Breaking Ground
Peter Bell, President & CEO, National Housing & Rehabilitation Association
By Darryl Hicks
10 min read
Peter Bell is the president & CEO of National Housing & Rehabilitation Association and publisher of Tax Credit Advisor magazine. He has been an observer, chronicler and convenor of the affordable housing industry since becoming NH&RA’s first full-time staff member back in 1976.
TCA sat down with Bell to talk about his longevity in the industry, the changes he’s seen and the changes he’d like to see.
Tax Credit Advisor: You have been engaged in the affordable housing industry for 46 years now. With that long-term perspective, what are some of your observations on the affordable housing business?
Peter Bell: It has been an exciting field to build a career. The individuals who participate in this business are deeply committed to building communities of quality, highly creative at problem-solving, clever in deploying new government programs as they are introduced and mutually supportive of one another in working towards building more affordable housing.
The collegiality in this field is extraordinary. Unlike other fields of commerce, where competition is cut-throat and companies don’t necessarily talk openly to each other, the willingness to share ideas, discuss successes, describe challenges and provide referrals is unique. This is partly due, I think, to the allocation of tax credits in this business. No company can receive all the allocations in any jurisdiction; it gets distributed by the agencies to many participants, so if my competitor receives an allocation, then it doesn’t preclude me from getting mine.
Also, because this business relies heavily on public policy and government programs, industry participants understand the importance of working together to present a united front when discussing policy with government officials. This helps weave a common thread among those engaged in affordable housing.
Finally, I think the fact that every project requires a well-rounded team with individuals from varied professional disciplines, most of whom also work with many other clients and associates, helps generate mutual respect, the willingness to share knowledge and a high level of collaboration among companies that are essentially competitors.
TCA: How has that had an impact on NH&RA?
PB: It is our understanding of this underlying dynamic—the need to share knowledge and collaborate—that has allowed us to sustain NH&RA as an organization of thought leaders and innovators in the affordable housing community. Early in my career, the first chairman of NH&RA with whom I worked, Carl Dukess (previously of Continental Wingate), told me that many Washington organizations spend their time reporting the blow-by-blow process as policy works its way incrementally through Congress and the implementing agencies. Carl told me that what is helpful instead, is to provide thorough insight into what the policy means and the opportunity it creates (or changes), and, most importantly, the implementation or transition dates. It is based on that early lesson from Carl that we have developed our concept of presenting “transaction-oriented” information—news you can use—as the cornerstone of NH&RA’s activities.
TCA: What were some of the “headwinds” the industry faced in your early days at NH&RA?
PB: Rising interest rates. A shortage of qualified laborers. Volatile, unpredictable utility costs. Escalating construction and insurance costs.
On the construction cost issue, I recall the Department of Housing & Urban Development’s Assistant Secretary for Housing Larry Simons addressing an NH&RA conference in 1988 telling the audience, “You must get costs under control. We can’t keep supporting programs, like Section 8 new construction, where it costs $35,000 to build a new unit.” That number seems quaint today.
TCA: And what are the “headwinds” the industry is facing today?
PB: Not enough subsidies to meet the demand. Rising interest rates. A shortage of qualified laborers. Volatile, unpredictable utility costs. Escalating construction and insurance costs. Sometimes it seems that no matter how much things change, they also remain the same.
TCA: So, have we not made much progress then?
PB: No, we have. In all seriousness, we have come a long way since the 1970s and have grown into a more sophisticated industry. Deal structures have evolved to entice a broader pool of investors. Financing is more complex with the use of many tools, including various categories of bonds; interest rate caps and swaps; New Markets, Historic Rehabilitation and Energy Tax Credits; twinning nine and four percent tax credits on a single deal; and ground leases. The list goes on and continually evolves. The resourcefulness with which this industry rolls with the punches and adapts to challenges that arise has always impressed me and has been a source of inspiration. The prevailing attitude has been that obstacles create challenges and opportunities; they don’t create roadblocks.
The design and construction aspects of affordable housing have evolved, as well. I think the architectural design of multifamily properties has improved vastly since I first started in this field. Architects think more holistically about the activity that takes place in an apartment community. Facilities for community activities are more commonplace. Unit designs and layouts are better. Utility systems and HVAC are more efficient. Construction technology is always in a state of modernization and many affordable housing developers, designers and contractors have been among the first to embrace new technology, new building products and emerging technology, such as panelized construction, 3D printing, etc.
TCA: What else do you think has changed in the housing tax credit program over the years?
PB: To some extent, I think allocating agencies ask developers to address more and more of our nation’s societal issues. Most affordable housing developers, including the larger nonprofit developers, have gained expertise in building high-quality properties and operating them to be safe, secure and attractive communities. However, allocation plans often require targeting some, if not most of the units, to special needs populations to be competitive in obtaining nine percent credits. Developers are asked to house very low-income households, disabled individuals, frail elderly, formerly homeless or previously incarcerated residents.
