundational to the solution. Developers, businesses and public entities can (and should) work together to determine how QAPs can both better reflect the needs of modern-day residents and reduce per unit costs.
Originally published on Forbes Business Councils by Seth Gellis, President of CPP.
With the continued urgent need for more affordable housing across the country, industry experts and academics are looking for solutions, whether they involve preserving existing communities nationwide or creating additional units where they are needed most.
According to a recent study by the National Low Income Housing Coalition, there is a shortage of 7.3 million available affordable rental homes for the lowest-income renters in the U.S. While it’s a complex issue, one overlooked path to financing is the option to increase the use of private activity bonds (PABs), which pair with 4% low-income housing tax credits (LIHTCs).
Volume cap, a “use it or lose it” resource provided by the federal government to the states based on a per capita formula, allows tax-exempt financing to be issued for affordable housing at a lower interest rate. The lower interest rates offset the lower net operating income that debt is sized from as a tool to help keep project sources and uses in balance. This ensures a greater level of capitalization, reducing the need for other sources and increasing the funding available for construction activity.
This important resource is allocated and awarded by state finance agencies, some of which unfortunately do not use all the resources made available to them. This means that if a state agency has unused volume cap and a deal is unable to make it through the funding cycle for that state in a timely manner, the resource and accompanying economic and social benefits are lost for good.
So, what can affordable housing professionals and organizations do to ensure the volume cap does not go to waste or to use it in the most efficient manner possible?
One solution is to work with local bond issuers and agencies that support them.
Local bond issuers play a major role in identifying the projects most impactful for their community and often can reduce the overburdened load that housing agency staff must deal with.
At my company, we find that an average deal may take nine months to close, plus an additional year to complete the development or preservation of the property (with a few more months of time tagged on for an IRS Form 8609 to be issued). We consider that a quick turnaround. But when entities do not use a local issuer for the deal, the acquisition or renovation timeline can extend for an additional one and a half to two years—sometimes making the deal untenable.
Across the U.S., many affordable properties are in immediate need of preservation; and many of these deals use LIHTC as a part of their financing. Completing these deals as quickly as possible is integral to reducing the loss of affordable units and preserving options for communities.
According to a 2024 report from Harvard’s Joint Center for Housing Studies (JCHS), there was a loss of 2.1 million units with rents below the maximum amount affordable for the lowest income group since 2012. While creating new affordable housing units is a part of the solution, new construction alone won't be able to keep up with the need, especially if communities are losing more units than are being created.
I've found that when local leaders, community advocates, developers, lenders and agencies can work together, it creates efficiencies and the strongest outcomes in affordable housing development and preservation. Communities should have a say in their local housing choices. Local leaders and community advocates have the best understanding of residents’ needs and where and how to invest, and good developers will listen.
Working with local issuers increases the ability for local jurisdictions to control the terms and circumstances that preservation or new development must follow in addition to minimum state provided standards. When deals and terms are localized, it creates the largest impact for the community. Specific benefits may include:
• The community is empowered to decide the priorities they wish to address. Developers should foster dialogue with local housing advocates and community leaders to discuss and outline their wish list. Unsurprisingly, the goals are often the same.
• Related improvement projects (e.g., street, sewer, LEED), social service requirements, crime prevention programs, prevailing wage, are benefits that are, by and large, staying within their community (should they choose). This autonomy also relieves pressure on developers by having an equal partner in the myriad decisions.
• Locals control within the development what is done, where it’s done and who does it within the community. For example, they may have checklists or requirements (e.g., Section 3 that requires a local workforce) that directly benefit the local community and economy.
Affordable housing developers looking to finance their deals may have the opportunity to work with a local issuer to get the deal done. I recommend you keep these best practices in mind:
Just like when working with any financial partner, organization is paramount. As a developer, that means having the deal structure solidified, financial documents in place and a single point of contact for the local issuer identified. The more streamlined you can make the process, the better.
