The Nuts And Bolts Of Community Single-Family Development: A Successful Approach To Acquisitions, Rehabs And Ground-Up

Just Economy Conference – May 6, 2021

Six years ago, NCRC established its GROWTH fund to focus on helping create homeownership opportunities for LMI persons or to help improve properties in LMI neighborhoods. As GROWTH has evolved, there are significant and important lessons to be learned from its work with municipalities, nonprofits and land banks. This session will share strategies and homegrown solutions to address the inventory crisis through collaboration and partnerships.


  • Sharon Lee,  Executive Director of Low Income Housing Institute
  • Richard Gessner, Chairman, Wilmington Neighborhood Conservation Land Bank
  • John O’Callaghan, CEO and President, Atlanta Neighborhood Development Partnership
  • Ed Gorman, Chief of Community Development, NCRC


NCRC video transcripts are produced by a third-party transcription service and may contain errors. They are lightly edited for style and clarity.

Lee, 01:28 

Good morning, good afternoon, everybody. I’m Sharon Lee, and I’m the executive director of the low income housing Institute. I’m welcoming you to this important session, which I think it is going to be very fascinating. We’re going to hear from three experts in the field. As you know, creating homeownership opportunities for low and moderate income households is a very challenging, not only before the pandemic, during the pandemic, and post pandemic, and I’m thrilled that you are all here to join us. We have I think, challenging issues around scaling up homeownership, working with our partners, our lenders, financial institutions, and public agencies. As you know, many of us have experienced the challenge of wrestling public property from local governments, like how to transfer city owned or county owned, or even transit agency properties. So I think what you’ll hear today would be how some agencies have tried really hard to develop partnerships and to also produce at a faster clip than many of us have experienced in the past. It’s just been very, very challenging to do this kind of work. So this session, the nuts and bolts of community Single Family Development, we will have three executive director CEO. And they will talk about their model, I think, I first want to introduce Rick Gessner, who is chief of comete. I’m sorry, Chief president and CEO of Atlanta. I’m sorry, I apologize. We’re getting there, who is the chair chairman of the Wilmington, neighborhood conservation land bank. And he has a big challenge to return vacant, dilapidated, abandoned properties to productive use. So he has a unique role to play as sort of like a broker. And even though they don’t develop themselves, they package and promote and make things happen by facilitating development. So let’s welcome Rick. 

