Talking Heads: Eric Price, AFL-CIO Housing Investment Trust
By Darryl Hicks
10 min read
For over 30 years, the AFL-CIO Housing Investment Trust (HIT) has provided retirement security for millions of union members and their pension plans, while simultaneously expanding the supply of affordable housing, creating family-supporting union jobs, opening doors to homeownership for working families, and revitalizing communities across the nation where union members live and work.
An SEC-registered mutual fund, the HIT has invested over $7 billion of union pension money toward the construction/rehabilitation of more than 101,000 multifamily units, 65% of them affordable.
A key figure in these efforts is Executive Vice President Eric W. Price, who joined HIT in 1994 as Chief Investment Officer and Director of Housing Production before leaving in 1999 to serve as Deputy Mayor for Planning and Economic Development under D.C. Mayor Anthony Williams. After leaving public office, Price worked for Local Initiatives Support Corporation (LISC), then for a real estate developer, before coming back to HIT in 2010.
Outside of work, Price is active in the DC community. He is the President of Casey Trees Endowment Fund, a non-profit that has planted over 20,000 trees in the nation’s capital since 2002, and he participates on the Boards for the DC Preparatory Academy, the Washington Hospital Center and National Low Income Housing Coalition.
TCA sat down with Price to learn more about his organization and his opinions on different labor issues impacting the affordable housing business.
Tax Credit Advisor: What was your path into affordable housing?
Eric Price: My first job was with McDonnell Douglas working on the manufacturing side, initially scheduling the delivery of the aircraft and eventually working directly with the airlines in commercial contracts. It had nothing to do with my major but I wanted to work for a couple of years and then go back to law school or business school, which I eventually did when I earned my MBA from the Fuqua School of Business at Duke University. I knew that I didn’t want to be in the aerospace industry, or work for a corporation. I wanted to do something that impacted communities, and that helped transform neighborhoods. I wasn’t sure what profession that might be, but I knew I wanted to be involved in creating change in low-income neighborhoods. I was in my second year at Duke University, when a developer named Marshall Isler gave a lecture in my real estate finance course. Marshall was a pioneering developer of affordable housing in the Raleigh-Durham and Winston-Salem areas. He discussed several affordable housing deals he had structured and the positive impacts they were having. I reached out to Marshall and asked if I could work for him, on anything. He had a small shop, just a few employees. When the summer came, I had to decide whether to stay in Raleigh-Durham. I wanted to work with Marshall full-time and also get a salary, but unfortunately he had another MBA graduate who he had already hired. Marshall said he was trying to put some deals together and perhaps we could work something out at a later time, which we did. We established a non-profit called Churches for Action, which developed a small affordable housing project of between 15 to 20 units. Working in a small shop I was able to do everything – submitting grant proposals, working on zoning issues – and learned a tremendous amount, both failure and success.
TCA: How does HIT fit into the larger AFL-CIO? How does HIT’s labor relations staff add value to a project?
Eric Price: The Housing Investment Trust is a registered investment company or mutual fund with nearly 390 investors, which include union pension funds and labor organizations, as well as public employee pension funds. Our relationship with the AFL-CIO is through our Board of Directors, which includes among its ten current members AFL-CIO President Richard Trumka, Secretary-Treasurer Liz Shuler and Sean McGarvey, President, North America’s Building Trades Unions, AFL-CIO. The HIT investments in construction-related projects require 100% union labor. The HIT provides competitive returns for our investors and collateral benefits of union construction jobs and affordable housing. Our mission is very much aligned with the mission of the AFL-CIO, which helps ensure people are paid family-supporting wages and receive retirement and medical benefits. Regarding your second question, our Labor Relations staff provides housing developers and contractors with labor relations services that assist them in meeting HIT’s labor requirements and completing their projects on time and within budget. So the question becomes how do we make that happen, how do we get in early and have those discussions with the developer to ensure the project complies with our requirements. When we start a new project, we give the developer or the mortgage banker our requirements upfront. We make sure they fully understand what that means. It’s not that almost all of the trades are union, or that some are not, or this one isn’t. The job must meet our union labor requirements.
TCA: HIT offers an array of debt programs to finance the construction/rehabilitation of affordable housing, mixed-income housing and market-rate housing. What programs are most popular and what do the terms look like?
