1 00:00:10,720 --> 00:00:14,680 Speaker 1: Hello, and welcome to another episode of The Odd Lads Podcast. 2 00:00:14,760 --> 00:00:17,160 Speaker 2: I'm Joe Wasental and I'm Tracy Allaway. 3 00:00:17,320 --> 00:00:19,759 Speaker 1: Tracy, Uh, let's do another housing episode? 4 00:00:20,440 --> 00:00:21,800 Speaker 2: Why not? Let's do it? 5 00:00:21,880 --> 00:00:23,759 Speaker 1: No, you know, I think I've said it before to you. 6 00:00:23,840 --> 00:00:25,200 Speaker 1: I don't know if I've said it like on the show. 7 00:00:25,200 --> 00:00:28,320 Speaker 1: One thing I like about housing episodes is like, no 8 00:00:28,360 --> 00:00:31,920 Speaker 1: matter what, it is, just like this permanent source of 9 00:00:31,960 --> 00:00:33,320 Speaker 1: anxiety for everyone. 10 00:00:33,720 --> 00:00:35,199 Speaker 2: Everyone has an opinion on it. 11 00:00:35,360 --> 00:00:38,120 Speaker 1: Yeah, and where everyone was born short housing, you know, 12 00:00:38,159 --> 00:00:40,240 Speaker 1: they need to cover their housing short at some point. 13 00:00:40,400 --> 00:00:42,479 Speaker 1: And if you have, you know, if you don't have 14 00:00:42,479 --> 00:00:45,000 Speaker 1: a house, you're anxious about rent and house prices going up. 15 00:00:45,280 --> 00:00:46,839 Speaker 1: If you have a house that you own, you might 16 00:00:46,840 --> 00:00:49,280 Speaker 1: be anxious about it going down, et cetera. Like there's 17 00:00:49,440 --> 00:00:51,720 Speaker 1: just there will never be an era of any market 18 00:00:51,720 --> 00:00:53,400 Speaker 1: in which I don't think like some people are like 19 00:00:53,520 --> 00:00:54,600 Speaker 1: anxious about housing in. 20 00:00:54,560 --> 00:00:55,240 Speaker 3: One way or another. 21 00:00:55,440 --> 00:00:59,120 Speaker 2: Well, okay, so housing is a perennial source of interest 22 00:00:59,160 --> 00:01:00,680 Speaker 2: for sure. But I also so I think we're kind 23 00:01:00,680 --> 00:01:04,040 Speaker 2: of in this unusual moment for housing as well, because 24 00:01:04,360 --> 00:01:07,319 Speaker 2: no one, as we've discussed on multiple episodes, at this point, 25 00:01:07,520 --> 00:01:10,039 Speaker 2: no one is quite sure what's going to happen to 26 00:01:10,080 --> 00:01:14,560 Speaker 2: the market. And there's been this discussion of perpetual supply 27 00:01:14,720 --> 00:01:17,640 Speaker 2: shortages of housing, but at the same time there's this 28 00:01:17,720 --> 00:01:20,000 Speaker 2: discussion of as interest rates go up, whether or not 29 00:01:20,080 --> 00:01:21,959 Speaker 2: we're going to start to see an impact on prices. 30 00:01:22,000 --> 00:01:24,160 Speaker 2: It just feels like there's a lot of uncertainty at 31 00:01:24,160 --> 00:01:28,640 Speaker 2: the moment, combined with these sort of long term structural issues. 32 00:01:28,360 --> 00:01:32,320 Speaker 1: Totally, and it feels like there's something you said, structural, 33 00:01:32,360 --> 00:01:35,880 Speaker 1: and it feels like one particular structural flaw. 34 00:01:35,720 --> 00:01:37,319 Speaker 3: In sort of the way we do. 35 00:01:37,200 --> 00:01:40,520 Speaker 1: Housing development in this country, which is that you know 36 00:01:40,600 --> 00:01:42,679 Speaker 1: and we see it right now, which is that you know, 37 00:01:42,720 --> 00:01:45,880 Speaker 1: the FED has been trying to fight inflation, cool things down. 38 00:01:46,040 --> 00:01:49,120 Speaker 1: A big source of inflation over the last few years 39 00:01:49,120 --> 00:01:50,960 Speaker 1: have been rent prices. So you want to get down 40 00:01:51,000 --> 00:01:53,680 Speaker 1: rent so you raise interest rates and hopefully that cool 41 00:01:53,680 --> 00:01:55,760 Speaker 1: things down, and maybe that works, maybe it doesn't. But 42 00:01:55,880 --> 00:01:58,720 Speaker 1: one effect that seems to have is it seems to 43 00:01:58,760 --> 00:02:02,520 Speaker 1: impair the supply side as well, right, and then you like, okay, 44 00:02:02,600 --> 00:02:05,240 Speaker 1: maybe in the short run cool things down and rents 45 00:02:05,280 --> 00:02:07,920 Speaker 1: go down a little bit, but you actually set yourself back. 46 00:02:08,000 --> 00:02:10,639 Speaker 1: It would seem in the long term goal of having 47 00:02:10,840 --> 00:02:12,160 Speaker 1: affordable housing abundance. 48 00:02:12,240 --> 00:02:15,799 Speaker 2: Yes, so, I remember Jerome Powell specifically said that they 49 00:02:15,880 --> 00:02:19,200 Speaker 2: wanted to bring house prices down. Well, I don't know 50 00:02:19,200 --> 00:02:21,919 Speaker 2: if he explicitly said that, but you know, something along 51 00:02:21,919 --> 00:02:24,839 Speaker 2: those lines. They wanted to impact the housing market, bring 52 00:02:24,919 --> 00:02:28,560 Speaker 2: prices down in order to bring inflation down, which makes 53 00:02:28,600 --> 00:02:30,760 Speaker 2: a lot of sense. But on the other hand, people 54 00:02:30,840 --> 00:02:34,600 Speaker 2: want affordable housing for obvious reasons, and if you're sort 55 00:02:34,639 --> 00:02:36,880 Speaker 2: of crushing that market, you can imagine a lot of 56 00:02:36,880 --> 00:02:37,959 Speaker 2: people are going to be upset. 57 00:02:38,160 --> 00:02:38,320 Speaker 3: Right. 58 00:02:38,360 --> 00:02:41,079 Speaker 1: There was a question to Powell. It was sometime early 59 00:02:41,160 --> 00:02:42,840 Speaker 1: this year, maybe last year. I think it must have 60 00:02:42,880 --> 00:02:44,239 Speaker 1: been last year, and someone's like, oh, what would you 61 00:02:44,280 --> 00:02:45,880 Speaker 1: say to someone who wants to buy a house and 62 00:02:45,880 --> 00:02:48,920 Speaker 1: they see mortgage rates shooting up? And he's like, well, yeah, 63 00:02:48,919 --> 00:02:51,320 Speaker 1: it's tough, but then we'll cool things down and then 64 00:02:51,480 --> 00:02:54,320 Speaker 1: things will be better. But all that's really happened is 65 00:02:54,840 --> 00:02:58,519 Speaker 1: prices are still really high, supply is impaired, rates are up, 66 00:02:58,560 --> 00:03:02,360 Speaker 1: so housing affordability is basically the worst level in like 67 00:03:02,440 --> 00:03:03,000 Speaker 1: five decades. 68 00:03:03,040 --> 00:03:04,959 Speaker 3: Yes, maybe ever so, no. 69 00:03:05,120 --> 00:03:08,320 Speaker 2: I think on record, According to Jim Egan over at 70 00:03:08,320 --> 00:03:09,440 Speaker 2: Morgan Stanley. 71 00:03:09,360 --> 00:03:11,200 Speaker 1: Yeah, yeah, I think you're right, And so then the 72 00:03:11,240 --> 00:03:12,480 Speaker 1: questions like, what are we doing here? 73 00:03:12,680 --> 00:03:13,600 Speaker 3: Do we need a. 74 00:03:13,520 --> 00:03:17,680 Speaker 1: Different model of housing development beyond what we have in 75 00:03:17,720 --> 00:03:19,880 Speaker 1: the country right now where we have like developers and 76 00:03:19,880 --> 00:03:22,959 Speaker 1: home builders sort of fluctuating how much they build based 77 00:03:23,000 --> 00:03:23,680 Speaker 1: on various markets. 78 00:03:23,880 --> 00:03:27,720 Speaker 2: Well, absolutely, and I think historically there have been sort 79 00:03:27,760 --> 00:03:32,119 Speaker 2: of two dominant ways of tackling the affordability problem in 80 00:03:32,240 --> 00:03:35,280 Speaker 2: the US housing market. And it's either we build more 81 00:03:35,520 --> 00:03:38,880 Speaker 2: houses more supply, which, as you just pointed out, can 82 00:03:38,960 --> 00:03:41,760 Speaker 2: be difficult in the current interest rate environment. And even 83 00:03:41,800 --> 00:03:46,120 Speaker 2: if we do build more housing, because developers are a 84 00:03:46,160 --> 00:03:50,120 Speaker 2: savvy bunch, they tend to build more expensive houses for 85 00:03:50,240 --> 00:03:52,840 Speaker 2: people who are going to pay a higher price so 86 00:03:52,880 --> 00:03:55,840 Speaker 2: that developers can make more money. And then the other 87 00:03:55,880 --> 00:03:58,160 Speaker 2: way we tend to deal with affordability is I think 88 00:03:58,200 --> 00:04:03,520 Speaker 2: through voucher programs like Section eight and maybe building public 89 00:04:03,560 --> 00:04:06,960 Speaker 2: housing to some extent. But as you point out, there 90 00:04:07,040 --> 00:04:07,720 Speaker 2: is a third way. 91 00:04:08,840 --> 00:04:09,520 Speaker 3: There's a third way. 92 00:04:09,560 --> 00:04:10,960 Speaker 1: There may even be a fourth or fifth way, but 93 00:04:11,080 --> 00:04:13,480 Speaker 1: let's at least talk about a third wave. So I 94 00:04:13,480 --> 00:04:16,440 Speaker 1: am excited. We have two guests today who are have 95 00:04:16,520 --> 00:04:18,600 Speaker 1: been working for a while, and think about are the 96 00:04:18,800 --> 00:04:22,560 Speaker 1: other models for housing development beyond the two that Tracy 97 00:04:22,800 --> 00:04:24,680 Speaker 1: just laid out. I'm very excited we're going to be 98 00:04:24,720 --> 00:04:28,159 Speaker 1: speaking with Zach Marx. He is the chief real estate 99 00:04:28,279 --> 00:04:33,120 Speaker 1: officer at the Housing Opportunities Commission Montgomery County, Maryland, as 100 00:04:33,120 --> 00:04:35,560 Speaker 1: well as Paul Williams. He's the executive director for the 101 00:04:35,600 --> 00:04:39,120 Speaker 1: Center for Public Enterprise who's also working on these issues 102 00:04:39,120 --> 00:04:43,479 Speaker 1: alongside Zach. A little bit of a personal disclosure that 103 00:04:43,520 --> 00:04:45,840 Speaker 1: I have to get out off the bat right at 104 00:04:45,839 --> 00:04:47,080 Speaker 1: the beginning of the episode. 