Gessner, 03:57 

Thanks, Sharon. Just to give you some background, so give me a background some get background on the Wilmington neighborhood Conservancy land bank. First, I’ll just start with some background on Delaware. We were actually the first land bank establish the state of Delaware. And to give you some background on the state, where the second smallest physical state, in in the US after Rhode Island, we have a roughly a 990,000 population. And we actually have the smallest number of counties we only have three counties in our state and Newcastle on the north Kent in the middle and Sussex County, which is known for the beaches, Rehoboth Bethany. And Wilmington is the largest city in the state. It was founded in 1638 by the Swedes. Current Population is approximately 70,000. That’s down almost half right after World To the population got up to about 130,000 people. But during the 60s and 70s, their population decreased. And currently our population is roughly 70,000 people with about 32,000 housing units. And to between two and 4000 vacant lots and abandoned structures. We started a group of us started meeting in 2014. To start the land bank, we the state of Delaware was probably one of the last two or three states that did not have a land bank. And so we went through the process of getting the enabling legislation passed by the state legislature and then the city of Wilmington City Council, and approved by the mayor. We’re a city that is a minority majority city, our population is roughly 58%, African American 33% Caucasian and roughly 12%, Hispanic Latino. After the group started, we really, we reached out to over 5050 land banks throughout the United States. And through that, we also got to work with the Center for Community progress. And most of the enabling legislation and the way we structured, the Wilmington neighborhood Conservancy land bank, was based on the discussions that we had with the successful land bank models throughout the US. And with the Center for Community progress. At the time, we, our original structures, a number of homes that we lots of were received, came from the city of Wilmington. Since that time to date, we have successfully repositioned 221 homes, they are either renovated or under renovation. We have distributed 14 side lots, these are vacant lots that are next to a homeowner that has taken over responsibility for those. And we’ve also done 14 urban garden lots spread throughout the city. And basically those all were started with initiatives from the local residents. Currently, we have an inventory of roughly 126 structures and 170 107, empty lots things that we’ve learned really, in the years since we began this is that you really need scale, doing one house at a time is really not going to make an impact. And in order to do that, to get the scale, you need partners, we’ve been so far we’ve been successful in using a wide range of partners, local nonprofit, affordable housing developers, we work with everyone in the state of Delaware that’s in that area. Working with local contractors, working with local investors in the past year, we have created a program mainly focused on fix the flip affordable and also fix the rent affordable. And we’ve had a very good response from the local investment community. We also found that we needed to have regional national partners and so we’ve reached out. And one of our first major projects that we did in conjunction with JPMorgan Chase Bank. We went into a nice street in Wilmington, and partnered with NCRC. And they brought their expertise in affordable housing development. Again, we as a land bank, we’re basically facilitating we’re finding the units and the lats and we are not acting as developers. Our focus really has been on our core focuses on homesteads, in other words, finding people that are interested in renovating their own homes, and live and live in those, fix the flip fordable housing, fix the rent, affordable housing, side lots and urban gardens. One of the things we’ve also found is that, you know, we are not we as the land bank are not a developer. And so by partnering with both local nonprofits, local contractors and investors, and regional national developers, affordable housing developers such as ncrc, we’re able to actually have an impact. And again, in a very short period of time, we feel like we’ve had a fairly significant impact. One thing though, that I found, again, I’m a volunteer, I’m chairman of the board, but I’m a volunteer and in my background, I’ve been CRA officer for IMG direct and Capital One. And actually, the interesting story is that the only group that objected to the merger between IMG direct and Capital One was NCRC. And so they were sort of my opponent in a former in my former life as a banker, but I came to really appreciate, you know, how much how much how hard they work, and what an impact that they have in the community. And so they have become one of our major partners, and groups that they are affiliated with. And Wilmington are really our partners. Throughout the efforts that we’re doing. One of the things that I learned was there really what there’s a void that is out there. And the ability to build an affordable unit in the city. And so I actually, personally, I put a group together this past year, and we put a new markets tax credit application in, in order to build a modular housing project, that would be a factory and modular housing factory would be located in an opportunity zone in Wilmington, Delaware, the idea being is that we can hire from within the community, create workforce training and development, and then through the formation of an employee stock ownership plan, actually have the employees of the factory actually be the owners. And the idea is that we would be creating affordable units in the city of Wilmington, in opportunity’s own area. And by using modular, we’re able to build affordable, faster, and at a lower cost. So I think that, you know, one thing that we I’ve learned personally, is we need to be flexible. We need to be innovative. We need scale, we need partners. And so I think that’s something that, you know, I really appreciate NCRC taking a leadership role in bringing us all together to help us to try to do that. Thank you. 

Lee, 12:06 

Thank you, Rick, you have quite a challenge. That’s incredible that you’re working across so many different categories of existing housing, vacant lots, public properties. That’s pretty incredible. I’m glad you found a way to scale up, but I know it’s been very, very hard. So our next speaker is John O’Callaghan. And welcome john. And he is the president, CEO of Atlanta Neighborhood Development Partnership. And he is focusing on affordable housing in the metro Atlanta region, including working in neighborhoods that have been declining, and also supporting mixed income development opportunities, and also addressing vacant foreclosed homes. So John, go ahead.  