Eric Price: We primarily invest in mortgage-backed securities of a high credit quality. Either government insured, like a Ginnie Mae security issued under the FHA 221(d)4 program or 221(d)3 program, or we buy bonds (both taxable and tax-exempt) issued by state housing finance agencies with an AA or better credit rating. Most of the underlying projects have an affordable component.
TCA: How does that work if you are not actually providing the loan?
Eric Price: If the developer needs financing, we recommend the names of mortgage bankers. The mortgage banker is responsible for underwriting the loan and structuring the transaction and we are the purchaser of the security backed by the loan. In some cases, we work with a developer as much as needed through the process, whether it’s technical assistance, or indicative pricing, so that if they are trying to get other layers of subsidies, they can say, ‘we have a partner and investor ready to purchase the security and they have given us indicative pricing and believe our pro forma is real.’ We do a lot of that, and if there are gaps in the financing, we try to figure out what sources of financing can be brought into the deal.
TCA: How many affordable housing units have been financed through HIT? Do you lend nationally or specific regions?
Eric Price: Since 1984, we have financed over 101,000 units of which 66,000 were affordable. Since 2009, we have financed approximately 25,000 units, of which more than 80% were affordable. We operate nationally, but more so in areas where there is an active labor presence.
TCA: What types of deals do you find most appealing?
Eric Price: Affordable housing projects that have a mixed-use, mixed-income component, that are transformative for the neighborhoods in which they are located, and which pay family-supporting wages to the laborers involved in the construction/rehabilitation. We also work well with state housing finance agencies. We can fund bonds on a draw-down basis and eliminate the negative arbitrage that normally comes when HFAs issue bonds through the market. We can also eliminate some of the underwriting fees when we do direct-placement deals. If the HFA provides a guaranty, we can offer bridge financing, so that you don’t have to bring in another source to fund the tax credit equity.
TCA: Perhaps the biggest challenge facing the affordable housing industry today is rising construction costs (land, labor, etc.) and fewer financial resources to keep pace with the demand for housing. What is HIT doing to tackle this problem?
Eric Price: We work with different for-profit and non-profit developers, and offer early technical assistance when they are beginning to structure deals and identify and leverage resources. We are currently working with a group in New York called United Clergy Task Force. The task force is working with houses of faith who have land that they own outright. They are looking at the real estate possibilities for that land, and other social programs they can provide. We are working with them as they develop a site plan and decide what uses make the most sense and how to pay for them. We are also working on a project in Detroit. The Detroit Land Bank owns approximately 30,000 residential properties. We are partnering with two local non-profit organizations, a building trades non-profit and a community development non-profit. We, along with another financial partner, are providing financing for construction, while the building trades non-profit will furnish training and labor. The Land Bank is offering the land for a de minimis cost and subsidies for the residents who will be buying these refurbished properties. The cost of land is what it is, but these are two examples of how we are trying to overcome that challenge.
TCA: Another issue facing developers is the lack of skilled labor. Younger people seem less inclined to become welders, plumbers and other skilled craftsmen. How do we incentivize people to learn these trades?
Eric Price: We try to work with different organizations that provide skilled training. A program in Detroit called Access for All trained some of the people working on the single-family housing project I just mentioned. There are similar programs in New York and Boston and in Jersey City, we utilize an apprenticeship program called Project Impact, through which the building trades try to involve, and provide training opportunities for, local residents for projects in our pipeline. I am seeing more and more of this in different areas of the country. If there is a market that we are looking to get into, we will make inquiries with developers and the local building trades about what apprenticeship programs exist and how they can be integrated into our efforts. When we work with states and local communities, the impetus for them to provide subsidies is that they want to see residents from those neighborhoods get some of the work that will come from the construction.
TCA: Of the many accomplishments you have had with HIT, what are you most proud of?
Eric Price: People often say you can’t provide competitive returns, and at the same time create affordable housing or create new jobs. You always hear how difficult it is to meet these objectives, but we really make an attempt to do that. We try to provide competitive returns for our investors, put together projects that make a difference in communities, while ensuring that the people who work on the projects are paid family-supporting wages. Too often, because of high land prices, the first thing people want to do is cut wages, not necessarily consulting fees or any other fees that go into the transaction. But we don’t believe in that. Speaking for myself, we should be able to build affordable housing, we should be able to transform neighborhoods, but not on the backs of people who take wage cuts or don’t have health benefits. In general, the ability to accomplish those things is something I am proud of.