105 00:04:47,320 --> 00:04:49,279 Speaker 3: Paul and I are friends. We play music together. 106 00:04:49,560 --> 00:04:52,520 Speaker 2: Oh, I thought you guys were joking. I didn't realize 107 00:04:52,880 --> 00:04:55,160 Speaker 2: you were actually in a bandage. So you are actually 108 00:04:55,200 --> 00:04:56,400 Speaker 2: a member of Light Sweet Crewed. 109 00:04:56,800 --> 00:04:57,240 Speaker 4: Yeah. 110 00:04:57,360 --> 00:05:01,839 Speaker 1: Yeah, Paul plays I write songs and play guitar together. 111 00:05:01,960 --> 00:05:04,719 Speaker 1: So if you want to just ignore this entire episode 112 00:05:04,720 --> 00:05:07,479 Speaker 1: because you've perceived there to be a glaring conflict of interest, 113 00:05:07,800 --> 00:05:09,839 Speaker 1: you're welcome to turn off the episode right now. 114 00:05:09,880 --> 00:05:12,040 Speaker 2: Paul, do you know I've been forced to buy tickets 115 00:05:12,120 --> 00:05:14,840 Speaker 2: for your upcoming show? Joe won't calp me. I had 116 00:05:14,839 --> 00:05:15,400 Speaker 2: to buy them. 117 00:05:15,560 --> 00:05:17,360 Speaker 5: That's fantastic, it's good for the economy. 118 00:05:17,400 --> 00:05:20,800 Speaker 1: It hurts snow walk exactly Zach and Paul, Thank you 119 00:05:20,839 --> 00:05:22,720 Speaker 1: guys both for coming on the podcast. 120 00:05:22,800 --> 00:05:23,480 Speaker 4: Thanks for having me. 121 00:05:23,600 --> 00:05:25,159 Speaker 3: What do we start with you? 122 00:05:25,920 --> 00:05:27,919 Speaker 1: Zach, you've been working in this area. What does the 123 00:05:28,040 --> 00:05:31,560 Speaker 1: Chief real estate Officer at the Housing Opportunities Commission of 124 00:05:31,560 --> 00:05:34,560 Speaker 1: Montgomery County, Maryland do? Or if you just want to say, 125 00:05:34,600 --> 00:05:36,520 Speaker 1: what is the Housing Opportunities Commission do? 126 00:05:36,680 --> 00:05:37,240 Speaker 3: That's fine too. 127 00:05:37,440 --> 00:05:40,360 Speaker 6: Yeah, you know, fancy name for really the Housing Authority 128 00:05:40,600 --> 00:05:44,880 Speaker 6: for Montgomery County, so fairly typical governmental entity. We also 129 00:05:44,880 --> 00:05:47,080 Speaker 6: happen to be the Housing Finance Agency, which is a 130 00:05:47,080 --> 00:05:50,440 Speaker 6: lot less typical. Typically those are two separate governmental unities 131 00:05:50,480 --> 00:05:55,200 Speaker 6: and these are both combined and contained under the HOC shingle. 132 00:05:54,839 --> 00:05:55,320 Speaker 4: If you will. 133 00:05:55,880 --> 00:05:58,880 Speaker 6: And so for a bunch of decades, HOC has been 134 00:05:59,120 --> 00:06:02,360 Speaker 6: providing affordable how housing in different ways. It started as 135 00:06:02,360 --> 00:06:05,520 Speaker 6: a pure play public housing authority, so just building public 136 00:06:05,560 --> 00:06:09,400 Speaker 6: housing in the seventies, but over those decades, because of 137 00:06:09,440 --> 00:06:11,840 Speaker 6: where it's located, and you know, we can sort of 138 00:06:11,880 --> 00:06:13,760 Speaker 6: get into some of those drivers if you wish, but 139 00:06:14,560 --> 00:06:17,320 Speaker 6: because of where it was located, the combination of the 140 00:06:17,360 --> 00:06:21,320 Speaker 6: Housing Authority and Housing Finance Agency, it has sort of 141 00:06:21,760 --> 00:06:27,040 Speaker 6: continually innovated around how to deliver affordable housing. And they've 142 00:06:27,080 --> 00:06:30,960 Speaker 6: basically developed a large portfolio of real estate assets, which 143 00:06:31,279 --> 00:06:33,680 Speaker 6: many public housing authorities across the country kind of own 144 00:06:33,720 --> 00:06:34,320 Speaker 6: public housing. 145 00:06:34,320 --> 00:06:35,919 Speaker 4: And that's it, hoc ouns. 146 00:06:36,279 --> 00:06:37,960 Speaker 6: I think we're somewhere in the vicinity of ninety four 147 00:06:38,040 --> 00:06:41,400 Speaker 6: hundred units, and it happens to be that Montgomery County 148 00:06:41,400 --> 00:06:44,279 Speaker 6: real estate is very valuable, and so my job is 149 00:06:44,320 --> 00:06:47,400 Speaker 6: really to figure out how to further expand that portfolio 150 00:06:47,880 --> 00:06:51,200 Speaker 6: through acquisition, through new development, and to also make sure 151 00:06:51,240 --> 00:06:54,800 Speaker 6: that the existing portfolio is continually reinvested in and maximized 152 00:06:54,800 --> 00:06:55,560 Speaker 6: for its potential. 153 00:06:55,880 --> 00:06:59,479 Speaker 2: I'm going to start with an even more basic question, potentially, 154 00:06:59,520 --> 00:07:02,479 Speaker 2: but what is it that Montgomery County is actually doing 155 00:07:02,800 --> 00:07:06,880 Speaker 2: that is different to the way we've traditionally dealt with 156 00:07:07,120 --> 00:07:08,800 Speaker 2: housing affordability issues. 157 00:07:09,279 --> 00:07:12,200 Speaker 6: Yeah, so Montgomery County has answered that question kind of 158 00:07:12,360 --> 00:07:14,720 Speaker 6: a few times, and then the things that it's done 159 00:07:14,760 --> 00:07:18,440 Speaker 6: have become more standard practice. It started as I think 160 00:07:18,520 --> 00:07:22,960 Speaker 6: arguably the first to implement inclusionary zoning several decades ago, 161 00:07:23,000 --> 00:07:25,480 Speaker 6: so that was a that was an inflection point of innovation. 162 00:07:26,160 --> 00:07:29,040 Speaker 6: They also were among the first to begin to use 163 00:07:29,080 --> 00:07:32,440 Speaker 6: a condominium regime. This starts to get super technical, but 164 00:07:32,480 --> 00:07:34,960 Speaker 6: a condominium regime in the way in which li tech 165 00:07:35,120 --> 00:07:37,640 Speaker 6: low income housing tax Credit equity could be used to 166 00:07:37,720 --> 00:07:39,239 Speaker 6: finance mixed income buildings. 167 00:07:39,360 --> 00:07:42,400 Speaker 2: What's the word you said, condominium regime. 168 00:07:43,640 --> 00:07:45,280 Speaker 3: Condominium regime, Yeah, okay. 169 00:07:45,720 --> 00:07:48,320 Speaker 6: So, typically, the Low Income Housing Tax Credit Program, which 170 00:07:48,360 --> 00:07:51,440 Speaker 6: is the standard way in which affordable housing is produced 171 00:07:51,440 --> 00:07:54,320 Speaker 6: in this country at this point, generally speaking, because of 172 00:07:54,360 --> 00:07:56,800 Speaker 6: the rules and the structure of the program, will generally 173 00:07:56,880 --> 00:07:59,160 Speaker 6: force a building that's somewhere between eighty percent and one 174 00:07:59,200 --> 00:08:04,600 Speaker 6: hundred percent affordable. And what HSC did was it began 175 00:08:04,680 --> 00:08:07,840 Speaker 6: to basically develop mixed income buildings where the majority of 176 00:08:07,840 --> 00:08:10,000 Speaker 6: the units in the building were market rate. It would 177 00:08:10,040 --> 00:08:12,280 Speaker 6: basically form a condominium for the market rate units and 178 00:08:12,440 --> 00:08:15,320 Speaker 6: condominium for the low income Housing Tax Credit units and 179 00:08:15,360 --> 00:08:19,240 Speaker 6: effectively execute two transactions even though they're you know, they're 180 00:08:19,280 --> 00:08:22,080 Speaker 6: effectively in the same building. And so that was a 181 00:08:22,120 --> 00:08:24,160 Speaker 6: really important innovation because it was a way in which 182 00:08:24,160 --> 00:08:28,120 Speaker 6: to deliver hsc's what's become hsc's mixed income model, where 183 00:08:28,160 --> 00:08:31,440 Speaker 6: you have this affordability being delivered in what are otherwise 184 00:08:31,480 --> 00:08:35,920 Speaker 6: Class A plus majority market rate socioeconomically mixed buildings. 185 00:08:36,040 --> 00:08:38,559 Speaker 2: So let me make sure that I've got this straight. 186 00:08:38,640 --> 00:08:44,880 Speaker 2: So historically, the government either built public housing or they 187 00:08:45,160 --> 00:08:50,320 Speaker 2: encouraged private developers to build housing, a portion of which 188 00:08:50,400 --> 00:08:55,040 Speaker 2: would then be dedicated to lower income households. But what 189 00:08:55,080 --> 00:08:59,160 Speaker 2: Montgomery County is doing is somewhat different in that their 190 00:08:59,400 --> 00:09:05,320 Speaker 2: finance saying sort of a mix of private income and 191 00:09:05,679 --> 00:09:07,640 Speaker 2: lower income residences. 192 00:09:07,720 --> 00:09:08,160 Speaker 1: Is that right? 193 00:09:08,800 --> 00:09:11,040 Speaker 6: Yeah, it's really the taking an ownership position in a 194 00:09:11,040 --> 00:09:13,800 Speaker 6: building that has market rate ents is not something that's 195 00:09:13,800 --> 00:09:16,240 Speaker 6: widely practiced, and so it's really taking the position that 196 00:09:16,320 --> 00:09:19,800 Speaker 6: we should also really be a majority or outright owner 197 00:09:19,800 --> 00:09:22,800 Speaker 6: of these assets. That's really kind of what's the core 198 00:09:22,880 --> 00:09:24,680 Speaker 6: of what they did and what was at the core 199 00:09:24,720 --> 00:09:27,280 Speaker 6: of this latest I guess innovation that we're I think 200 00:09:27,559 --> 00:09:28,360 Speaker 6: here to talk about. 201 00:09:28,400 --> 00:09:30,880 Speaker 3: So Paul, let me bring you in here. 202 00:09:30,920 --> 00:09:33,600 Speaker 1: So, in addition to your music, you're also the executive 203 00:09:33,600 --> 00:09:36,120 Speaker 1: director for the Center for Public Enterprise. Tell us from 204 00:09:36,200 --> 00:09:38,959 Speaker 1: your perspective what it is about the work being done 205 00:09:39,000 --> 00:09:42,880 Speaker 1: at Montgomery County that feels different to you and your 206 00:09:42,880 --> 00:09:46,120 Speaker 1: work and sort of spreading the gospel to other public 207 00:09:46,160 --> 00:09:47,800 Speaker 1: authorities that could do something similar. 