The Guru Is In Archives

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.

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.

What then is the business model of 21st century rural America? Though you may not realize it, finding the answer is absolutely critical for the affordable housing industry. It stumped me for years, but now I think I’ve figured it out.

Ask Americans what they envision by green building and the property they describe will likely be a ground-hugging campus, newly built, festooned with cutting-edge technology. Then show them a 12-story central-city high-rise built in the mid-1960s and they may instinctively recoil at its plain exterior, small footprint (often paved), and visible age. Yet, when properly compared, that refurbished 202 is much greener than the new campus, because “green isn’t what you think it is.” Instead it’s three things.

Even as tax reform looms on the horizon, the LIHTC is under a different mortal threat, one from an unlikely source – the Obama Administration and its judicially questionable but so-far politically effective blunderbuss known as disparate impact. If not struck down in a case just argued in the Supreme Court, then we might as well kiss goodbye states’ autonomy to set their own QAPs and to make binding awards, and say sayanora to the LIHTC production pipeline as we know it.

Young singles have plenty of personal, economic, and social mobility; they have minimal cash assets (and possibly maximal student-loan liabilities); they want to live somewhere close to work and pay as little cash for it as they can. Their needs beautifully complement what the elderly homeowners have, and what they have is what the elderly need.

RAD, the public housing Rental Assistance Demonstration is in jeopardy of stalling for want of a simple legislative fix: Passage by Congress of a bill raising the current cap of 60,000 units to at least 185,000, or, better yet, eliminating the cap entirely.

Sometimes a revolution happens not with a blare of trumpets but through a thousand small actions in the same direction. Without actually sensing movement, one suddenly realizes the world has become quite different than it was – and is never going back.