O’Callaghan, 12:56 

Thank you so much, Sharon. Thank you, NCRC. We’re an active member; we’re a not for profit, CDC that serves a larger territory serving Metro region, we’re 30 years old, we’ve been working for 30 years and addressing the after effects, the gaps caused by systemic racism, and the housing delivery system. Suspect only reform 30 years ago that perhaps other words were used, but that’s what we have been a part of throughout our history. And that work continues today. And metro Atlanta. You know, some of the issues that we have is homeownership gaps, particularly for black families, and the resulting wealth gaps, and the private market is just not delivering product. Historically, we all know that discrimination. You know, my dad got out of World War Two, he could buy a home. If you were a veteran of color or family of color, you could not then we know about zoning. We know about financial access, and some of the barriers. But I believe today in Atlanta, the number one barrier to addressing those impacts of generations and centuries of systemic racism in the housing delivery system, particularly the homeownership delivery system is a lack of affordable product. Where a not for profit. We started in this space and the foreclosure crisis. Right before the neighborhood stabilization program. we piloted six homes, and we were very pleased that we done six out some said Why do six, we said well, six families, six streets, six neighborhoods, and maybe we’ll learn something and could do more. Last year, we did 120 homes 80 of those were targeted for national homeownership, where not a very large number profit. But we are the number one seller, not not for profit seller, market seller of affordable single family homes and metro Atlanta ads going to be talking that they may be surpassing us as number one or number two, it’s literally our sector, this leading the market, private sector in there. So we need to scale. And our board’s been asking that question our staff, our partners have asked us to scale. Well, if you’re in low income housing tax credit, there’s a program, there’s a subsidy program, you can learn it. You can scale. They’re not subsidy programs for single family home ownership for low income people. They are for wealthy people. They get tax deduction, but there aren’t. So how do we figure it out? Well, we learned with the neighborhood stabilization program. One of the benefits of that program was it really built our capacity, we got to know local contractors, we get through the bed, the governmental process. At times, it was frustrating times it took a while to get repaid by the local governments. We were cash constrained, but we learned it. We measure the impact and saw that our homeowners were successful. And us coming in and redeveloping a home creating a new market Gump kept other neighborhoods who were losing value. It kept them afloat. So we knew those impacts. We saw the money going away. we rotated it 3456 times. But the money was going away. And we asked ourselves, how can we do more? Well, we tried the governmental model, we said can we go out, pick the right home, get three beds, go get alone from the CDF II and manage it. And not make any money but not lose any money. Because if you lose your money, you keep going now. And yeah, we couldn’t quite pull it off. So we have, we have used three animations. And we’ve been working on these animations for eight years. So it’s taken us a while to incorporate them. The first was we found private sector partners  who shared our mission. But also they shared a desire to stay afloat. And to scale their business as we wanted to scale, our impact. They didn’t have capital, they’d been wiped out as well. We had capital, we had some personal accounts, we had other not for profit advantages. We knew all the realtors and relativist in the community and the mortgage lenders who specialized we could be partners. We asked them to bring us projects, then it was acquisition rehab, that they thought if we bought and they rehabbed. And then we work together to sell the NDP, with at least breakeven, we wouldn’t lose any money. And we piloted one group with three homes, said, Okay, now you you’re bringing the deal to us, if we lose money, I was gonna pay you a fee. But if we lose money, you’re facedown, right? You ran it with us? Yes. I said, Well, if we do better, you deliver it for less, we do a better job of marketing. And maybe we sell it not to 100% ami buyer. But our mission is we want to serve more below 80. And we’ve served some as low as 50% ami. You know, we like to have some incentives if we meet mission and financial objectives. And it worked. All three homes were successful, narrow margins, he got paid, he wouldn’t have had to work. He kept his crews busy. We started finding other partners, we’re now up to eight partners. a side note to that is if we’re working and largely communities of color. Yeah, we’ll don’t discriminate. But we’re frankly proud that the overwhelming majority of our homeowners are black homeowners because we’re dealing with a gray space gap. Yeah, most of wealth is in the home. And so we’re trying to address that. Well, if you’re doing that work, and you need partners, the past partners or the local builders, for us, we shifted from largely rehab. Now it’s hard to find those homes with rehab. private investors that bought them. We’re doing new construction might be smaller. Well, we’re working with four new construction builders. They’re all local. They’re all African American owned, they can’t get capital. So we’ve found we’re investing $50 million in the next five years in small businesses that aren’t served largely by other small business initiatives, because it’s real estate based. So we’re excited about that work. That was the first innovation. Thank great partners share the mission. Make sure they come out, okay. They don’t get rich, but we keep them busy. They hire people. And if we’re successful and mission financially, they are. If we aren’t successful, they share And a portion of that, if you’re in 25% of the losses, 50% of the upside are NFV. And then we have mission objectives are in something else. The second piece is enterprise level capital, we were borrowing from fabulous CDF eyes, we didn’t have a strong balance sheet, but we’re slowly improving it. And you know, if you’re borrowing, you borrow at 70%, loan to value, you have to cross collateralize your properties. So you might need to change title for the collateral pool, you’ve got to manage straws. You’ve got to have a staff meeting when the home is sold, figure how much is going to the bank, or the CDF II and how much do we have for the next town? Well, we started raising money like a CDF I would, it’s at the enterprise or organizational level. And we’ve now raised started with 100,000, with RBC bank. Now we’re up to 14 million, some of its impact fund money. So most of its bank, CRA 3%, capital, some as our money that we’ve sort of saved, and we’re saving $10,000 per home, because we are not having that construction costs, and the draw fees and the complexity. That was innovation number two, we realize we’re now at some scale, we have a capital stack. What’s up cities out there, while they’re home dollars, the very few we manage that Treasury program has a capital magnet program, you need to be at some scale, you need to leverage their dollars 10 to wine with the capital, we had the partners developing, we’ve applied successfully for three capital magnet awards. That’s $1.8 million of equity into our organization. That’s been huge. It’s helped us grow even more capital. We have worked with the Housing Partnership network now with Reinvestment Fund and Enterprise Community Partners. Community Housing capitals getting into the space all great city, CDF eyes, one new markets, tax credits can be used for single family home ownership. It provides an important subsidy that we can use to provide downpayment or cover the gap between what it costs to develop a home and what the homeless for. So with those innovations, we have slowly grown, and we are at scale, but our aspirations are to do even more. And we love talking, sharing notes with other not for profits, largely that are in the space, that are figuring out how do we get a system, our system works for us, other communities that may have a different mixture. But that’s our story.  