208 00:09:48,440 --> 00:09:50,680 Speaker 5: Yeah, the core way I look at the kind of 209 00:09:50,679 --> 00:09:53,520 Speaker 5: innovative programs that HC has come up with is that 210 00:09:53,760 --> 00:09:57,320 Speaker 5: currently all affordable housing that gets built in the United 211 00:09:57,360 --> 00:10:00,400 Speaker 5: States is funded with either the Lonecome Housing Tax Credit 212 00:10:00,720 --> 00:10:05,480 Speaker 5: or Section eight vouchers. That's it, and in basically every 213 00:10:05,480 --> 00:10:07,800 Speaker 5: state in the country, every jurisdiction in the country, those 214 00:10:07,840 --> 00:10:12,440 Speaker 5: programs are fully oversubscribed. Every dollar that Congress appropriates gets 215 00:10:12,520 --> 00:10:16,360 Speaker 5: used to build that housing, and the wait list for 216 00:10:16,440 --> 00:10:18,600 Speaker 5: you know, eligible households, you know, we have to build 217 00:10:18,640 --> 00:10:21,080 Speaker 5: at the current level for seventy five years right to 218 00:10:21,120 --> 00:10:23,640 Speaker 5: get there. It's not going to happen. So the tool 219 00:10:23,720 --> 00:10:26,360 Speaker 5: that HOC has come up with is something that allows 220 00:10:26,400 --> 00:10:29,240 Speaker 5: them to, in addition to using all of those current 221 00:10:29,280 --> 00:10:33,000 Speaker 5: programs from the federal government, they can self finance and 222 00:10:33,040 --> 00:10:36,560 Speaker 5: build mixed income properties on top of everything that they're 223 00:10:36,600 --> 00:10:39,719 Speaker 5: already doing. So a lot of times in kind of 224 00:10:39,760 --> 00:10:42,880 Speaker 5: affordable housing policy circles, what happens is, you know, you 225 00:10:43,000 --> 00:10:45,440 Speaker 5: want to take the same pie of federal subsidies and say, 226 00:10:45,480 --> 00:10:47,000 Speaker 5: how can we chop it up a little bit differently 227 00:10:47,040 --> 00:10:49,720 Speaker 5: to make it a little bit better for this person 228 00:10:49,800 --> 00:10:52,640 Speaker 5: or that person. But this is is just completely separate pie, 229 00:10:52,880 --> 00:10:55,559 Speaker 5: and the model is essentially just going out and being 230 00:10:55,559 --> 00:10:58,280 Speaker 5: a participant in the housing market, right and building these 231 00:10:58,280 --> 00:11:02,600 Speaker 5: mixed income projects because of the tools, access to capital, 232 00:11:03,080 --> 00:11:06,800 Speaker 5: statutory authorities that an agency like HOC has. And that's 233 00:11:06,840 --> 00:11:09,240 Speaker 5: what's kind of new and innovative that not very many 234 00:11:09,280 --> 00:11:13,240 Speaker 5: people are doing. And so what my organization has been 235 00:11:13,240 --> 00:11:17,280 Speaker 5: doing on this is essentially take it's a really simple model, right, 236 00:11:17,320 --> 00:11:20,240 Speaker 5: it's not all that much work to do, not very 237 00:11:20,320 --> 00:11:23,760 Speaker 5: many complicated financial pieces, and we can get into it, 238 00:11:23,800 --> 00:11:27,520 Speaker 5: but it's relatively simple. Take this model to other agencies 239 00:11:27,520 --> 00:11:30,040 Speaker 5: that are seeing the same kind of housing market constraints 240 00:11:30,080 --> 00:11:32,680 Speaker 5: and say, this is a pretty simple approach you could 241 00:11:32,679 --> 00:11:37,280 Speaker 5: be using to expand overall production, affordable production and for 242 00:11:37,400 --> 00:11:40,160 Speaker 5: really a kind of deminimous upfront investment. All you really 243 00:11:40,240 --> 00:11:41,640 Speaker 5: need to do is kind of think a little bit 244 00:11:41,640 --> 00:11:45,040 Speaker 5: differently about how you operate as a public agency. Right, 245 00:11:45,120 --> 00:11:47,040 Speaker 5: you might want to participate in the market and. 246 00:11:46,960 --> 00:11:47,920 Speaker 4: Shape it a little bit more. 247 00:12:03,400 --> 00:12:06,320 Speaker 2: Can we talk more about the money aspect of this 248 00:12:06,559 --> 00:12:09,800 Speaker 2: and the financing arrangements, So you just use the term 249 00:12:10,000 --> 00:12:13,320 Speaker 2: self financing. It's government agencies, So I guess they can 250 00:12:13,400 --> 00:12:15,880 Speaker 2: go out and raise money through the bond market and 251 00:12:15,920 --> 00:12:17,800 Speaker 2: then just loan that to themselves. 252 00:12:17,880 --> 00:12:20,240 Speaker 6: Is that the idea, Yeah, I mean that really is 253 00:12:20,400 --> 00:12:23,440 Speaker 6: generally the idea that I think Paul's right, like, mostly 254 00:12:23,480 --> 00:12:27,000 Speaker 6: what we're doing is conceptually very simple. It's really just 255 00:12:27,080 --> 00:12:29,560 Speaker 6: sort of a tweak to how we're employing it. And 256 00:12:29,640 --> 00:12:33,280 Speaker 6: so to start with, HOC, as the housing finance agency, 257 00:12:33,360 --> 00:12:35,280 Speaker 6: is able to be a lender to its projects and 258 00:12:35,360 --> 00:12:37,600 Speaker 6: has been for a long time. You know, the FHA 259 00:12:37,679 --> 00:12:40,880 Speaker 6: Risk Share program is a really a standard tool provided 260 00:12:40,920 --> 00:12:45,400 Speaker 6: by HUD to certain sophisticated housing finance agencies that you know, 261 00:12:45,520 --> 00:12:48,960 Speaker 6: is for the express purpose of producing affordable housing faster 262 00:12:49,080 --> 00:12:51,680 Speaker 6: and more efficiently. And so HOC has been for a 263 00:12:51,679 --> 00:12:55,400 Speaker 6: long time the senior permanent lender sometimes construction lender on 264 00:12:55,440 --> 00:12:58,280 Speaker 6: its projects, and so that was already a part of 265 00:12:58,320 --> 00:13:01,160 Speaker 6: the toolkit. And so the next piece is really that 266 00:13:01,280 --> 00:13:03,920 Speaker 6: equity piece. Where does that chunk of equity come from, 267 00:13:03,920 --> 00:13:06,640 Speaker 6: the part that the debt won't cover. And effectively, what 268 00:13:06,760 --> 00:13:09,840 Speaker 6: we you know, we worked with our local council to 269 00:13:09,880 --> 00:13:13,560 Speaker 6: do is to use municipal finance as the source of 270 00:13:13,600 --> 00:13:18,280 Speaker 6: our construction equity, which typically it comes from two places, 271 00:13:18,320 --> 00:13:20,240 Speaker 6: one below income housing tax credit. 272 00:13:20,240 --> 00:13:21,960 Speaker 4: And as as Paul mentioned, that's. 273 00:13:21,880 --> 00:13:25,560 Speaker 6: Very limited we're already doing all that basically, or it 274 00:13:25,559 --> 00:13:28,160 Speaker 6: comes from the private market, and that is a particularly 275 00:13:28,200 --> 00:13:30,040 Speaker 6: expensive piece of capital. 276 00:13:30,520 --> 00:13:32,720 Speaker 2: Can you give us an idea of the difference in 277 00:13:32,840 --> 00:13:35,959 Speaker 2: the cost of capital between public and private and maybe. 278 00:13:35,760 --> 00:13:37,160 Speaker 1: If you could just sort of give us like a 279 00:13:37,400 --> 00:13:40,960 Speaker 1: I don't know if it's a stylized financial model. I mean, 280 00:13:41,000 --> 00:13:43,080 Speaker 1: I get the different pieces both, I don't know, So 281 00:13:43,280 --> 00:13:46,920 Speaker 1: maybe pencil it out in words if it's possible, like 282 00:13:46,960 --> 00:13:47,920 Speaker 1: what a deal looks like. 283 00:13:48,720 --> 00:13:51,360 Speaker 6: So one of these essentially is taking the it's really 284 00:13:51,360 --> 00:13:54,840 Speaker 6: taking the conventional American private equity real estate model, and 285 00:13:54,880 --> 00:13:56,960 Speaker 6: it's just pulling it over the private side, so the 286 00:13:56,960 --> 00:13:59,880 Speaker 6: way in which the public side to the public side, 287 00:14:00,280 --> 00:14:03,360 Speaker 6: yes to the public side, and so you know, typically 288 00:14:03,440 --> 00:14:06,720 Speaker 6: the private sector, conventional finance is a private bank loan 289 00:14:06,880 --> 00:14:09,760 Speaker 6: for the construction debt, and then a huge pile of 290 00:14:09,800 --> 00:14:12,800 Speaker 6: equity because the bank's typically only giving you somewhere between 291 00:14:12,800 --> 00:14:15,600 Speaker 6: fifty to sixty percent of what you need. And then 292 00:14:15,679 --> 00:14:18,400 Speaker 6: maybe a private developer puts a tiny bit in of 293 00:14:18,440 --> 00:14:21,320 Speaker 6: their own, often not but maybe a little bit. But 294 00:14:21,640 --> 00:14:24,720 Speaker 6: for the most part, it's that big thirty five percent 295 00:14:24,840 --> 00:14:27,480 Speaker 6: chunk that's going to come from all the folks that 296 00:14:27,520 --> 00:14:29,800 Speaker 6: inhabit the big tall buildings around the one we're in 297 00:14:30,080 --> 00:14:33,600 Speaker 6: that fund those projects, and really our thought was, really 298 00:14:33,640 --> 00:14:34,760 Speaker 6: take that model. 299 00:14:34,520 --> 00:14:35,160 Speaker 4: Pull it in. 300 00:14:34,920 --> 00:14:39,000 Speaker 6: Instead of using that capital, we can use our municipal 301 00:14:39,000 --> 00:14:43,040 Speaker 6: finance tools to basically lower the cost of that capital substantially. 302 00:14:43,280 --> 00:14:45,880 Speaker 6: And most importantly from our view, is the put HC 303 00:14:45,960 --> 00:14:48,040 Speaker 6: in the position as a majority or outright owner of 304 00:14:48,040 --> 00:14:50,000 Speaker 6: the project, which has all the knock on effects that 305 00:14:50,040 --> 00:14:50,840 Speaker 6: everybody likes. 