Developers likely understand that one of the key benefits of working with a local issuer is the ability to help impact the local community in specific ways. But, for that impact to be felt in the biggest way, developers must take the time to truly understand the local community and its needs.
Developers need to reach out early in the process to understand if the issuer has sufficient volume cap, and what their processes may be. Creating a relationship early makes the processing, organization and understanding of their needs much easier.
Ultimately, the ability to work with local agencies carries many benefits and can make developers and investors nimbler in their work solving the nation’s affordable housing crisis.
CPP (Community Preservation Partners), a mission-driven affordable housing preservation developer has announced the acquisition and planned renovation of Canoga Park Apartments, an affordable housing development in Los Angeles, Calif. This is the fifth community in the greater Los Angeles area for CPP and the 60th in the state.
Built in 1983, Canoga Park Apartments is comprised of 14 walk-up units across three stories, the first of which is tuck-under parking. Located at 6824 Winnetka Ave in the Canoga Park neighborhood of Los Angeles, the 14-unit development consists of 12-two-bedroom units and 2-three-bedroom apartments designated for individuals and families earning 60 percent of the area median income (AMI) or below. CPP’s total development investment is approximately $11,350,000, which includes the purchase price of $6,000,000 and an estimated per unit renovation cost of $142,000.
“Canoga Park is a unique opportunity for CPP to provide needed capital improvements to a project that would otherwise be overlooked by developers due to its smaller size,” said Evan Cramer, Assistant Development Manager at CPP. “This project is truly a mission-driven development for us, and we are proud to renovate and improve the property while preserving its affordable status for its residents.”
Many of the original building systems are still in place, underscoring the need for modernization and development. CPP’s renovation will include replacement of HVAC systems, water heaters, lighting, appliances, interior and exterior paint, countertops, cabinetry, flooring, and seismic upgrades, along with ADA upgrades throughout the property.
Canoga Park Apartments residents will be able to participate in adult education, health and wellness, and skill-building classes and services through a partnership with LifeSteps.
The property’s affordability was set to expire in March 2026. Affordability will be deepened and renewed for at least 20 more years under a renewed Housing Assistance Payment (HAP) contract and 55 years under the new CA Tax Credit Regulatory Agreement that will be implemented post-renovation.
“WNC is pleased to partner with CPP to renew affordability status for Canoga Park Apartments,” said Anil Advani, Executive Vice President of Originations and Finance at WNC. “The Los Angeles market has a historic pattern of inadequate affordable housing options, which we hope to help mitigate.”
Renovations are expected to be completed in December 2024. Partners on the project include the California Tax Credit Allocation Committee (CTCAC), who issued 9% Federal Low-Income Housing Tax Credits and CA State Low-Income Housing Tax Credits. WNC & Associates will be providing tax credits.
Originally published on Forbes Business Councils by Seth Gellis, President of CPP.
It’s no secret that there is a nationwide housing crisis. According to the National Low Income Housing Council, "there is a shortage of more than 7 million affordable homes for our nation's 10.8 million plus extremely low-income families." And that’s just one of many sobering statistics. It’s clear that there is a need to develop affordable housing across the nation. While there isn’t a silver bullet to solve the crisis, I believe a solution that supports reducing per unit cost while also increasing generation of affordable units is a step in the right direction.
Affordable housing tax credits, issued through the Low-Income Housing Tax Credit (LIHTC) program, are instrumental for developers and partners looking to develop and preserve affordable housing nationwide. Qualified Action Plans (QAPs) outline housing priorities of the state and create the rules by which LIHTC applications are scored and credits are awarded. Examples of set-asides include geographic preferences, local housing market conditions, building characteristics (e.g., unit size) and type of project (e.g., new construction, rehabilitation), among others.
LITHC remains an essential part of the housing crisis solution in the U.S. Since 1987, it has helped to place 3.55 million affordable housing units in service. However, the guidelines and scoring mechanisms used to award tax credits for affordable housing projects have remained largely unchanged for decades—meaning that we are consistently evaluating (and funding) today’s affordable housing projects by 1986 standards.