Lee, 22:43 

Wonderful, John, thank you. Thank you so much. I’m so glad you listed the three important partners and lessons learned about how you facilitate the work you’re doing. Next, I want to introduce Ed Gorman. And he is chief of Community Development at NCRC. And he managed the housing rehab fund. And of course, growth is what we want him to talk about. So welcome, Ed.  

Gorman, 23:17 

Thank you, Sharon. This is a great panel. And so I hope folks are appreciated, please post questions in the chat. So we all get a chance to see what you’re interested in. And if there’s a poll, please, please answer it. Because we we will learn from your participation here today. So, so let me let me first of all, say, of Rick Gessner, who mentioned the Capital One fight, those of you who are around for that, and certainly I was and quite a few veterans in NCRC will remember that. I’ll say about Rick and had he been CEO of Capital One, there wouldn’t have been a fight, because he understands community needs, and why it’s one of the reasons we’ve been able to work together since. So it’s it’s pretty funny that we end up working together. But we both enjoy having been on opposite sides of that fight. And then, and it’s been a great being a partner of Rick’s in Wilmington and see their vision come to fruition and through Rick’s leadership and the leadership of the mayor there. And then john, you know, john and i have been regularly meeting because I hope we learn from each other. I know I learned from him. And it’s been a real pleasure as we get deeper into things in Atlanta, to see how john does business. And I have to say, john is one of those guys who really understands, as Sharon pointed out at the top of this, this is about scale, that that the problem of the inventory crisis is so great, that if we’re not thinking about scale, we’re really not serving our communities. And so, we certainly have been doing that since our inception. You know, john, and I and and and Other ncrc, folks, when we first kind of came up with the idea of growth, growth actually stands for something generating real opportunities for work through housing. The idea really was how do we put folks to work building housing and communities, and more importantly, providing homeownership opportunities. And some housing counseling opportunities as well for the folks that we work with. The idea was something we ran by our bankers counsel on banks were very instrumental in helping us shape it, because they saw what we saw coming out of the Great Recession, there was so much wealth stripping. And what we saw is a kind of a burgeoning cottage industry, of investors buying up single family homes to tournament to rental had grew substantially in that period. And we wanted to take advantage of what was then the foreclosure pipeline, and, and go to auction and bid against these folks with the cash that we had, and, and compete and win those bids. Well, of course, the market changed. And so you know, what you build for one purpose, you have to be ready to pivot, as john O’Callaghan mentioned, and we’ve pivoted probably, this our third pivot. It’s, it’s not easy doing this work. In fact, there’s a level of there was a level of skepticism, which I think is disappearing among banks and bankers, who do Community Investment, about the nature of single family home ownership models, particularly scattered site. When we launched growth in 2015. there really weren’t any other national single family scattered site home ownership models. And so raising the capital for that was not easy. And you know, john Taylor gets the credit for that, for using all of his relationships over many years to convince banks that this was a, a challenge, but but also an opportunity. And, and so we set out to raise $50 million, we ended up raising probably close to 90 million all in. And we continue to raise capital to do this. Because one of the other things we learned was, it’s not just about rehab, we are called the housing rehab fund thinking we would buy up available inventory and rehab it. And that would help balance the scales, it would help prop up property values in distressed communities, it would help provide homeownership opportunities to two LSI folks and people of color. I mean that that was our mission. But the inventory is disappeared, as John said. And so if you’re not building, you’re not responding to the inventory problem. And so we have over time pivoted to become a builder. And so the innovation, I think, for us to get to Sharon’s requests and talking about business model. I can talk about capital stack in a minute, but really the business model I think is we are much more organized now towards being essentially a national homebuilder. And so the staff we have, I am so