306 00:14:51,120 --> 00:14:53,200 Speaker 5: And I think to stylize it a little bit more 307 00:14:53,200 --> 00:14:55,840 Speaker 5: and to give some kind of examples, sure Zach sometimes 308 00:14:55,840 --> 00:14:58,800 Speaker 5: talks about this project that was built six seven years 309 00:14:58,840 --> 00:15:02,000 Speaker 5: ago where it was a mixed income project. HOC was 310 00:15:02,000 --> 00:15:05,640 Speaker 5: involved in the deal, and this was before these new tools, 311 00:15:05,680 --> 00:15:08,280 Speaker 5: and so so you had a private equity investor who had, 312 00:15:08,440 --> 00:15:11,680 Speaker 5: you know, wanted double digit returns and wanted to you know, 313 00:15:12,080 --> 00:15:15,160 Speaker 5: significant ownership stake and all of that. And that building 314 00:15:15,200 --> 00:15:19,000 Speaker 5: performed very well, and HOC saw very little of the 315 00:15:19,040 --> 00:15:21,480 Speaker 5: benefit of that really high performing building that they had 316 00:15:21,640 --> 00:15:24,080 Speaker 5: put this money in and you know everything, and so 317 00:15:24,320 --> 00:15:26,360 Speaker 5: they kind of went back to the drawing board. How 318 00:15:26,360 --> 00:15:28,680 Speaker 5: do I get in a better position in a project 319 00:15:28,720 --> 00:15:30,480 Speaker 5: like this that I'm building. Right, because I have these 320 00:15:30,640 --> 00:15:32,600 Speaker 5: social goals. I want to provide these affordable units. I 321 00:15:32,600 --> 00:15:35,080 Speaker 5: want to have this long term, permanent affordability. How can 322 00:15:35,160 --> 00:15:37,680 Speaker 5: I further that goal by being in a better position 323 00:15:37,760 --> 00:15:40,240 Speaker 5: on the deal. Well, the way to do that is 324 00:15:40,280 --> 00:15:44,040 Speaker 5: to bring your own source of capital to replace that 325 00:15:44,160 --> 00:15:46,560 Speaker 5: source of capital that's pushing you into a bad position. 326 00:15:47,120 --> 00:15:50,400 Speaker 5: Bring your own. And so they created this Housing Production Fund, 327 00:15:50,440 --> 00:15:53,200 Speaker 5: which is the tool that facilitates this kind of new 328 00:15:53,240 --> 00:15:56,280 Speaker 5: model of mixed income development. And really what it's doing 329 00:15:56,440 --> 00:16:00,680 Speaker 5: is it's making short term construction loans. You know, it's 330 00:16:00,760 --> 00:16:03,840 Speaker 5: essentially replacing what would be private construction equity in a 331 00:16:03,880 --> 00:16:07,280 Speaker 5: conventional deal, but you loan it from your fund to 332 00:16:07,360 --> 00:16:10,160 Speaker 5: yourself to your project at a much lower interest rate, 333 00:16:10,760 --> 00:16:12,440 Speaker 5: and so you're kind of taking on a little bit 334 00:16:12,480 --> 00:16:13,120 Speaker 5: more of the risk. 335 00:16:13,200 --> 00:16:13,360 Speaker 4: Right. 336 00:16:13,920 --> 00:16:17,720 Speaker 5: Why does private equity want really high returns for their investment, Well, 337 00:16:17,840 --> 00:16:20,440 Speaker 5: because that's what they price the risk at job. Right, 338 00:16:20,480 --> 00:16:22,120 Speaker 5: it's their job, and that's what they price the risk up. 339 00:16:22,160 --> 00:16:27,560 Speaker 5: But as the public developer and owner, you're not just 340 00:16:27,560 --> 00:16:29,880 Speaker 5: like eating that risk, right, you also bring things to 341 00:16:29,920 --> 00:16:32,240 Speaker 5: the table that lower the risk of the project. 342 00:16:32,320 --> 00:16:32,480 Speaker 4: Right. 343 00:16:32,480 --> 00:16:36,080 Speaker 5: You're a governmental agency, so a lot of the kind 344 00:16:36,120 --> 00:16:40,480 Speaker 5: of barriers regulatory things to some kinds of development, you 345 00:16:40,520 --> 00:16:43,200 Speaker 5: can get past those sometimes in a little bit easier way. 346 00:16:43,520 --> 00:16:45,680 Speaker 5: And the other really big thing is one of the 347 00:16:45,720 --> 00:16:49,120 Speaker 5: biggest risks from the construction to kind of permanent operating 348 00:16:49,160 --> 00:16:51,920 Speaker 5: phase of a building is the lease up period. Once 349 00:16:51,960 --> 00:16:54,000 Speaker 5: you're done, how long to take you to get people 350 00:16:54,000 --> 00:16:57,400 Speaker 5: in that building and pay rent. And when you do 351 00:16:57,440 --> 00:16:59,160 Speaker 5: a project like this, if you have a third of 352 00:16:59,200 --> 00:17:04,040 Speaker 5: your building at these affordable levels, HOC has a line 353 00:17:04,080 --> 00:17:06,840 Speaker 5: out the door of thousands of households who are waiting 354 00:17:06,840 --> 00:17:10,040 Speaker 5: for affordable Like lease up for affordable units is like 355 00:17:10,080 --> 00:17:12,560 Speaker 5: the snap of a finger compared to market rate units, 356 00:17:12,600 --> 00:17:16,320 Speaker 5: and so you're reducing that lease up time risk too. 357 00:17:16,440 --> 00:17:19,119 Speaker 5: And there's other kind of risk reduction things that you 358 00:17:19,200 --> 00:17:19,920 Speaker 5: bring to the table. 359 00:17:20,320 --> 00:17:23,800 Speaker 2: I take the point about risk reduction and the lease 360 00:17:23,880 --> 00:17:27,159 Speaker 2: up period and things like that, but my next statement 361 00:17:27,240 --> 00:17:29,840 Speaker 2: is going to be somewhat facetious, but the pee pricing 362 00:17:29,880 --> 00:17:32,760 Speaker 2: does seem a little bit ridiculous when housing at this 363 00:17:32,800 --> 00:17:35,119 Speaker 2: point almost seems like a sure thing, like when do 364 00:17:35,240 --> 00:17:40,760 Speaker 2: rents ever go down? I have yet experience time, Seriously, 365 00:17:40,800 --> 00:17:43,840 Speaker 2: I've yet to experience that phenomenon in my lifetime. 366 00:17:44,040 --> 00:17:46,720 Speaker 5: You know, I actually saw a Bloomberg chart on Twitter 367 00:17:46,880 --> 00:17:52,280 Speaker 5: this morning showing market rents going down, deflation in rents 368 00:17:52,320 --> 00:17:54,440 Speaker 5: in some of the cities that had the highest supply 369 00:17:54,520 --> 00:17:55,480 Speaker 5: increases over the past. 370 00:17:56,119 --> 00:17:56,920 Speaker 3: Not New York City. 371 00:17:57,119 --> 00:17:59,960 Speaker 5: Not New York City, right right, I mean Boise Boys 372 00:18:00,200 --> 00:18:01,760 Speaker 5: rents went down something like five percent. 373 00:18:02,359 --> 00:18:04,800 Speaker 2: Yeah, some rents are so the answer has moved to 374 00:18:04,880 --> 00:18:08,080 Speaker 2: Poise Okay, Wait, I realized there is something I should 375 00:18:08,119 --> 00:18:10,400 Speaker 2: have asked at the beginning of this conversation. But can 376 00:18:10,440 --> 00:18:14,160 Speaker 2: you describe the types of housing or building? 377 00:18:14,400 --> 00:18:14,640 Speaker 4: Nice? 378 00:18:14,840 --> 00:18:18,640 Speaker 2: Yeah, that you're that you're creating a little bit more detail. 379 00:18:19,680 --> 00:18:22,480 Speaker 6: So, and this is just historically the way that HC 380 00:18:22,800 --> 00:18:25,520 Speaker 6: has approached things. We deliver affordable housing through what we 381 00:18:25,600 --> 00:18:28,760 Speaker 6: call financing solutions, not construction solutions. And so the general 382 00:18:28,800 --> 00:18:31,639 Speaker 6: ideas you produce and market competitive project. We need it 383 00:18:31,680 --> 00:18:33,399 Speaker 6: to be market competitive because it's going to have a 384 00:18:33,440 --> 00:18:36,760 Speaker 6: majority market rate component in it, but also because we 385 00:18:36,800 --> 00:18:39,000 Speaker 6: want all of our residents to feel like they're living 386 00:18:39,040 --> 00:18:40,800 Speaker 6: in a building that a lot of them. 387 00:18:40,640 --> 00:18:41,199 Speaker 4: Don't even know. 388 00:18:41,760 --> 00:18:44,200 Speaker 6: One of the refrains you'll see is that I didn't 389 00:18:44,200 --> 00:18:47,000 Speaker 6: even know this was owned by hoc. It's a very 390 00:18:47,040 --> 00:18:50,240 Speaker 6: common experience for our residents, both the residents of our 391 00:18:50,400 --> 00:18:52,720 Speaker 6: rent restricted units and those in our market rate units. 392 00:18:52,800 --> 00:18:55,800 Speaker 6: And so these are Class A buildings that are typically 393 00:18:55,800 --> 00:18:58,600 Speaker 6: built to be competitive with the market. And I would 394 00:18:58,640 --> 00:19:02,080 Speaker 6: say even in our more recent iterations, we are actually 395 00:19:02,240 --> 00:19:06,160 Speaker 6: using the HPF platform to actually set some higher standards 396 00:19:06,200 --> 00:19:09,639 Speaker 6: in the market around energy efficiency and even scale. So 397 00:19:09,760 --> 00:19:11,479 Speaker 6: we really try to use the HPF platform for one 398 00:19:11,480 --> 00:19:13,199 Speaker 6: of our things. But in general these are just as 399 00:19:13,280 --> 00:19:15,399 Speaker 6: nice as the Class A. It is a Class A 400 00:19:15,600 --> 00:19:18,440 Speaker 6: rental building. It may be kind of the high dens 401 00:19:18,480 --> 00:19:21,600 Speaker 6: any garden or four over one where you have you know, 402 00:19:21,640 --> 00:19:24,240 Speaker 6: four or five floors of wood frame over over a 403 00:19:24,280 --> 00:19:26,920 Speaker 6: retail or parking podium, but we also do mid and 404 00:19:27,000 --> 00:19:27,960 Speaker 6: high rise as well. 405 00:19:28,440 --> 00:19:31,360 Speaker 1: You mentioned that Montgomery County has sort of a history 406 00:19:31,520 --> 00:19:36,040 Speaker 1: of housing innovation and is the phenomenon essentially like we 407 00:19:36,119 --> 00:19:39,879 Speaker 1: all know, like the DC economy has like boomed, but 408 00:19:40,040 --> 00:19:42,080 Speaker 1: like there aren't a lot of like especially like people 409 00:19:42,119 --> 00:19:44,000 Speaker 1: working in government, Like they're not like a lot of 410 00:19:44,000 --> 00:19:46,320 Speaker 1: those people, like they don't become rich, Like the economy 411 00:19:46,359 --> 00:19:50,120 Speaker 1: is like boomed, but they're not like maybe particularly high salary. 