Breaking Ground
Tony Bertoldi, Co-President, CREA, LLC
By Darryl Hicks
10 min read
Tony Bertoldi has devoted nearly three decades to the affordable housing business and currently serves as co-president at CREA, LLC, a national Low Income Housing Tax Credit syndicator, where he and his team manage all investment funds and investor relationships.
Prior to joining CREA 14 years ago, Bertoldi was managing director of syndications at a similar firm in Boston for ten years and was a vice president at a large public real estate investment trust company.
Bertoldi recently completed his first book, American Dream Come True: Why Affordable Housing Is Good Policy, Good Business, and Good for America, which hits bookstores on January 9. In the book, Bertoldi explains in a clear and entertaining way what affordable housing is and who it impacts. The book can be preordered from Amazon or Barnes & Noble.
Tax Credit Advisor sat down with Bertoldi to discuss his book, sum up the past year and share his thoughts on LIHTC investor priorities in the coming year.
Tax Credit Advisor: Why did you write this book?
Tony Bertoldi: Affordable housing is widely misunderstood. I wanted to debunk the misconceptions and set the record straight. The target audience is average Americans who aren’t familiar with affordable housing; what it is, or why we need it. Another reason is that a lot of people in my own personal life don’t really know what I do or what the role of a syndicator is. I’ve always joked that I sometimes wish I was an accountant, lawyer or doctor because that kind of response is a hell of a lot simpler than a tax credit syndicator. The book goes about explaining exactly what the LIHTC industry is, including who the key players are, what a syndicator is and how roles like mine serve the industry.
TCA: How is your book different from others that have been written about the affordable housing crisis in America?
TB: I’m not that familiar with many books about affordable housing. However, I think the difference here is that I provide context by looking back at when I graduated high school in 1985. The LIHTC was enacted in ‘86, but it didn’t become permanent until ‘93. When I was going through college, when I was looking for work and when I was studying, no one knew what LIHTC was. Today, there is some coursework at a few universities that focuses on LIHTC, but it still doesn’t quite get the focus it deserves in college coursework. American Dream Come True focuses on the business of LIHTC, how the different participants in the business come together to produce affordable housing and why we need it.
TCA: In researching the book, what one statistic or fact did you find most surprising?
TB: I’m the son of an immigrant. My father came here from Italy when he was 13 years old. In the mid-1960s, my father was earning minimum wage and was able to buy a single-family house. At that time, the median cost of a house was about $25,000 and my parents spent $16,000 on a more modest home. My dad was likely not making much more than minimum wage, which was around $1.25 at the time. So, effectively, you could afford a house on a minimum wage salary. Today, the median cost of a house in the U.S. is $467,000. We went from $25K to $467K, or a factor of almost 20. The federal minimum wage, on the other hand, has remained stagnant at $7.25 an hour since 2009. That is the most glaring statistic that most people are not really aware of, and it drives home the point of why we need affordable housing.
TCA: That’s astounding. Have you seen similar discrepancies in other countries?
TB: If you go to any major European city and other parts of the world, they have issues with affordable housing and are trying to address them in different ways. LIHTC has not been replicated outside of the U.S., but there are attempts—like public housing-type programs—to provide affordable housing. I don’t know the statistics for other countries, but I think that there is a general theme of wages remaining flatter compared to the cost of housing, and frankly, the cost of everything. The other interesting statistic that a lot of people may not realize is that 33 percent of the Consumer Price Index, which measures inflation, is comprised of housing costs. If we can control housing costs and increase the supply of affordable housing, we can tackle inflation. In the book, I advocate for increasing the LIHTC allocations, which is part of what the Affordable Housing Credit Improvement Act is focused on right now.
TCA: I am sure you’d like everyone to read your book, but is there a particular audience for which this is essential reading?
TB: I would be thrilled if my business partners and colleagues read the book. Some of them probably go through the same struggles of explaining what they do and describing the affordable housing crisis we’re in and the business that we work in. But it’s really geared towards average Americans who don’t know what affordable housing is and who might have fallen victim to the common myth that affordable housing is a government handout, thus not supporting affordable housing and all the positive implications of providing a place for everyone to lay their head at night.
TCA: I imagine that includes people who subscribe to NIMBYism.
