Talking Heads Jeff Brodsky, Related Companies
By Darryl Hicks
8 min read
Building from Strength
Jeff Brodsky graduated from Rensselaer Polytechnic Institute in upstate New York with a degree in Mechanical Engineering and moved to Detroit to work for the Ford Motor Company, just as the Middle East oil crisis hit in 1978. But gas shortages and auto industry losses cut short Brodsky’s automotive career. So, he moved back to Long Island and started working for his father, a small-scale affordable housing developer in a one-man office.
Jeff started by opening mail, but took the time to learn his father’s business and over time developed an understanding of the risks and rewards of a career in affordable housing. His life changed forever during a project that was desperate for capital. When the elder Brodsky asked a business partner if he knew anybody who could help complete the financing, the partner replied Stephen Ross, owner of Related Companies. With Ross’s help, the project was completed. Throughout the course of the deal, Jeff impressed Ross with his work ethic. Afterwards, Ross called Brodsky’s father and asked permission to hire his son. That was 1982 and Jeff Brodsky has been working for Stephen Ross ever since.
Over the next 30-plus years, Jeff Brodsky rose through the ranks to become President of Related Management and Executive Vice President of Related Affordable. During his tenure, Related Companies’ affordable housing portfolio has grown to 200 properties and 34,000 units.
In September 2015, Jeff was promoted to the role of Vice Chairman. In a rare interview, Brodsky sat down with Tax Credit Advisor to discuss where he sees the future of the affordable housing business headed and where Related fits in.
Tax Credit Advisor: What is Related’s corporate philosophy and what role does affordable housing fit?
Jeff Brodsky: Most people don’t realize that Stephen (Ross) started over 40 years ago purely as an affordable housing operator. He was a developer, an acquirer, and his commitment to affordable housing has never waned. Our portfolio has grown every year since Related was founded in 1972. The commitment to affordable housing is a core capability knitted into the fabric of Related since its inception.
TCA: Before being promoted to Vice Chairman, you ran Related Companies’ property management and affordable housing divisions for almost two decades. In this new role, what is your daily involvement in affordable housing?
JB: I am now able to spend more of my time in business development and building our affordable housing portfolio. That includes some focus on envisioning new assets that we are building or preserving. I am, also, able to spend time engaged more directly in policy discussions that are taking place around the country that associate with rental affordability.
TCA: Given the growing competiveness in the affordable housing market, what do you see as your strategic vision for the next five years?
JB: After 40 years of consistent growth, we are not about to change direction. Our principles are the same. We are going to build, acquire and preserve affordable assets across the country. We will take advantage of what we are fortunate to have: significant access to capital, very creative internal finance capabilities and in-house construction, asset and property management services. We look forward to adding value to the communities in which we invest, while maintaining a commitment as we have for our entire existence of having never exited an affordable housing program.
TCA: What are your biggest concerns right now about affordable housing?
JB: We are worried about tax reform after the next presidential election. We are concerned about the structure of income tax rates even if the tax credit program continues. We are very concerned about what could happen to liquidity if the affordable housing roles of Fannie, Freddie or HUD change. There is even a concern about being able to execute deals if there is policy uncertainty, when Congress can’t make up its mind and you are half in, half out of a program. We are concerned about yield buyers who are looking to exit the affordable housing programs on the sites they buy. It is very difficult to compete and pay for affordable assets at the prices that yield buyers will invest in. There is, also, a concern about private activity bonds. There are states that do not have sufficient private activity bonds. They are over-subscribed. The bond cap is not, though it should be, a “use it or lose it” proposition, like tax credits, that get allocated to states that can use them from the states that don’t use them. So, limits associated with private activity bonds are also compromising the capacity to build more affordable housing in states that need housing most.
TCA: If there were more LIHTC available would Related be building more affordable housing? Are you being limited by what is available?
JB: Yes, we are an active tax credit user. We are very much constrained by the over-subscribed nature of the program. We would love to do more.
TCA: Related often looks outside the box for new business opportunities. One example is RAD. How is that working out?
JB: I think HUD showed solid leadership in getting the program out and is now closing deals. We are using RAD for Type 2’s and the re-structuring of HOPE VI deals. It makes a lot of sense and we are pleased with HUD’s response.
TCA: Besides RAD, what other growth opportunities do you see?
JB: Affordability is not just a 60% of area of median income and below problem. Communities across the country are struggling to preserve rental housing stock that’s affordable to teachers, police and nurses who want to live in the same communities they serve. A middle-class affordability problem is obvious in many parts of the country and we are trying to be a leader in this as well. We recently completed and rented up a 900-plus unit, 100% affordable property in Queens, New York called Hunter’s Point South Living. The units are rented to working-class families. It’s not just targeted to families who make 60% or less of the area median income, but, also, services that the target audience that I was referring to. We are building a similar 200-unit property that we broke ground on recently in Boston. What I will refer to as workforce housing is a need that many communities are trying to satisfy.
TCA: Right in your own backyard, New York Mayor Bill di Blasio made affordable housing a big part of his campaign and has allotted a lot of financial support, but seems to be having trouble getting a program rolling. What can developers, like Related, do to support these initiatives?
JB: I think the mayor has put together a solid team, all knowledgeable housing people. They have reached out to multiple stakeholders across the industry to consolidate ideas. They have a plan that is being put into place. I admire his commitment. It’s a very difficult problem that administrations dating back 50 years have tried to overcome.
TCA: Has the disparate impact decision or AFFH re-routed Related’s business plans?
JB: No. For over 40 years, we have been committed to fair housing, not only the letter of the law, but the intent. We do not have any concerns that this will compromise that strategy in any way.
TCA: As the current Chairman of the New York Energy Efficiency Corporation, how do you envision the energy efficiency movement evolving over the next few years? What is Related’s approach to energy efficiency?
JB: There will be more of a focus on what I will characterize as active energy management or “smart buildings.” You will see more focus on facades, not just boiler systems, lighting and solar, but you will see facades as a tightening of the building and the ability to reduce an energy profile. You will see more onsite renewable energy. The governor of New York in his State of the State Address made a commitment to renewables, especially as capacities and capabilities are built around energy storage and they become part of commercial use. These are just some examples of what you will see over the next number of years. When you ask me how Related sees this issue, it’s just one part of what I call sustainable best practices. We have been benchmarking our energy profile for seven years. Every one of the buildings we purchase goes through an energy efficiency retrofit program. All of our new construction in the last five years are certified to LEED or other standards. We received three of the first 20 building Energy Star designations in the country from EPA for multifamily last year, and all three of them were affordable housing sites. We have a national smoke-free program that was the first of its kind and the only one of its scale.