At a high level, the goal of these guidelines is to promote the development of suitable, community-based affordable housing properties. But many of the guidelines are based on antiquated schemas and use cases that don’t factor in how people work, live, and interact with their community today. As a result, the scoring guidelines in the QAPs have the unfortunate and unintended consequence of discouraging affordable development—usually by increasing the cost of the development until it becomes unattainable, even with LITHC.
So, how do we increase affordable housing development while also maintaining a reasonable per unit cost? One key may be for affordable housing developers to take a critical and collaborative look at QAP scoring mechanisms to ensure that LITHC is operating effectively and efficiently. Based on my experience working in this sector, here are three scoring areas ripe for re-examination and collaboration among affordable housing stakeholders.
Many current state QAPs require affordable housing units to be a certain size, with California’s most recent QAP requiring one-bedroom LITHC units to be at least 450 square feet. At the same time, we’re seeing the emergence of market rate micro-units (apartments between 140 and 350 square feet) in urban cores as a solution to the need for more rental units in densely populated areas. Cities like Seattle have incorporated thousands of micro-units in their downtown core housing supply, resulting in high occupancy and more affordable rent.
The video player is currently playing an ad.
Downsizing the square footage requirement for affordable units to reflect trends in market rate units could enable developers to increase the density of affordable units within a property—making the property more affordable to develop and enabling the property to serve more people. In today’s world, where common property amenities and greenspaces may take precedence over primary living spaces, we must ask ourselves if unit square footage matters as much as it did previously.
Today’s tenants are looking for spaces that allow them to live, work, play and thrive in a seamless and convenient environment. Currently, many QAPs provide higher scores to affordable housing developments that are within certain distances of parks, libraries and other community cornerstones. However, many proposed affordable housing developments are looking to create those cornerstones within property lines—making the address’ location relative to existing cornerstones less important.
One example being explored involves including on-property parks, gathering spots, community rooms and social services. By providing your residents with free or subsidized high-speed internet access, they can access library materials online. There is also an opportunity for developers and property managers to subsidize subscription services (like Amazon Prime) for residents, which would allow for access to books and other entertainment media that would otherwise be accessible via library services. Through collaboration and implementation of creative on-site and technological solutions, you can create access to amenities and build community cornerstones within your own developments.
When LITHC scoring was first developed, there were no such things as Uber, Lyft, work-from-home or Amazon. Everyone was required to go to their place of work to get a paycheck—either via personal vehicle, public transportation or walking—and they’d have to visit a brick-and-mortar store to get their goods. Today’s mobile and gig economy enables residents to reap the benefits of a downtown core location while living further out from a city’s epicenter, where land costs for development are cheaper. For example, people can use rideshare services as transportation to work and can order groceries and medications to be delivered directly to their doorstep.
Looking forward, there is an opportunity to come up with flexible and innovative solutions that account for these types of amenities. One solution could be to work directly with cities to expand bus stops and routes further outside of the downtown core. However, there are other creative solutions to the issue to consider. If a property is not on a direct public transportation route, you may be able to work with rideshare companies to provide ride credits or reduced rates for their services to create affordable transportation options for your residents. Similarly, credits or partnerships with major retailers like Amazon, Target and Walmart could be explored for groceries and medications.
I believe looking at the affordable issue from a modernized lens will be an important first step in beginning to solve the nation’s affordable housing crisis, and that exploring creative options that allow developers to increase densification and unit creation will be foundational to the solution. Developers, businesses and public entities can (and should) work together to determine how QAPs can both better reflect the needs of modern-day residents and reduce per unit costs.
Community Preservation Partners (CPP), one of the nation’s most active affordable housing preservation developers, today announced the appointment of Belinda Oakes as chief financial officer. Oakes will be responsible for the development, oversight and maintenance of financial policies and accounting systems and functions, ensuring proper financial controls are in place. Working closely with various divisions throughout the company, she will provide strategic direction to support CPP’s plans to grow its acquisition and development pipeline across the U.S.