TB: That’s addressed in the book as well. I’d like to drive home the point that every community needs a fully functioning social economic system. We need people at all income levels within every community because there are jobs and needs at every level. What we’ve started to create in this country are wealthy cities or enclaves where workers must drive anywhere from one-and-a-half to two hours away for affordable living options and the costs of commuting further complicate that. I use the example of the Big Tech companies and what some of them are doing to subsidize the cost of housing through mortgage programs for their employees. It provides housing, but it doesn’t address the need for housing in a more over-arching sense.
TCA: What’s the one key takeaway you’d like people to get from reading your book?
TB: Supply, supply, supply. We need more affordable housing. People need to dissuade themselves from the thought that public housing, Section 8, LIHTC and market-rate housing are all the same. There are people who straddle both worlds. They can afford to live in market-rate housing, even though it’s a bit of a stretch for them, but they also can qualify for LIHTC. Just increasing the supply allows for more room in that inventory and can help bring costs down. We can only increase the supply of LIHTC through an increase in the housing credit. The LIHTC program has produced 90 percent of all affordable housing in the last 35 years. It is the most successful and longest-standing housing program, as well as public-private partnership, in the U.S. With the excellent track record the LIHTC program has had, we need to provide more resources in order to create more supply.
TCA: I’d like to switch gears now and talk about marketplace issues and trends. How would you sum up 2023 from your perspective as a syndicator?
TB: 2023 has been very challenging. The entire banking industry was impacted by the collapse of Silicon Valley Bank, Signature Bank and First Republic Bank. With respect to our syndication model, we, unfortunately, had all three institutions as significant investors for CREA. We were just about to launch a California fund in March of this year when these banks collapsed. All three banks were top targets that we had initial conversations with for that fund. I wouldn’t want to represent that they were committed because that would not be fair. However, they were the three top targets for our fund, so we had to scrap it. And because of where interest rates are, there has been a lot of pressure on the economic buyers who require higher rates of return or are simply not able to make an investment. Somehow, miraculously, we’ll probably do about the same level of volume in 2023 that we did in 2022, which is a testament to CREA’s commitment to building upon its platform, offering new products and gaining new investor relationships. When something like a banking crisis happens, we’re not completely disabled.
TCA: Has your investor base changed at all? Earlier this year, affordable housing advocates were concerned that proposed changes to the Community Reinvestment Act (CRA) would disincentivize banks from investing in the LIHTC program. I am curious if those concerns are still justified.
TB: On October 24, regulators issued the final CRA regulations, which contain 1,400 pages. As of this interview, I haven’t had a chance to read the final rule yet, but there are a lot of very smart people who have. It appears that the concerns and comments from the industry were heard by the regulators. While there isn’t a separate investment test, the final rule has a couple of mechanisms whereby LIHTC investments are used to measure institutions against each other or provide some sort of impact in the scoring of their ratings. I’m a little more hopeful today than I was last week that there will continue to be a strong appetite for LIHTC investments. To be absolutely clear, there is no penalty for not investing in LIHTC. However, companies do get “bonus points” for investing in LIHTC. The question is: how are those bonus points calculated, weighed or compared from institution to institution?
We need a little more time to figure out what’s going to happen and with it not taking effect until Jan. 1, 2026, that gives the market time to adjust. We do expect to see pricing kind of level out a little bit across the country instead of having CRA “hot” spots. One of the other major changes to the regulations is the recognition of what I would refer to as Internet Banks whose deposits come from across the country. Previously, they were required to do community development activities, lending and investing, in specific markets where their physical structures were located. Now, they can invest across the country because those deposits come from everywhere in the U.S. With that and other things, I think we’re going to see the market need to adjust a bit to a leveling of the appetite or price for each deal across the country, which I believe is the regulators’ intent.
TCA: What plans do you have for 2024? Are you looking to expand into new markets, or launch new investment funds?
TB: With where things are right now—economic buyers pulling back a little bit and having lost a couple of investors—I think what we’re seeing is a focus on impact investing next year. That could be an insurance company that’s focusing on a certain population or area where they have a large presence or a health insurance company that’s focusing on certain locations or a targeted tenancy. Even banks, to a certain degree, may do CRA lending and investment, but then make an additional contribution directly to a nonprofit in the area to provide services to the property and its residents. Insurance companies that still require certain economic returns are looking for ESG hot buttons, and looking to see that the deals they’re investing in are serving a wide range of resident populations and providing social services. This is increasingly coming up in conversations. We have more proprietary funds that are focused on targeted deals than multi-investor funds. That’s going to continue to grow. It’s an important opportunity to partner with investors who want to make an impact with their LIHTC investments.