412 00:19:50,240 --> 00:19:52,919 Speaker 1: So they need somewhere to live in a booming economy, 413 00:19:53,320 --> 00:19:55,639 Speaker 1: but they also need to be like somewhere affordable. Is 414 00:19:55,680 --> 00:19:57,960 Speaker 1: that sort of the general economic condition that has sort 415 00:19:58,000 --> 00:20:00,920 Speaker 1: of like forced the hand of a county like I 416 00:20:00,960 --> 00:20:01,520 Speaker 1: mean Montgomery. 417 00:20:01,760 --> 00:20:04,879 Speaker 6: Montgomery County's challenge. It's one of the most affluent counties 418 00:20:04,920 --> 00:20:07,760 Speaker 6: in the country, okay, but it is a It's also 419 00:20:07,800 --> 00:20:10,480 Speaker 6: one of the most diverse counties, certainly in Maryland and 420 00:20:10,520 --> 00:20:13,520 Speaker 6: in the country. And it's a relatively large county, certainly 421 00:20:13,560 --> 00:20:15,439 Speaker 6: for Maryland, so I guess low bar, but you know, 422 00:20:15,480 --> 00:20:17,720 Speaker 6: it's got distinct parts of the county and so you 423 00:20:18,200 --> 00:20:20,840 Speaker 6: have you know, a significant amount of immigration, obviously in 424 00:20:20,880 --> 00:20:23,840 Speaker 6: the DC area, and so you have you know, first 425 00:20:23,840 --> 00:20:26,880 Speaker 6: generation families that are looking for, you know, their first 426 00:20:26,920 --> 00:20:29,880 Speaker 6: affordable home, and they've often looked at Montgomery County schools 427 00:20:29,920 --> 00:20:32,120 Speaker 6: as that first leg up, you know, into this country. 428 00:20:32,560 --> 00:20:35,919 Speaker 6: You also have you know, lots of in many cases 429 00:20:35,960 --> 00:20:38,880 Speaker 6: progressively minded but boomers who bought there. It's a relatively 430 00:20:38,920 --> 00:20:41,119 Speaker 6: young county. A nineteen fifty there were a lot of 431 00:20:41,160 --> 00:20:44,000 Speaker 6: fields and so it really was that expansion that you're 432 00:20:44,000 --> 00:20:46,080 Speaker 6: talking about of the federal government where you have this 433 00:20:46,200 --> 00:20:49,679 Speaker 6: wave of boomers who bought homes for you know, fifteen 434 00:20:49,760 --> 00:20:52,440 Speaker 6: dollars and you know now they're worth you know, one 435 00:20:52,440 --> 00:20:54,720 Speaker 6: point five million, and then everything between is kind of 436 00:20:54,760 --> 00:20:57,840 Speaker 6: the range of challenges that we have of housing. And 437 00:20:57,920 --> 00:21:00,920 Speaker 6: we have very urban centers. You know, we have taller 438 00:21:00,960 --> 00:21:04,480 Speaker 6: buildings in Silver Spring and Bethesda and Rockville than there 439 00:21:04,480 --> 00:21:07,280 Speaker 6: are in DC. So there are very urban locations where 440 00:21:07,320 --> 00:21:11,359 Speaker 6: you have folks employed within a whole spectrum of different industries. 441 00:21:11,720 --> 00:21:14,880 Speaker 6: So it's really trying to serve what is an extremely 442 00:21:14,920 --> 00:21:19,000 Speaker 6: socioeconomically diverse environment and ethnically a diverse, racially diverse and 443 00:21:19,040 --> 00:21:21,760 Speaker 6: so forth. And there have been successes and failures around 444 00:21:21,760 --> 00:21:24,199 Speaker 6: that over the course of the decades, but that has 445 00:21:24,680 --> 00:21:27,040 Speaker 6: definitely been the trend for Montgomery County over the last 446 00:21:27,359 --> 00:21:42,240 Speaker 6: or twenty years. 447 00:21:43,440 --> 00:21:47,480 Speaker 2: Maybe this is a question for Paul, but how replicable 448 00:21:48,160 --> 00:21:52,280 Speaker 2: is this model outside of Montgomery County, because as Zach 449 00:21:52,400 --> 00:21:55,560 Speaker 2: just described, you know, this is a relatively affluent place. 450 00:21:55,960 --> 00:21:59,040 Speaker 2: I've seen some people make the argument that the county 451 00:21:59,080 --> 00:22:02,560 Speaker 2: also has an advance because it's a municipality and so 452 00:22:02,640 --> 00:22:05,480 Speaker 2: it's easier to do this model. I don't quite understand 453 00:22:05,520 --> 00:22:08,199 Speaker 2: that argument, but maybe you can expound on that, But 454 00:22:08,800 --> 00:22:13,160 Speaker 2: how easy is it to export this particular way of 455 00:22:13,240 --> 00:22:16,200 Speaker 2: doing affordable housing to other parts of the US. 456 00:22:17,000 --> 00:22:19,160 Speaker 5: Yeah, great question. I think the first thing to ask 457 00:22:19,280 --> 00:22:22,159 Speaker 5: is does the financing work in other places? And I 458 00:22:22,160 --> 00:22:24,239 Speaker 5: think the really nice thing about the approach is that 459 00:22:24,560 --> 00:22:28,080 Speaker 5: really the test is if market rate rental construction pencils 460 00:22:28,320 --> 00:22:30,960 Speaker 5: in your market, then this works because all you're doing 461 00:22:31,000 --> 00:22:33,920 Speaker 5: is taking the market rate model, pulling the most expensive 462 00:22:33,920 --> 00:22:36,680 Speaker 5: piece of capital out of that, putting in your own 463 00:22:36,720 --> 00:22:38,879 Speaker 5: source of capital, and then all of a sudden you 464 00:22:38,960 --> 00:22:42,840 Speaker 5: have more room to provide additional affordability. So if market 465 00:22:42,880 --> 00:22:44,879 Speaker 5: rate is pencil and then you then you can just 466 00:22:45,320 --> 00:22:47,679 Speaker 5: you can do this. As far as how do you 467 00:22:47,760 --> 00:22:50,040 Speaker 5: get other agencies to find a way to do this 468 00:22:50,400 --> 00:22:52,440 Speaker 5: or to use a tool like this, right there, there's 469 00:22:52,440 --> 00:22:54,040 Speaker 5: more than one way to use a tool like this. 470 00:22:54,960 --> 00:22:57,440 Speaker 5: The City of Atlanta recently stood up a program that's 471 00:22:57,520 --> 00:23:00,800 Speaker 5: essentially they're trying to copy exactly what my Emory County student. 472 00:23:00,800 --> 00:23:03,720 Speaker 5: And actually we hosted a kind of event last week 473 00:23:03,720 --> 00:23:07,080 Speaker 5: in Montgomery County bringing together folks from housing agencies around 474 00:23:07,080 --> 00:23:09,240 Speaker 5: the country. So you know, we're people out west, people 475 00:23:09,240 --> 00:23:11,240 Speaker 5: in the South, people in Northeast, people in the Midwest 476 00:23:11,240 --> 00:23:13,679 Speaker 5: who run agencies who are interested in figuring out how 477 00:23:13,720 --> 00:23:16,080 Speaker 5: to do this. And you know, no two kind of 478 00:23:16,119 --> 00:23:18,720 Speaker 5: programs are going to look identical because you know, everybody's 479 00:23:18,800 --> 00:23:21,520 Speaker 5: kind of institutional environment in different jurisdictions looks a little 480 00:23:21,520 --> 00:23:24,280 Speaker 5: bit different. But I think, and Zach talks about this, 481 00:23:24,280 --> 00:23:27,480 Speaker 5: sometimes there's kind of two main kind of pipelines you 482 00:23:27,480 --> 00:23:29,360 Speaker 5: can use for you know, how do you get projects 483 00:23:29,359 --> 00:23:31,520 Speaker 5: in a pipeline for development with a tool like this. 484 00:23:31,920 --> 00:23:34,159 Speaker 5: There's one where, like you know, you're housing authority, you 485 00:23:34,160 --> 00:23:35,560 Speaker 5: own a piece of land. You say, you know what, 486 00:23:35,640 --> 00:23:37,520 Speaker 5: I have this land, I'm going to develop it. I'm 487 00:23:37,520 --> 00:23:40,040 Speaker 5: gonna's you an RFP. I'm going to find construction manager, 488 00:23:40,160 --> 00:23:42,720 Speaker 5: engineered designed me the building. I'm going to you know, 489 00:23:42,800 --> 00:23:45,440 Speaker 5: hire somebody as a fee developer and build me this thing. 490 00:23:45,600 --> 00:23:47,960 Speaker 5: You have this other approach, which HOC recently did a 491 00:23:48,000 --> 00:23:51,000 Speaker 5: project like this where there was a fully entitled project 492 00:23:51,080 --> 00:23:54,080 Speaker 5: by a private developer that was sitting there on the dirt. 493 00:23:54,160 --> 00:23:56,440 Speaker 5: Nothing was built because they couldn't get financing to close 494 00:23:56,480 --> 00:23:59,760 Speaker 5: the deal. It's fully entitled, was ready to go. HOC 495 00:23:59,800 --> 00:24:02,920 Speaker 5: came in and said, nice looking entitled project. You got there, 496 00:24:03,160 --> 00:24:05,679 Speaker 5: how about I come in with my cool new capital. 497 00:24:05,920 --> 00:24:07,920 Speaker 5: I'm going to come in with property tax relief because 498 00:24:07,920 --> 00:24:09,800 Speaker 5: I'm a public agency. I'm going to come in and 499 00:24:09,880 --> 00:24:12,040 Speaker 5: reduce the police up risk. And what you're going to 500 00:24:12,080 --> 00:24:14,120 Speaker 5: give me is this increase in affordability that I want. 501 00:24:14,520 --> 00:24:17,400 Speaker 5: And I'm going to be majority owner and private developer 502 00:24:17,400 --> 00:24:19,760 Speaker 5: with entitled project that can't close on financing. And it's 503 00:24:19,800 --> 00:24:21,840 Speaker 5: like absolutely, please real quickly. 