“Belinda has significant experience and is an industry leader specialized in affordable housing finance,” said Anand Kannan, president of CPP. “She brings an unmatched level of sophistication and expertise to our accounting and finance team that will serve as the backbone to the tremendous growth we are anticipating at CPP over the next several years. We look forward to being led by the best in the business during this next chapter.”
As part of the executive leadership team, Oakes will lead the controller function and oversee accounting functions including business planning and financial forecasts, in addition to sharing in the oversight of housing acquisition and re-syndication activities. She will work collaboratively with the asset management, development and construction management teams to elevate deals, analyze potential capital transactions, provide long-term goals and assist with forecasting. Additionally, she will foster banking, legal and other strategic relationships to further the growth potential of CPP.
“Having been part of the industry for more than 20 years, I understand the importance of affordable housing preservation,” said Oakes. “I have always admired CPP for their ability to get deals done and prowess to execute on their purpose of preserving affordable housing. I am excited to join an organization whose goals are aligned with my professional experience and personal passion for company culture and vision.”
Prior to joining CPP, Oakes spent more than 19 years at Highridge Costa Companies, in a series of roles, most recently as vice president accounting and taxation. Earlier in her career she spent time at Novogradac & Company LLP, Oracle and Arthur Andersen. She volunteers as the treasurer and CFO of the Hermosa Beach Education Foundation. She received her Bachelor of Science in accounting from Golden Gate University and is a certified public accountant. Oakes resides in Hermosa Beach, California with her husband and son.
Community Preservation Partners (CPP Housing), a national affordable housing developer committed to creativity, performance and purpose, today announced the closing of six rural communities in Central New Mexico. This marks the final installment in a total grouping of 654 units in 20 properties across 10 counties in the state that began in 2019. CPP serves as the fee developer for J.L. Gray Company, who will own and operate the properties.
Purchased for $7.3 million with a 4% tax credit equity investment of $8 million, the central portfolio comprises 218 units across four family and two senior properties in the cities of Las Vegas, Portales, Artesia, Belen and Ruidoso Downs. Affordability for residents earning less than 60% AMI will be extended for another 35 years.
“In New Mexico, it is extraordinarily difficult for affordable housing communities in rural areas to secure the financing they need to address maintenance and rehabilitation,” said Anand Kannan, president at CPP. “With our experience in rural development, CPP was able to arrange the smaller communities into portfolios that would meet both the mortgage finance authority and the rural development requirements to make a reinvestment possible.”
CPP is overseeing the $32,000 per unit renovation, which includes energy efficient improvements such as new windows, interior/exterior lighting and fully upgraded kitchens and appliances. Common rooms and offices will be upgraded and outdoor playgrounds and gathering areas added. Exterior improvements include new roofs, metal staircases and paint, and accessibility will be addressed throughout the properties. Construction is expected to complete in August 2022.
“CPP navigated the complex and challenging process of gaining approvals through the state and county offices to close on the largest 4% bond deal in the state of New Mexico,” said Bobby Griffith, CFO/principal of J.L. Gray Company. “Thanks to their expertise and tenacity over the past three years, we are able to preserve more than 650 homes for families and seniors in these hard-to-reach areas.”
Financing partners for the central portfolio include Bonneville, who is providing a 538 USDA guaranteed loan, bond underwriter Stifle and New Mexico MFA, bond issuer. USDA Rural Development is subordinating the existing 515 loans.
CPP continues its aggressive growth initiative to preserve affordable housing communities across the country. Communities recently closed in the U.S. have led the company to deepen the affordability of neighborhoods across Colorado, Utah, Montana, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Tennessee, Connecticut and Virginia, in addition to its long history of providing affordable housing solutions across the state of California.
Authority Magazine’s Jason Hartman conducted an in-depth interview with CPP Senior Vice President Seth Gellis for its series, "How We Are Helping To Make Housing More Affordable." Read on to learn more about Seth, who heads up our Eastern Division, including some interesting stories, his favorite life lesson from Steve Jobs, and most importantly, why we believe preservation is the immediate solution for affordable housing.