lucky to have just the greatest people who who’ve had years and years in this industry. I mean, our CEO John Adams has 40 years in the business working for major national home builders. Tim Hawkins incredible strength on the CFO side. Joe Lucado. On the construction side, Derek and Rene, so I mentioned these folks to say it’s the stat it’s about who you hire, and and then how you approach communities. So let me talk about capital stack, then talk about partnerships. And so capital stack, when we set out to raise the capital, we basically realized that we needed to set up the kind of fund that would give us like, give us flexibility, flexibility, flexibility. So we we basically structured it as a private equity fund. We decided to use Wall Street’s, you know, models to our benefit. And we ended up raising significant amount of equity. And in raising the equity, we were able to then bring debt on board. Because the folks who provide debt were comforted by the amount of equity we had in the fund. We did some EQ tools, we did some grants. But the truth is the grants really helped a little bit. There are a couple banks, one in particular that helped us with foundation grants will be forever grateful. But it’s it’s really ultimately about do you have flexible capital is the equity coming in at a price at that time? Break you, does the there’s a CRA debt commanded at a level that’s also reasonable. And if you do that, and if you have that level of flexibility, now, banks don’t invest, you know, for purely charitable reasons, they want you to have impact in their major assessment areas. So we have some limits, about how we can spend the Capitol, we have to make sure that we have enough money as we go into each city, to be able to sustain a regional presence, and do enough to be helpful. We are in 17 cities currently. We’re headed for 20. This year. There’s a website growth by NCRC, calm, please check it out, you’ll see our cities, and you’ll see examples of what we’re doing. But let me take one example, and talk about why we’re proud of it. And why we think it’s an excellent opportunity for the future. Because it, it bodes, well, if you can do it, it’s community land trust model. In the middle of the pandemic, we were able to deliver 20 homes at $20,000. Under cost five weeks early. I’m proud of that. But I’m particularly proud of the fact that the folks who got the benefit, were between 45% and 91% of ami, with many more on the below 80 side and above. Now that takes subsidy and not every city has subsidy. But with the America cares act money that’s floating around the cities Now, those are opportunities you should be taking advantage of because they haven’t figured out exactly how to spend it. But if you have shovel ready opportunities, you have land available to develop, they might well invest in you. And we just for example, we just signed in, I’m sorry, I didn’t sign we we got an agreement, a developer agreement, unanimously passed in the city council of Birmingham Alabama this week. And and signed another mo you down there to work with a neighborhood foundation to develop more properties. But behind all that is the confidence that the city has, that there is America cares act money, if they need it, to do this work, I don’t suggest you purposely pursue a ton of subsidy because I don’t think it’s ultimately sustainable. I mean, you can do some of it and get subsidy. But the truth is, if you can do it market rate, maybe you get the discount that you can get from having donated land, great. But there’s nothing to substitute for the partnerships you can build locally. And we do that, particularly, you know, joint venture partners, john mentioned the same thing I’m going to mention, which is they have to be willing to share both in the downside and the upside. We tried it. We tried doing it where they only share in the upside. And we learned quickly that that’ll lead to losses. So there’s a lot to be said for this. I think this is now a viable allocation for banks in the CRA space. That wasn’t the case in 2015. So I encourage folks, you know, we’re happy to work with you. We’d love to work with you, particularly as we get money, we’d love to be west of the Mississippi, honestly. But you can do this as well. And and I’d think banks now are receptive to this because they’re hearing about it in every community needs conversation they have in john Taylor’s comments earlier this week, you heard bill gem Chuck say this, that that was the number one thing that stood out for him in all of the community listening sessions that PNC did around its community benefit agreement. So our time has come I think on this. And I strongly encourage you to think in terms of scale and, and work with great partners like John and Rick, thanks. 

