NH&RA 2013 Vision Award Honoree, Jack Manning: Tax Credit Pioneer

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In 1974, Jack Manning and Herb Collins formed a partnership then called the Greater Boston Development Corporation to provide equity investment capital for the development of apartment properties. But after just two years of financing market-rate projects in a high inflation, high interest rate (prime rate rose to 12%) environment, they concluded there had to be a less risky way to invest in real estate.

Their research led them to a government program known as Section 515 Rural Rental Housing. Sect. 515 offered 95% financing and a 50-year amortization period at 1% interest rate. Their first Sect. 515 investment was $195,000 in equity and financed construction of the 40-unit River Crest Apartments in Lancaster, Pa. Rivercrest was the first of over 3,000 investments Manning would make over the next 28 years.

In January of 2014, the company, now run solely by Manning following Collins’ retirement in 2001 and known since 1987 as Boston Capital Corporation, will celebrate it’s 40th anniversary and is now the largest owner/investor of apartment properties in America, according to the National Multi Housing Council, with a portfolio of over 156,000 units with original costs in excess of $15 billion. Boston Capital employs over 200 people in offices in five states and services 88,000 investors.

On November 13 of this year, Jack Manning will be honored along with Vincent P. O’Donnell with the National Housing & Rehabilitation Association’s 2013 Vision Award for career achievement in affordable housing. The gala ceremony at The Langham Hotel in Boston’s financial district will coincide with NH&RA’s 2013 Fall Developers Forum.

Jack Manning’s History

Manning, the son of a pediatrician from the mill town of Fall River that lies along the route between Boston and Cape Cod, graduated with a business degree from Boston College, married young, and had two children. After graduation, he spent two years commuting between Beverly Hills and Boston, putting real estate deals together along with finding investors to partner with the real estate division at Beverly Hills Bancorp. Though the projects were located on the West Coast, the investors he attracted were from the East, which set him up to head back home and bring value to a partnership with Herb Collins that would ultimately define both their success and a commitment to affordable housing advocacy.

The unparalleled growth of Boston Capital was ignited in the 1980s by the push for tax reform by the Reagan administration and Congress. At the time, Boston Capital had been investing five to ten million dollars annually largely on the value of depreciation deductions for investors. But with top personal income tax rates being sliced from 50% to 33%, doubt crept into the real estate investor pool, then exclusively comprised of individuals who sought tax relief via depreciation deductions.

“Herb and I realized then that we would have no business if we didn’t act politically,” Manning says. Working closely with the not-for-profit organizations Local Initiatives Support Corporation and Enterprise, Collins, a Republican, and Manning, a self-described liberal Democrat, began spending as much as two weeks each month in Washington on Capitol Hill. Together the three organizations and other housing advocates, realizing that the Historic Preservation Tax Credit program would not be hurt by impending tax reform, conceived and lobbied for creation of the Low Income Housing Tax Credit.

Creation of the Housing Tax Credit

“The polarization that exists today in Washington did not exist then,” Manning says. “The White House and the Senate were then Republican and the House was Democratic. Herb and I pursued relationships on both sides of the aisle. He formed relationships with Senators Bob Dole and Finance Committee chair Bob Packwood and I pursued House Ways and Means Committee chair Dan Rostenkowski and Congressman Charles Rangel. We began to do a lot of campaign fundraising for those members who supported our idea of creating the Low Income Housing Tax Credit, which was novel at the time.

“We argued that with the value of depreciation down, the only way to attract investment capital for affordable housing was going to be through tax credits. Congress was much more receptive to not-for-profits and perceived for-profit companies as less committed to the cause. We first had to sell them on the value private for-profit companies could contribute. And then argued that with the tax credits, profitable corporations would be willing to make these social investments.”

The result was that Congress passed the Low Income Housing Tax Credit as part of the Tax Reform Act of 1986, creating a new form of affordable housing real estate investment as a limited pilot program with a “sunset” or reevaluation date of 1989. In the next year Manning and Collins launched the publicly-registered flagship Boston Capital Tax Credit fund. But shortly thereafter, by the end of the decade, as the sunset period neared its end, the real estate market fueled by Limited Partnerships built on accelerated depreciation crashed. “So our long visits to Washington started all over again,” Manning says. “The program had to be renewed annually from 1989 to 1993, so we needed to be there all the time.” Then in 1993, under Bill Clinton’s administration, the LIHTC program was made a permanent preference in the tax code.

“Those were critical moments in the history of affordable housing,” Manning says. “The tax credit program became the generator of a whole variety of different financing methods and properties targeted at specific markets…It was a whole new vista. Government was no longer the primary funder of affordable housing and a great deal of equity became available. Corporate America liked what they saw and more and more invested. What was almost exclusively a market for individual investors was now moving toward a market focused on institutional investment. It was like adding horsepower to an engine. We went from building 40-unit properties to multi-100 unit properties. As we grew, we had to build infrastructure. We added sophisticated asset management services and information services. This new level of sophistication was overwhelming and exciting. Our investments and relationships were becoming long term and we had the capital to support our growth and operations.”

Busy in Industry Advocacy

Manning’s political activism has continued with his involvement in the founding of the Affordable Housing Tax Credit Coalition and the Housing Advisory Group and his participation in the National Multi Housing Council, the National Council of State Housing Agencies, the National Association of Home Builders’ Housing Credit Group, and NH&RA, all intended to bring the industry together and have an ongoing presence on Capitol Hill and in state capitals as well as to encourage private/public partnerships.

Manning has always kept his fingers on the pulse of government and is very concerned about the future of both the LIHTC and HUD programs on Capitol Hill. “Now we find ourselves trying to protect the program once again. The industry has come a long way since our past tax reform battles but the ideology in our nation’s capital makes this foray as challenging if not more so…The LIHTC program is the perfect example of how the public/private partnership can solve social issues in America.”

“Irrespective of your business, no CEO cannot ignore the effect of politics on your business,” Manning says. “We have to be aware of what policy makers are proposing as that affects their actions, which, whether intentional or not, can put our business at risk. This is why it is so important that our industry continues to engage and educate Congress on the value of the LIHTC and our housing programs.”

“I like to view myself as a social entrepreneur, and part of being an entrepreneur is being aware of and working to secure an environment favorable to your business. At Boston Capital, we never take this guideline for granted.”