504 00:24:21,880 --> 00:24:25,200 Speaker 1: So there's no property taxes because it's the government developing 505 00:24:25,240 --> 00:24:28,560 Speaker 1: on government land or government program. How big is that 506 00:24:28,600 --> 00:24:30,040 Speaker 1: when you talk about like, Okay, we're going to make 507 00:24:30,040 --> 00:24:32,480 Speaker 1: this pencil out, We're going to expand the supply of 508 00:24:32,520 --> 00:24:33,439 Speaker 1: affordable housing. 509 00:24:33,920 --> 00:24:35,760 Speaker 3: How big of a deal is that. 510 00:24:35,720 --> 00:24:41,200 Speaker 1: Property tax component in terms of making things pencil out better. 511 00:24:41,520 --> 00:24:42,520 Speaker 6: Definitely a key tool. 512 00:24:43,160 --> 00:24:45,479 Speaker 4: It really is what allows us to do so. 513 00:24:45,520 --> 00:24:47,840 Speaker 6: As an example of the Housing Production Fund, the Production 514 00:24:47,920 --> 00:24:51,040 Speaker 6: Fund could still function with just the Housing Production Fund 515 00:24:51,080 --> 00:24:55,280 Speaker 6: itself around producing the housing without any increased affordability, but 516 00:24:55,320 --> 00:24:58,040 Speaker 6: it's really the ability to increase the affordability and to 517 00:24:58,240 --> 00:25:01,480 Speaker 6: deepen the affordability as well, because many of the units 518 00:25:01,480 --> 00:25:05,040 Speaker 6: we deliver are actually below our inclusionary zoning standards. So 519 00:25:05,040 --> 00:25:08,879 Speaker 6: so the property tax abatement is probably something like maybe 520 00:25:09,000 --> 00:25:13,080 Speaker 6: twenty percent, maybe fifteen to twenty percent of op X 521 00:25:13,080 --> 00:25:16,280 Speaker 6: of operating expenses. And so it's that relief that feeds 522 00:25:16,280 --> 00:25:18,320 Speaker 6: into the performer and allows us to go as far 523 00:25:18,359 --> 00:25:23,640 Speaker 6: as we possibly can with affordability, with you know, with services, 524 00:25:23,680 --> 00:25:25,720 Speaker 6: and you know, all the other types of things we 525 00:25:25,800 --> 00:25:27,560 Speaker 6: layer in when we do these projects. 526 00:25:27,880 --> 00:25:31,240 Speaker 1: What is your capacity constraint? Like, what is the source 527 00:25:31,320 --> 00:25:34,680 Speaker 1: of Like in theory, I imagine there's a demand from 528 00:25:34,720 --> 00:25:37,600 Speaker 1: any more apartments, there's probably still scarcity. 529 00:25:37,840 --> 00:25:38,440 Speaker 3: What is the. 530 00:25:38,440 --> 00:25:43,560 Speaker 1: Constraint on Hoc's side in terms of building out even more? 531 00:25:44,000 --> 00:25:47,160 Speaker 6: I would say the primary constraint, especially as we've entered 532 00:25:47,160 --> 00:25:50,240 Speaker 6: into this sort of economic environment where where you know, 533 00:25:50,320 --> 00:25:53,679 Speaker 6: we have twenty projects to choose from that are from. 534 00:25:53,600 --> 00:25:55,920 Speaker 4: The private sector that are all great, They're. 535 00:25:55,720 --> 00:25:58,600 Speaker 6: All tremendous, and it would add tremendously to the county's 536 00:25:58,880 --> 00:26:01,720 Speaker 6: housing stock. So I would say there are kind of 537 00:26:01,760 --> 00:26:04,800 Speaker 6: three key both short and long term constraints for us. 538 00:26:05,720 --> 00:26:08,080 Speaker 6: You know one and it's really I think the deepest 539 00:26:08,080 --> 00:26:11,080 Speaker 6: part of it this discussion is simply building the staffing 540 00:26:11,119 --> 00:26:14,800 Speaker 6: and the capacity and the competency around being able to 541 00:26:14,880 --> 00:26:19,720 Speaker 6: manage how do you be a public limited limited partner investor, Like, 542 00:26:19,760 --> 00:26:22,639 Speaker 6: how do you create the staff you need for that 543 00:26:22,840 --> 00:26:25,080 Speaker 6: out of both sort of what I call found people, 544 00:26:25,160 --> 00:26:27,240 Speaker 6: the people that were kind of already there, but also 545 00:26:27,280 --> 00:26:30,680 Speaker 6: attracting the kinds of practitioners you need to be able 546 00:26:30,720 --> 00:26:33,280 Speaker 6: to scale up like our council wants us to do, 547 00:26:33,440 --> 00:26:35,639 Speaker 6: like the fund is designed for us to do. So 548 00:26:35,640 --> 00:26:39,080 Speaker 6: there's that's certainly I think really one of the deepest 549 00:26:39,080 --> 00:26:41,919 Speaker 6: parts of this discussion is is really just that, and 550 00:26:41,960 --> 00:26:44,680 Speaker 6: then there are other you know, on the financing side. Obviously, 551 00:26:44,920 --> 00:26:47,879 Speaker 6: our aim is to fully subscribe the revolving fund, so 552 00:26:48,000 --> 00:26:50,840 Speaker 6: we've largely done that, and so to some extent it's 553 00:26:50,960 --> 00:26:52,800 Speaker 6: just the size of the fund, and that's fine. That's 554 00:26:52,840 --> 00:26:55,920 Speaker 6: probably the easiest thing to solve. It's just a budget adjustment. 555 00:26:56,320 --> 00:26:58,560 Speaker 6: But then the last piece is things that start to 556 00:26:58,600 --> 00:27:02,640 Speaker 6: get into things like guarantee capacity. So if we're using 557 00:27:02,640 --> 00:27:04,840 Speaker 6: a private bank loan and the bank has come to 558 00:27:04,960 --> 00:27:07,440 Speaker 6: us and said, you know, look, we really trust you guys, 559 00:27:07,440 --> 00:27:10,960 Speaker 6: we think you're excellent practitioners, but while we're under construction, 560 00:27:11,040 --> 00:27:12,720 Speaker 6: you know, we need you to guarantee x percent of 561 00:27:12,760 --> 00:27:15,960 Speaker 6: the loan and across enough deals that starts to be 562 00:27:16,240 --> 00:27:19,119 Speaker 6: an issue relative to a balance sheet, even as that 563 00:27:19,160 --> 00:27:21,480 Speaker 6: balance sheet is growing because of the production. And so 564 00:27:22,119 --> 00:27:23,880 Speaker 6: it's one of those things that you know, we watch 565 00:27:24,040 --> 00:27:26,720 Speaker 6: very very carefully to make sure that not only are 566 00:27:26,760 --> 00:27:29,400 Speaker 6: we thinking about, okay, how do we just finance this deal, but. 567 00:27:29,280 --> 00:27:31,400 Speaker 4: We're also very very cautious. 568 00:27:31,440 --> 00:27:34,639 Speaker 6: We work with our financial advisor extensively on really keeping 569 00:27:34,680 --> 00:27:37,000 Speaker 6: an eye on that guarantee capacity and making sure that 570 00:27:37,080 --> 00:27:40,320 Speaker 6: even from just because we're actually rated by Moodies, to 571 00:27:40,400 --> 00:27:42,439 Speaker 6: make sure that you know, when Moody's comes in for 572 00:27:42,480 --> 00:27:45,639 Speaker 6: their annual review, that we're always keeping that in mind 573 00:27:46,240 --> 00:27:49,399 Speaker 6: so that there are no surprises. We obviously want to 574 00:27:49,480 --> 00:27:51,879 Speaker 6: keep that capacity in a good place, and there are 575 00:27:51,920 --> 00:27:54,320 Speaker 6: innovations elsewhere in the country that we definitely did not 576 00:27:54,440 --> 00:27:56,800 Speaker 6: do that are good solutions for that. So yeah, it's 577 00:27:56,840 --> 00:27:59,600 Speaker 6: really a host of things between just plain old people 578 00:27:59,640 --> 00:28:02,800 Speaker 6: power and then some of the larger implications of taking 579 00:28:02,920 --> 00:28:05,080 Speaker 6: a governmental energy and really supercharging it. 580 00:28:06,000 --> 00:28:09,160 Speaker 2: Well, I'm going to ask a devil's advocate question, which 581 00:28:09,240 --> 00:28:13,040 Speaker 2: I have a teensy bit of sympathy for as someone 582 00:28:13,119 --> 00:28:16,679 Speaker 2: who has spent a lot of money on terrible apartments 583 00:28:16,680 --> 00:28:19,320 Speaker 2: in New York for a long time. But what do 584 00:28:19,359 --> 00:28:23,639 Speaker 2: you say to people who argue that it's unfair that 585 00:28:23,680 --> 00:28:27,480 Speaker 2: the government is subsidizing people to be able to live 586 00:28:27,600 --> 00:28:29,760 Speaker 2: And you know, as you describe it, these are nice 587 00:28:29,760 --> 00:28:33,520 Speaker 2: buildings with a lot of facilities, and people on low 588 00:28:33,560 --> 00:28:37,439 Speaker 2: incomes are able to live in places that they otherwise 589 00:28:37,800 --> 00:28:42,200 Speaker 2: could not afford. And then related to this, in an 590 00:28:42,200 --> 00:28:45,160 Speaker 2: ideal world, wouldn't the solution for this just be for 591 00:28:45,280 --> 00:28:49,280 Speaker 2: companies to pay higher wages so that people could live 592 00:28:49,320 --> 00:28:52,520 Speaker 2: in nice places well? And then on that note, like 593 00:28:52,680 --> 00:28:55,640 Speaker 2: why do we have tax pacers who are subsidizing like 594 00:28:55,800 --> 00:28:59,280 Speaker 2: someone who's earning minimum wage at Walmart so that they 595 00:28:59,320 --> 00:29:02,680 Speaker 2: can actually live somewhere close to where they're supposed to live. 596 00:29:02,920 --> 00:29:05,160 Speaker 5: I think there's a couple of answers to questions like 597 00:29:05,160 --> 00:29:08,040 Speaker 5: this that you know. One is just kind of a 598 00:29:08,840 --> 00:29:11,560 Speaker 5: moral answer of is it fair in a society for 599 00:29:11,600 --> 00:29:13,680 Speaker 5: people to pay seventy percent of their income to rent? 600 00:29:14,000 --> 00:29:15,680 Speaker 5: Some people have different answers to that question. I have 601 00:29:15,720 --> 00:29:18,640 Speaker 5: my answer. The other one just done an economic growth 602 00:29:18,760 --> 00:29:21,600 Speaker 5: point of view. I think it's important to consider it 603 00:29:21,640 --> 00:29:23,360 Speaker 5: from the point of view of if you took ten 604 00:29:23,560 --> 00:29:26,440 Speaker 5: twenty percent of all households in America and double their 605 00:29:26,480 --> 00:29:30,680 Speaker 5: housing payments overnight, what would that do to consumer demand 606 00:29:30,720 --> 00:29:33,960 Speaker 5: in America? That'd be very bad for consumer demand and 607 00:29:34,040 --> 00:29:35,680 Speaker 5: be very bad for growth. It'd be very bad for 608 00:29:35,720 --> 00:29:38,280 Speaker 5: broad economic growth. I don't think anyone who works in 609 00:29:38,280 --> 00:29:41,440 Speaker 5: business wants to have a massive reduction in consumer demand 610 00:29:41,520 --> 00:29:44,000 Speaker 5: by doubling people's rent payments over night. So I think 611 00:29:44,040 --> 00:29:45,960 Speaker 5: there's moral reasons, and I think there's I think there's 612 00:29:46,080 --> 00:29:49,440 Speaker 5: you know, economic reasons why you want to have housing 613 00:29:49,440 --> 00:29:52,240 Speaker 5: supports for people, you know, and as far as you know, 614 00:29:52,280 --> 00:29:55,480 Speaker 5: a fairness question, I think a really important way to 615 00:29:55,480 --> 00:29:58,760 Speaker 5: look at this program is what are we doing to 616 00:29:58,840 --> 00:30:02,680 Speaker 5: stabilize housing production across the business cycle? 617 00:30:02,760 --> 00:30:02,840 Speaker 4: Right? 618 00:30:02,880 --> 00:30:05,320 Speaker 5: One of the things that we're seeing now is that 619 00:30:05,560 --> 00:30:09,040 Speaker 5: when we have a rates environment like we have today, 620 00:30:09,600 --> 00:30:12,800 Speaker 5: we're just seeing housing not pencil at all. Nobody's being 621 00:30:12,840 --> 00:30:15,480 Speaker 5: able to close deals. You have you know, entitled land 622 00:30:15,560 --> 00:30:17,160 Speaker 5: ready to go, and it's just not going to get 623 00:30:17,160 --> 00:30:19,400 Speaker 5: built even though there's housing demand. And so you know, 624 00:30:19,400 --> 00:30:21,720 Speaker 5: when I talk to other agencies, what they're telling me is, 625 00:30:22,240 --> 00:30:25,000 Speaker 5: my god, I have you know, dozens of entitled projects 626 00:30:25,080 --> 00:30:26,480 Speaker 5: that I would love to see built around. 627 00:30:26,480 --> 00:30:28,040 Speaker 3: Mind, what's an entitled project. 628 00:30:28,240 --> 00:30:30,920 Speaker 5: It basically means you've gone through all of the archetel 629 00:30:31,040 --> 00:30:34,120 Speaker 5: to get engineering right, You've gone through all these kind 630 00:30:34,120 --> 00:30:35,960 Speaker 5: of approvals to get it ready to develop, and you're 631 00:30:35,960 --> 00:30:37,880 Speaker 5: ready to move. You just need to close on your finance. 632 00:30:38,040 --> 00:30:41,200 Speaker 6: Yeah, it's really a development application process. So every place 633 00:30:41,240 --> 00:30:41,840 Speaker 6: has got. 634 00:30:41,680 --> 00:30:42,360 Speaker 4: Some version of it. 635 00:30:42,400 --> 00:30:45,320 Speaker 6: But it basically means that you've gotten through what's usually 636 00:30:45,320 --> 00:30:48,120 Speaker 6: called something like a site plan approval. But it's basically 637 00:30:48,120 --> 00:30:49,880 Speaker 6: if you go to the permitting agency, they're going to 638 00:30:49,920 --> 00:30:51,480 Speaker 6: look at it and say, yeah, you've met all the 639 00:30:51,480 --> 00:30:54,400 Speaker 6: conditions of the legal zoning of the property and you 640 00:30:54,400 --> 00:30:55,080 Speaker 6: can now build. 641 00:30:55,280 --> 00:30:57,920 Speaker 5: But you can't build if you don't have half the capital. 642 00:30:58,000 --> 00:31:00,560 Speaker 5: And so that's where if you have a program that 643 00:31:00,640 --> 00:31:04,120 Speaker 5: can scale to many agencies, many places around the country. 644 00:31:04,400 --> 00:31:06,959 Speaker 5: I mean, obviously one building doesn't have a macro effect, right, 645 00:31:06,960 --> 00:31:09,959 Speaker 5: but you have every state running a program like this, 646 00:31:10,760 --> 00:31:14,240 Speaker 5: you maybe have lower dips in housing production kind of 647 00:31:14,240 --> 00:31:15,440 Speaker 5: across your business cycle. 648 00:31:16,040 --> 00:31:16,280 Speaker 6: Yeah. 649 00:31:16,320 --> 00:31:19,000 Speaker 2: The idea of smoothing the cycle in a sort of 650 00:31:19,080 --> 00:31:23,200 Speaker 2: classic Canesian fashion, I guess, is the interesting one for me. 651 00:31:23,600 --> 00:31:27,000 Speaker 2: The other interesting pro argument I could see in this 652 00:31:27,120 --> 00:31:31,880 Speaker 2: is the idea of avoiding enclaves of super rich people, 653 00:31:31,960 --> 00:31:35,120 Speaker 2: so you get sort of high, middle and low income 654 00:31:35,160 --> 00:31:38,120 Speaker 2: people all living together, which kind of goes some way 655 00:31:38,240 --> 00:31:42,800 Speaker 2: to alleviating labor shortage worries, because it feels to me 656 00:31:42,880 --> 00:31:45,200 Speaker 2: like so much of the labor shortage debate, this idea 657 00:31:45,240 --> 00:31:47,880 Speaker 2: that oh we can't get waiters or waitresses or maids 658 00:31:47,960 --> 00:31:51,360 Speaker 2: or cooks or whatever, is actually a housing shortage issue, 659 00:31:51,440 --> 00:31:53,480 Speaker 2: and this could go some way towards solving it. 660 00:31:54,080 --> 00:31:56,640 Speaker 1: Just on the point about building through the cycle, because 661 00:31:56,680 --> 00:31:58,560 Speaker 1: that was one of the things we discussed in the intro. 662 00:31:59,160 --> 00:32:01,520 Speaker 3: Is that true? I mean, in practice. 663 00:32:01,120 --> 00:32:04,480 Speaker 1: Has it been your experience that this model is able 664 00:32:04,520 --> 00:32:07,280 Speaker 1: to do that such that at a time when you're 665 00:32:07,320 --> 00:32:11,080 Speaker 1: seeing entitled projects not get off the ground, you're not impaired. 666 00:32:11,200 --> 00:32:15,160 Speaker 6: It's definitely tougher because again, all we're doing is getting 667 00:32:15,520 --> 00:32:18,680 Speaker 6: any advantage. You know, we have that capital advantage, but 668 00:32:18,880 --> 00:32:20,480 Speaker 6: there's obviously you're. 669 00:32:20,400 --> 00:32:21,960 Speaker 2: Still impacted by higher rates. 670 00:32:22,040 --> 00:32:25,240 Speaker 6: Absolutely we're impacted by higher rates. We have some built 671 00:32:25,280 --> 00:32:27,760 Speaker 6: in you know, because we're using tax exempt financing. 672 00:32:28,280 --> 00:32:29,240 Speaker 4: There are all these. 673 00:32:29,200 --> 00:32:31,920 Speaker 6: Sort of different buffers that we have that further help 674 00:32:32,000 --> 00:32:35,160 Speaker 6: us be this countercyclical agency. But there's no question it's harder. 675 00:32:35,400 --> 00:32:37,920 Speaker 6: But we're about to close a very large transaction. It'll 676 00:32:37,920 --> 00:32:41,080 Speaker 6: be our second housing Production Fund deal, and it's had 677 00:32:41,120 --> 00:32:44,600 Speaker 6: to weather, you know, the entire run up of both costs. 678 00:32:44,120 --> 00:32:45,840 Speaker 4: And rates, and it's still going to close. 679 00:32:45,880 --> 00:32:47,680 Speaker 6: And having been in the private sector, I can tell 680 00:32:47,720 --> 00:32:49,960 Speaker 6: you it's you know, it's just not a transaction that 681 00:32:50,000 --> 00:32:52,240 Speaker 6: would have any prayer of closing in this environment. 682 00:32:52,480 --> 00:32:55,160 Speaker 1: So just real quickly, other a lot of projects that 683 00:32:55,240 --> 00:32:58,480 Speaker 1: you see right now in Montgomery County or Paul, that 684 00:32:58,520 --> 00:33:02,120 Speaker 1: you see elsewhere that some ground was broken or some 685 00:33:02,240 --> 00:33:04,760 Speaker 1: plan was set in motion in twenty twenty twenty one 686 00:33:04,800 --> 00:33:07,200 Speaker 1: that's currently just not being worked on. Is this a 687 00:33:07,320 --> 00:33:10,240 Speaker 1: huge thing that's unfinished entitled property development? 688 00:33:10,760 --> 00:33:13,200 Speaker 6: Yeah, it's much more of like projects that basically are 689 00:33:13,280 --> 00:33:15,640 Speaker 6: like prepared to pull building permits and start but can't 690 00:33:15,640 --> 00:33:18,360 Speaker 6: get that financing. And we've seen that, you know, even 691 00:33:18,440 --> 00:33:22,560 Speaker 6: six months ago, I was probably looking at maybe six 692 00:33:22,600 --> 00:33:25,400 Speaker 6: to ten they have been presented and now it's it's 693 00:33:25,400 --> 00:33:26,720 Speaker 6: got to be twenty to thirty. 694 00:33:26,760 --> 00:33:27,040 Speaker 4: Wow. 695 00:33:27,360 --> 00:33:30,440 Speaker 5: And I was talking to some folks in Massachusetts at 696 00:33:30,440 --> 00:33:33,200 Speaker 5: one of their agencies who you're very interested and deploying 697 00:33:33,200 --> 00:33:35,360 Speaker 5: a two like this who telling me dozens of entitled 698 00:33:35,400 --> 00:33:38,800 Speaker 5: properties in the Boston metro area that seem like they're 699 00:33:38,800 --> 00:33:39,720 Speaker 5: not going to move right now. 700 00:33:40,160 --> 00:33:43,960 Speaker 3: Tracy. I think we have for the episodes to do. 701 00:33:45,240 --> 00:33:46,000 Speaker 2: Of course on. 702 00:33:47,560 --> 00:33:52,120 Speaker 1: Uncompleted housing that people desperately want, but that because of 703 00:33:52,160 --> 00:33:56,080 Speaker 1: our attempt to fight inflation, housing is being kept scarce 704 00:33:56,160 --> 00:33:59,760 Speaker 1: around the country. I think much more, much more to 705 00:33:59,760 --> 00:34:00,720 Speaker 1: be done on that topic. 