Lee, 34:14 

Wow, thank you. Thank you so much. Thank you for the three panelists. Listen, I wanted to maybe give you some of my feedback. And then we have about 20 minutes for questions and answers. So I’m the executive director of the low income housing Institute, which is a nonprofit organization based in Seattle. But we work regionally in six different counties. And you’re absolutely right. We’ve been able to over the 30 years, we’ve been able to scale up rental housing using home money, tax credits, bonds, and so we have about 2400 units of affordable rental housing. And over that 30 year period, we’ve only had maybe eight projects that have been homeownership. Because of how difficult how difficult it is to secure financing, you know, how do you get the the first mortgage? The second, the third? How do you get the land? How do you bring it? So that bring it in? So it appraises. I mean, I mean, I will tell you, it is so difficult. So we’ve tried everything we’ve had, we have a townhouse, which is townhouse on public property, where we used new market tax credits for construction, which is great rates, if you can do that. And then it’s on a community land trust. And then we have resale restrictions. So and then we’ve done cohousing. We’ve done fee simple condominium, we’ve done fee simple townhouses. So we’ve tried all these different varieties. But I think it’s been extremely, extremely hard to scale up. And so I really, I’m impressed with all three of what we’ve done. What I will say is that because of the housing and homelessness crisis, we’ve been doing now tiny houses for homeless people, and we’re graduating to doing cottages for homeless people, because we’re trying to get the production done really quickly. And we’re using public property, we’re using church property. Right, you know, also, private owners, if you’re housing, extremely low income, or homeless people, you can get a property tax break in, in Washington. So we have about 500, tiny houses. But of course, this is serving people who are essentially moving off the streets and need a place and then we transition them into permanent housing. So it’s a very different model. We’ve also tried purchase, we purchase a mobile home park where, obviously, the seniors and the families own the own their, you know, own their home, and they leased the pad from us. But it’s so challenging what you’re doing. I will say that, I think I would also make a plug to everyone for advocacy. I think it’s very, very important, because of the historic problems around, frankly, urban renewal model cities, the war against poverty, or the historic discrimination against communities of color, I think it’s very, very important to look at issues about, you know, reparation, and redress, and, and make a big pitch on how land has historically land has been stolen from the black community. Man has been stolen from communities, including churches, and and institutions. Because the War on Poverty essentially took a lot of wealth out of the community, for the bad.  

Gorman, 38:01 

Not too many make the Interstate Highway Transportation System that bisected neighborhoods and took property away from mostly African Americans, you know, in the 50s and 60s. And so yeah, we we’ve seen this time and time again, Sharon, you’re right. And I do. I was gonna say, I do think there’s an increasing sensitivity to the need to make reparations on this. I think cities are beginning to wake up to that concept. And this didn’t just happen in the south, as some people might want to believe. I mean, this happened, you know, throughout the country, we all can see the effects of just the highways that came through communities. So  

Lee, 38:45 

You’re right, and not just the highways, but the convention centers, the Asia, historic Asian communities that have been devastated. You know, where, where do the red light districts end up? I mean, all all of that, right. So I think it’s important for people to realize that there is a role for progressive taxation. And there’s a role for raising the need of the bipoc communities to make sure that there clearly is investment not only in communities of color, but also investment for bipoc populations in places of opportunity. I think, I think talking about mixed income housing mixed in communities, and that we have to really hit hard on how to redress some of the past crimes that have happened. So anyway, I wanted to say that.

Gorman, 39:45 

Can I take your point Sharon for a minute because I want to I think this is the pivot to this particular conversation and that is, I regard I think the others on the panel regard single family homeownership as one of the best ways to redress the sort of multi generational wealth blocking that’s gone on and bipoc communities, and that the absence of inventory is itself a racial equity issue. Because precisely at a time when interest rates are low, when people could enter the market, if given the opportunity, and I think a lot of folks are doing their best to think about new ways to access credit and capital for bipoc communities, the lack of inventory is going to be getting in the way because you can increase access to capital all you want. But if there’s no available inventory, it doesn’t matter. And so we have to build our way out of this. And it’s a question that I that Jesse was kind enough to pose to fed reserve chairman Powell earlier this week, which is, you know, what are you going to do about this? And what what do you see? And it doesn’t this doesn’t this create the issue that you’re trying to overcome years and generations of racial inequity, and yet you don’t have any inventory for people to buy and build wealth with? This becomes, I think, an issue for the long haul. And we just have to make more available, we just do?  