Thank you so much for doing this with us! Before we dig in, our readers would like to get to know you a bit more. Can you tell us a bit about your “backstory”? What led you to this particular career path?
I was born in Indianapolis and lived there until my parents divorced. My mother and I, along with my grandmother, all moved to Florida, and we lived there until my grandmother passed away. We then moved to California to be closer to family. I was shaped by all of these events, but even more so by growing up in a single-parent household. Seeing my mother work so hard to make sure we had food and decent shelter really impacted my outlook on the world and my work ethic in general. I was taught to fight for what you need, be who you want to be, and stand up for those that need help.
I feel very fortunate to have had some really great mentors both personally and professionally. In college I was part of a fraternity, Lambda Chi Alpha. Most fraternities had a house, but ours did not. So, I went to raise money to buy one. Through those efforts I met some great people that liked the hustle I was putting into the endeavor. I had always liked the idea of real estate development and at that point, didn’t really know the differences between housing types.
My first foray into housing was working with the facilities team in my dormitory, which led to a job in leasing for a student housing community while I was going to school. That is where I really started running numbers and getting excited about real estate finance. Through the mentor relationships I had formed I was able to segue into real estate and worked as a runner/marketing associate for an industrial-focused brokerage shop until I graduated. While there, I found the financing and how the projects were put together more interesting than the listing and selling side, and that experience solidified that I should take the real estate development route instead of brokerage.
I landed in affordable housing after securing a position as a land acquisition analyst for Simpson Housing Solutions. There I rose up the ranks and met some really fantastic people, one in particular, Moe Mohanna, who became a lifelong friend and mentor. He entrusted me to take on whatever I could put together so long as we were always treating people the right way and being fair in our dealings. I guess you can say I got hooked on the deals but as I learned more about the people we were helping, the work became even more exciting.
There is simply nothing better than doing for others and being rewarded for your efforts in doing so. Our team motto, “do the right thing, always,” started during my time at Simpson Housing and I’ve carried it throughout my career. I’ve been incredibly fortunate to have opportunities that others may not have had, and that’s why it’s important for me to give back. At CPP, along with its parent company, WNC, the leadership team fosters a people-first mentality, and we truly live it. CPP President Anand Kannan has pushed CPP to become a national presence, and like Moe, very much believes in doing the right thing, always. It’s a guiding principle that has led to our collective success and why we work so well together.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
“Stay Hungry, Stay Foolish.” — Steve Jobs
This quote is especially relevant in my work at CPP. As a mission-based developer, we are continually looking for opportunities to make a difference for our sellers, partners and the residents whose lives we can positively impact. This quote resonates in many ways:
Housing in general lacks innovation, and being foolish to me means looking for the less-obvious way to make a deal happen. Often times it takes creativity and a solution-oriented mindset.
When it comes to underwriting, relentlessly pushing for the next housing opportunity and overcoming the next obstacle to creating housing, without regard for how you previously transacted, keeps you fresh and gives you an advantage.
Financial products are constantly changing. In the environment we operate in, we want to be first and we want to find ways to make things work for everyone, which ultimately results in getting deals done that others may not have believed in.
Ok super. Let’s now shift to the main part of our discussion about the shortage of affordable housing. Lack of affordable housing has been a problem for a long time in the United States. But it seems that it has gotten a lot worse over the past five years, particularly in the large cities. I know this is a huge topic, but for the benefit of our readers can you briefly explain to our readers what brought us to this place? Where did this crisis come from?
To make a long and complicated issue as simple as possible, I believe our housing crisis stems from inappropriate land use policies that have been in place for a very long time, combined with ramped NIMBYism and bureaucracy controlling the process.
The real way out of this is to encourage the creation and preservation of as many housing units and types as possible. Increased supply, so long as we don’t lose supply, will drive down or stabilize rents.