706 00:34:00,960 --> 00:34:04,800 Speaker 2: This is the ultimate irony of fighting, you know, supply 707 00:34:05,320 --> 00:34:08,200 Speaker 2: lad inflation with higher interest rates. 708 00:34:08,719 --> 00:34:11,040 Speaker 1: Zach and Paul, thank you so much for coming on up. 709 00:34:11,480 --> 00:34:12,279 Speaker 5: You're really happy to. 710 00:34:12,200 --> 00:34:26,800 Speaker 7: Be here, Tracy. 711 00:34:26,840 --> 00:34:31,360 Speaker 1: Actually, that last point about just the surge in noncompletion 712 00:34:31,560 --> 00:34:34,640 Speaker 1: of developments is pretty alarming. The fact that it's significantly 713 00:34:34,640 --> 00:34:37,920 Speaker 1: different than it even was six months ago at a 714 00:34:37,960 --> 00:34:40,120 Speaker 1: time when people are frustrated by rants, at a time 715 00:34:40,120 --> 00:34:43,359 Speaker 1: when people are frustrated by housing shortage, and the fact 716 00:34:43,400 --> 00:34:46,840 Speaker 1: that in the last six months planned completions have gotten 717 00:34:46,920 --> 00:34:49,320 Speaker 1: worse is pretty It's pretty damning. 718 00:34:49,360 --> 00:34:52,000 Speaker 2: I would say, yeah, that was kind of a crazy number, 719 00:34:52,040 --> 00:34:55,360 Speaker 2: but also I guess it gets to the whole point 720 00:34:55,640 --> 00:34:59,160 Speaker 2: of maybe doing this sort of public private financing. This 721 00:34:59,280 --> 00:35:04,280 Speaker 2: idea of having a smoothing effect on the housing cycle 722 00:35:04,440 --> 00:35:07,840 Speaker 2: or having a sort of backstop for capacity at a 723 00:35:07,880 --> 00:35:10,880 Speaker 2: time of higher interest rates. But then to that point 724 00:35:11,000 --> 00:35:15,200 Speaker 2: there are limits. And even Montgomery County, you know, Zach 725 00:35:15,320 --> 00:35:19,680 Speaker 2: was talking about the guarantees and having to present their 726 00:35:19,760 --> 00:35:22,239 Speaker 2: finances to Moody's every year and get a rating for 727 00:35:22,440 --> 00:35:24,920 Speaker 2: unibonds and things like that, But there is an impact 728 00:35:25,120 --> 00:35:26,520 Speaker 2: of higher rates there as well. 729 00:35:26,880 --> 00:35:28,600 Speaker 1: By the way, it looks like they have a triple 730 00:35:28,640 --> 00:35:31,839 Speaker 1: A rating, at least Montgomery County does. That's the nice 731 00:35:31,840 --> 00:35:34,040 Speaker 1: thing looking at the terminal while we were doing this, 732 00:35:34,200 --> 00:35:37,960 Speaker 1: so very well rated across all three of the major 733 00:35:38,719 --> 00:35:41,960 Speaker 1: credit rating agencies. But yeah, you know, this idea of 734 00:35:42,200 --> 00:35:47,320 Speaker 1: using the public balance sheet in some way is really interesting. Also, 735 00:35:47,560 --> 00:35:50,839 Speaker 1: I thought Zach's point about one of the major constraints, 736 00:35:51,280 --> 00:35:53,960 Speaker 1: and again I think people tend to maybe abstract these 737 00:35:53,960 --> 00:35:56,839 Speaker 1: types of things away. Is Okay, you could have a 738 00:35:56,880 --> 00:36:00,480 Speaker 1: public sector or a public authority, be a lan lord 739 00:36:00,560 --> 00:36:03,360 Speaker 1: in some capacity, be the owner of what looks like 740 00:36:03,480 --> 00:36:06,600 Speaker 1: normal market rate construction, But do you have the personnel capacity. 741 00:36:06,760 --> 00:36:11,360 Speaker 2: Yeah, it's not the government's expertise, right right. Typically, the 742 00:36:11,400 --> 00:36:14,319 Speaker 2: big advantage of the government or the big specialty of 743 00:36:14,320 --> 00:36:17,400 Speaker 2: the government is basically a lower cost of capital. Yeah, 744 00:36:17,480 --> 00:36:20,319 Speaker 2: not actually execution on a lot of things. There are 745 00:36:20,320 --> 00:36:22,360 Speaker 2: some exceptions, like you know, when we talk to the 746 00:36:22,400 --> 00:36:25,200 Speaker 2: Department of Energy, they have a lot of energy experts 747 00:36:25,200 --> 00:36:28,560 Speaker 2: who are able to evaluate projects. But in general, I 748 00:36:28,600 --> 00:36:31,080 Speaker 2: think the big advantage of the government is that lower 749 00:36:31,120 --> 00:36:33,200 Speaker 2: cost of capital, and this kind of puts it to 750 00:36:33,239 --> 00:36:33,840 Speaker 2: best effect. 751 00:36:34,280 --> 00:36:34,480 Speaker 3: Yeah. 752 00:36:34,560 --> 00:36:37,400 Speaker 1: No, it's really interesting to think about. Yeah, personnel is 753 00:36:37,440 --> 00:36:39,600 Speaker 1: a constraint, and hiring is a constraint right now, and 754 00:36:39,680 --> 00:36:43,000 Speaker 1: public sector hiring is a constraint right now, and it's 755 00:36:43,040 --> 00:36:46,240 Speaker 1: one area in which public sector authorities across the country 756 00:36:46,280 --> 00:36:49,000 Speaker 1: have had issues hiring. So it's interesting to see how, okay, 757 00:36:49,280 --> 00:36:52,719 Speaker 1: you can transfer the ownership of the financing to the 758 00:36:52,760 --> 00:36:55,560 Speaker 1: public sector in some way or another. But then still 759 00:36:55,880 --> 00:36:58,919 Speaker 1: it doesn't mean that you don't have some of these 760 00:36:59,200 --> 00:37:01,799 Speaker 1: key constraints. Construction is another one, and it doesn't matter 761 00:37:01,800 --> 00:37:04,680 Speaker 1: who it is. If labor is scarce, some materials are scarce. 762 00:37:04,680 --> 00:37:07,920 Speaker 1: If you're waiting on you know, cooling equipment or whatever, 763 00:37:08,120 --> 00:37:08,919 Speaker 1: it's going to be tough. 764 00:37:09,080 --> 00:37:13,640 Speaker 2: Yeah, So pros smooth the housing cycle, expand housing capacity, 765 00:37:14,080 --> 00:37:17,200 Speaker 2: create more vibrant communities where there's a mix of low 766 00:37:17,239 --> 00:37:21,640 Speaker 2: income and higher income residents. And I guess cons some 767 00:37:21,680 --> 00:37:25,320 Speaker 2: people are inevitably gonna think this is unfair or someone 768 00:37:25,440 --> 00:37:28,399 Speaker 2: is always no, no, okay, wait, can I just say 769 00:37:28,440 --> 00:37:30,839 Speaker 2: I'm in a bad housing mood because my toilet has 770 00:37:30,880 --> 00:37:34,440 Speaker 2: been broken for like six months right now? Yeah, I am. 771 00:37:34,480 --> 00:37:36,800 Speaker 2: And also my neighbor drilled a hole in the partition 772 00:37:36,920 --> 00:37:39,560 Speaker 2: wall and yeah, and I didn't have any hot water 773 00:37:39,640 --> 00:37:42,160 Speaker 2: on Sunday either. Oh, and the intercom's not working. 774 00:37:42,280 --> 00:37:43,759 Speaker 3: Yeah, this is all true. I've been hearing a lot 775 00:37:43,760 --> 00:37:44,120 Speaker 3: about that. 776 00:37:44,200 --> 00:37:45,480 Speaker 1: Yeah, I'm sorry, that's right. 777 00:37:45,520 --> 00:37:46,080 Speaker 4: No, it's okay. 778 00:37:46,120 --> 00:37:50,080 Speaker 1: But for listeners, this is why Tracy is resentful of. 779 00:37:50,000 --> 00:37:52,160 Speaker 3: Other people getting a good deal out nice apartment. 780 00:37:52,920 --> 00:37:53,960 Speaker 2: Okay, shall we leave it there. 781 00:37:54,040 --> 00:37:54,759 Speaker 3: Let's leave it there. 782 00:37:55,000 --> 00:37:58,239 Speaker 2: This has been another episode of the Oddlots podcast. I'm 783 00:37:58,280 --> 00:38:01,360 Speaker 2: Tracy Alloway. You can follow me Tracy Alloway. 784 00:38:01,080 --> 00:38:04,040 Speaker 3: And I'm Joe Wisenthal. You can follow me at The Stalwart. 785 00:38:04,320 --> 00:38:08,560 Speaker 1: Follow Paul Williams on Twitter. He's at pe Williams Underscore. 786 00:38:08,719 --> 00:38:12,600 Speaker 1: Follow our producers Carmen Rodriguez at Carmen armand Dashel Bennett 787 00:38:12,640 --> 00:38:16,440 Speaker 1: at Dashbot and kel Brooks at Calebrooks and special thanks 788 00:38:16,480 --> 00:38:20,040 Speaker 1: to producer Moses Ondam And For more odd Laws content, 789 00:38:20,080 --> 00:38:22,440 Speaker 1: go to Bloomberg dot com slash odd Lots, where we 790 00:38:22,560 --> 00:38:25,759 Speaker 1: have transcripts the blog in a newsletter and you can 791 00:38:25,840 --> 00:38:29,000 Speaker 1: talk about this episode in our discord twenty four to 792 00:38:29,000 --> 00:38:31,719 Speaker 1: seven with fellow listeners. Maybe we'll get up Paul or 793 00:38:31,880 --> 00:38:34,040 Speaker 1: Zach or both of them to come in and answer 794 00:38:34,120 --> 00:38:36,120 Speaker 1: follow up questions when this comes out. 795 00:38:36,520 --> 00:38:37,160 Speaker 4: To go check it out. 796 00:38:37,200 --> 00:38:38,040 Speaker 3: We have a very. 797 00:38:37,960 --> 00:38:41,040 Speaker 1: Vibrant real estation on their discord dot gg slash out. 798 00:38:41,680 --> 00:38:44,400 Speaker 2: And if you enjoyed this episode, if you want us 799 00:38:44,440 --> 00:38:47,000 Speaker 2: to do more on affordable housing, or if you want 800 00:38:47,080 --> 00:38:49,520 Speaker 2: us to have all the members of Light Sweet Crude 801 00:38:49,640 --> 00:38:53,200 Speaker 2: on the podcast eventually, then please leave us a positive 802 00:38:53,239 --> 00:38:55,000 Speaker 2: review on your favorite pot or. 803 00:38:54,920 --> 00:38:56,680 Speaker 1: If you want or if you want Tracy to be 804 00:38:56,719 --> 00:38:59,239 Speaker 1: able to afford a place where someone isn't going to 805 00:38:59,280 --> 00:39:02,359 Speaker 2: Be drilling a that too, I'd appreciate it all right, 806 00:39:02,680 --> 00:39:03,480 Speaker 2: Thanks for listening,