David A. Smith Author Archives

Everyone in America knows that student debt is out of control. Seventy percent of the Class of 2015 will graduate with debt averaging $35,000 apiece, adding to the $1.2 trillion in student loans outstanding, a debt class bigger than car loans, bigger than credit card debt.

In central London, on the pavement at every street corner, every traffic light, every pedestrian crossing, are painted two words: LOOK RIGHT. They exist to protect us against the instincts most of us have spent a lifetime acquiring, instincts that kick in when we are inattentive, in a hurry, tired or under stress.

You know that old trees just grow stronger/ And old rivers grow wilder every day
Old people just grow lonesome/ Waiting for someone to say, “Hello in there, hello”
– John Prine, 1971

For centuries during the late Middle Ages, tales were told of the realm of Prester John, whose empire of milk and honey lay among the heathen somewhere beyond the horizon. Expeditions were mounted in search of this Most Christian King, reputed to breed unicorns, whose prized horns were brought back by intrepid explorers.

At the beginning of my talk on leadership to NH&RA’s Next Generation Leadership group in November here in Boston, my glib self-description (“either the room’s youngest old person or its oldest young person”) unwittingly voiced a generational paradox of our industry: what seems to older executives a gray floor seems to their younger colleagues a gray ceiling.

The Schleswig-Holstein question is socomplicated, only three men in Europe have ever understood it. One was Prince Albert, who is dead. The second was a German professor who became mad. I am the third … and I have forgotten all about it.
– Lord Palmerston (Prime Minister, 1855-65)

To the list of American things that are growing more expensive in real terms, we must add the standard LIHTC apartment, and the principal reason is our capital sourcing model, the funding sieve.

“You will be haunted,” resumed the Ghost,
“by Three Spirits.”
“I – I think I’d rather not,” said Scrooge.

RAD’s birth a little over three years ago could scarcely have been less heralded: tucked obscurely into an appropriations extender, it offered no new money (not a bug, a feature; if RAD had had scoring cost, it could never have emerged from the sausage factory); outside the public housing realm it was greeted with indifference; and within public housing circles it was generally treated with at best hostile vigilance1. How then could this unassuming program blow through its original optimistic cap, tripling in size to over 180,000 apartments (nearly 15% of the entire public housing inventory) with no signs of slowing down?

In thermodynamics, entropy is, among other things, a measure of a system’s granular complexity – and in thermodynamics it is a fundamental law that entropy and complexity always increase.

Acertain $10-billion-a-year industry faces systemic catastrophic risk, for which we are entirely uninsured.
Today’s tax credit properties would not exist without insurance. Today, a LIHTC property without insurance is unfinanceable and un-ownable. It must have title insurance, fire insurance, casualty and personal injury insurance, and flood insurance if relevant. Many properties expect the tenants to buy renter’s insurance, many loans have mortgage insurance.

LIHTC properties need increasing amounts of effective subsidy. Affordable housing always costs money, and the greater the desired affordability, the more money it costs (whether as income subsidy or concessionary financing), and in the main it must come from government. Because most people involved in making these government subsidy decisions are unschooled in development financing, their negotiations tend in the direction of adding policy goals that add cost – and hence increase the effective subsidy (or the net present value cost to government) required.