Preservation happens to be a lot more efficient than new construction due in large part to the minimum construction requirements that most agencies require. The result is much higher costs to construct affordable housing than market-rate housing. The answer is complicated but begins with stopping the bleeding and keeping the housing we have for as long as possible. Encourage this at all costs — not only is it less costly than replacing the housing, it also is preserving housing located in irreplaceable locations that serve an existing community.
Uncertainty for housing developers becomes a barrier for preservation and new construction, so cities and counties should look hard at their PILOT and tax abatement programs and codify them whenever possible to benefit the preservation or creation of affordable and workforce housing. This will give an advantage to affordable housing developers and a reason for sellers of existing communities and/or land to provide the time needed for an affordable housing community to become a reality.
Once you stop the bleeding, create more certainty in underwriting so you can then focus on the barriers and processes limiting or delaying the creation of new supply. These include entitlements, impact fees, and plan review processes that include lengthy environmental reviews in some states. These processes allow the opposition to control the outcome of proposed affordable developments with irrational fear. Reviews by state agencies, in some states, can lengthen the process even further beyond what market-rate developers face. To the extent affordable housing can become by right in the approval process, we benefit by shortening the approval process and creating certainty in new supply. From a seller’s perspective, certainty of a quick execution might be enough for them to choose an affordable developer over a market-rate developer.
It is worth noting that there are states that have recognized this issue of uncertainty and NIMBYism. Unfortunately, they have mixed public policy goals when addressing the issue and mix certainty and streamlined processes with prevailing wage requirements. This solves one problem but substitutes it for driving up costs, still limiting how many units can be produced.
There is also opportunity for states agencies to take a hard look at their scoring, minimum construction requirements, and QAPs, and ask themselves if they are encouraging the greatest number of units being preserved and created or, are there other noble causes being placed ahead of the housing goal itself. If they are a housing agency, I argue that housing should always be the lead priority over other public policy initiatives.
If a state isn’t using all of its volume cap for 4% tax credit and bond deals, it should take a look at why it can’t put its volume cap to use. I guarantee you the answer is not a lack of available projects; it more likely lies with the projects that score under their QAP, or the systems, timing and processes that limit the ability to produce, enhance and protect housing.
Housing is a basic human need and I believe that all of us in the housing industry should focus first on housing and then on the other benefits that we can provide through it to society. The fact is that there are always competing public policy objectives and goals that have to be balanced responsibly. The core of why the housing gap continues to get worse is that as an industry we continue to create advantages for producing new construction market-rate housing over affordable housing, yet still continue to make the production of housing costly, uncertain and time consuming in general.
Can you share something about your work that makes you most proud? Is there a particular story or incident that you found most uplifting?
I’m extremely proud of the placemaking and lives that we are positively changing in some of the properties we have invested in that previously were known as high-crime neighborhoods. From seeing children play in the playgrounds and use the services we install, to the seniors who come out and find comfort in our courtyards, I can’t help but feel like we are doing the right thing, and that we are providing opportunity and housing security where it is needed most. As a brand that is mission-driven, it is gratifying to see our creativity, performance and purpose come to life at each of the communities in which we invest.
For example, our community Winton Garden Towers in Rochester, New York earned a Multi-Housing News 2020 Excellence Award in the Transaction of the Year category and reflects the innovative financing, creativity, and positive impact that CPP strives for with each of its neighborhoods. CPP, with our partner Rochester’s Cornerstone Group, rehabilitated the 206-unit Winton Garden Towers, a community that once had a poor reputation marred by major problems of crime, drugs and physical neglect. Despite the myriad challenges, CPP saw an opportunity to enhance the quality of life for these residents and turn the towers into a beacon of light for the community. We completely transformed both the exterior and interiors, and closely worked with law enforcement and neighborhood groups to ensure everyone felt safe in their new homes. It truly is a Different Way to Home.
Read the full interview with Seth Gellis: https://medium.com/authority-magazine/seth-gellis-of-cpp-east-how-we-are-helping-to-make-housing-more-affordable-d5cfe39b5a69