This is an important effort and housing these challenged populations is indeed a noble undertaking. But there are costs involved that need to be recognized. And skill sets required that are not typically possessed by real estate developers. Additional funding from the states, or perhaps a new tax credit for investment in resident services should be considered as a means of supporting developers who agree to address these needs.
TCA: What changes would you like to see in the Low Income Housing Tax Credit program?
PB: Nowadays, it seems that most of the nine percent tax credits are awarded to smaller projects, typically under 80 units and often fewer than 60 units. These smaller properties are harder to make work from several perspectives and oftentimes harder to manage on an ongoing basis. It would be nice to see Congress expand the amount of tax credits given to each state. Then, states could consider creating separate pools for their competition, i.e., a pool for special needs projects, one for smaller projects and another for larger projects.
Larger projects are mostly relegated to the tax-exempt bond program these days and must work with four percent tax credits, a much shallower subsidy, even when paired with tax-exempt debt. States must also decide where to allocate their bond authority. Affordable multifamily housing must compete for allocation with other uses, such as single-family mortgage revenue bonds and industrial development bonds. While the spread between interest rates on tax-exempt and taxable bonds was narrow over the past several years, the other activities were able to be funded with taxable bonds. As that delta grows and the spread widens, those other activities will rely more upon allocations of tax-exempt debt.
So, what I’d like to see is an increase in the volume cap of tax-exempt debt that each state may be allowed to issue. Equally important, would be a priority placed by the states on using their tax-exempt volume for affordable multifamily housing first, and then using “recycled” bonds to fund the other activities. This makes sense for states because, by using the bonds for affordable housing, they leverage the additional investment yielding from the four percent credit. At the same time, since we only need the bonds to provide financing to meet the 50 percent test, and only until the property is placed in service and can be refinanced, the tax-exempt authority could then be recycled for other endeavors.
Recycling bonds, in my opinion, is a win-win for all. I don’t see any reason for a state to resist it.
TCA: What is NH&RA doing to prepare for the future?
PB: In my early years I was always the youngest person in the room at any meeting I attended. For the next 25 to 30 years, I was still often the youngest person in the room. The executives in this field are so passionate about what they do that many just “keep on keepin’ on,” as we say in the jazz world. In the last ten years, I’ve finally seen a greater degree of intergenerational change at the higher executive levels.
At NH&RA, in an effort initiated by my former colleague, Thom Amdur, and continued by our new managing director, Kaitlyn Snyder, we are striving to place more younger participants, especially those from diverse backgrounds, into positions of responsibility within affordable housing companies. Our organization’s primary role has always been to facilitate the exchange of ideas and information among leading practitioners in our field. We have been making an intentional effort to present participation opportunities to a broader array of young professionals by encouraging them to join us and become acquainted with and learn from the many “luminaries” among our membership who have driven this field for the past 40 years. We are conscious of this as we plan programs, invite speakers and recruit hosts for various panels at NH&RA events.
I used one jazz analogy previously and I’ll use one more. Jazz is an art form that is passed from one generation to the next by working together, playing together, composing tunes and creating arrangements for each other, with the more senior musicians teaching younger ones the lessons they’ve learned along the way. You can read textbooks on jazz or biographies of great musicians, and practice all day long, but if you don’t play with a seasoned musician, you will never really get it, really be able to swing.
Affordable housing development has similarities. There is a general structure to a deal – but a bit of improvisation is usually required to make it happen. You can study development in a real estate program at a university. You can read books, regulations, partnership agreements, contracts and financial documents. But it is by learning from a “master,” a seasoned developer who has experienced the ups and downs of various economic climates, worked with a range of programs and regulators, completed many deals and overseen the management of a growing portfolio, through which knowledge is acquired.
Our mission at NH&RA is to share that knowledge broadly among industry participants, both seasoned professionals and newcomers alike.
TCA: Finally, you alluded to the jazz world twice in this interview. What exactly is your role?
PB: There’s a saying among my jazz colleagues: Those who can, play. Those who can’t, present. I’m in the latter group. I never had the discipline to practice music when I was younger. But, through my career with NH&RA, I have grown to understand organizational management, particularly of nonprofit organizations.
I serve as executive director of the Telluride Society for Jazz, the nonprofit presenting organization for the Telluride Jazz Festival, an event held the second weekend of August each summer in the exquisitely beautiful mountain town of Telluride, CO. Our 46-year-old festival is the Society’s primary activity each year and funds earned are invested in music education both during our festival and year-round throughout the southwestern Colorado region.
I invite all TCA readers to join us next summer!