Lee, 41:17 

Well, we did have a as an example, we did have a state bill that passed, that said that 80% of all the transit land, like the staging area that was used for transit, had to be surplus, for affordable housing. So I mean, there are, you know, there are ways of legislating and advocating for land, public land that is underutilized or, you know, no longer needed. And instead of it going to the highest bidder for, you know, speculative development to make sure that the neighborhood and community organizations capture those properties. So we do have time right now for a number of questions. The first question we have is from Phyllis Logan, and that is a very simple question is Atlanta a Union City. 

O’Callaghan, 42:09 

So everything is relative. Compared to K rail, GA, it is a Union City, by you know, and Georgia has a right to work state, and our single family home development space, there’s very little in the way of labor farms, and other public projects and and in other trades. There There are so we may be more so for, you know, a city in the American South, but otherwise, not so much. 

Gorman, 42:45 

I gotta, I gotta jump in for one second on this because I have personal history with Atlanta on this question. I was a young labor lawyer out of law school union side working for the carpenters international is starting in 1981, which will tell you how old I started literally the week of the patco strike. In 1984, I was asked to become the trustee of the carpenters unions in Atlanta. And I tracked the history of organization for that union, which was the major, you know, for residential, it’s the major union. And I saw that in 1975, the carpenters had 75% of the work organized, wow. And by 1984, to gun down to 5%, in a nine year period. And part of that had to do with racism within the trades. But a lot of it had to do with they all went to the suburbs and follow the work and lost connection with the City of Atlanta, which ultimately cost him the entire market. So that’s the reason so 5% today. 

Lee, 43:53 

Wow. So we have a question from Bill Barber. Have you considered how innovations in finance such as shared appreciation, or creating limited equity housing co Ops, that can get ownership of apartments by teaming up with CLT can mean land trust? 

O’Callaghan, 44:13 

So, so great, great point. Today, we’re talking about homeownership. So within our homeownership, we are using Land Trust model where we can where we supply downpayment assistance at 0%. When that family needs we try to collect it back. So we’re really trying to look at a variety of tool sets. Our organization also does multifamily. And the broader answer is, yes, but I’ll give that give my answer as it relates to homeownership. 

Gorman, 44:45 

I think you know, I’ve mentioned the Prague that the project in Columbus, Ohio. The 20 units will be built there. I think Land Trust models are just beginning to come into their own. I know that in Atlanta, They have a Land Trust, that’s a spin off of the land bank, as many of them are. But it really hasn’t done much yet. Because it just doesn’t have it. It started. 

O’Callaghan, 45:08 

It’s got. It’s got a scale. Yeah, we 

Gorman, 45:12 

Just saw you with the Atlanta land trust to work with them as well. I do think, though, I think was a bill. I don’t know who raised this question. I do think land trusts are a great opportunity to keep homes affordable. So I hope we can see a lot more than 

Lee, 45:26 

Okay, we have a next question from Kathy Jackson, again, how would the loss of the 1031 exchange if it happens, impact the space for distressed communities and those with capital gains tax activities? 

 Gorman, 45:42 

I’m not seeing that where I work.  

Gessner, 45:47 

I think one of the one area that might impact is in opportunities. There are investors that are taking investments outside of opportunity zones and putting that money into opportunities zones through 1031. So I think that that might be the biggest impact there. 

Lee, 46:08 

Okay, we have a question from Steven. How do you deal with the issue of restrictive covenants or deeds? 

Gorman, 46:24 

Yes, I’d like a little clarification, because that can that cuts both ways. You can put restrictive covenants to maintain affordability, if that’s what he’s referring to, and that, of course, is the community land trust bottle among others. If it means what do you do with those restricted, you know, property you get that have restrictions, cuff restrictive covenants on it. I mean, if you can’t build on it, you can’t you can’t make it work. So you don’t take the property in to begin with. But I do think restrictive covenants are valuable, particularly in fast gentrifying neighborhoods. And I think that’s probably what you’re going to see a lot more cities do going forward. 

O’Callaghan, 47:04 

You know, what one thing we’re saying and, and why. And I think when new construction prices, things are gonna need to be smaller, and Lana has moved in is starting again to allow accessory dwelling units. And we think that’s a way to get a couple of units of housing, when a single family lot, one could be a minor shop. So we’re actually working to remove some of the existing zoning and restrictive covenants. So, you know, we, we’ve got to find the bad ones and use the ones that protect affordability mission. 

Gessner, 47:42 

Yeah, we actually put, if we do a homestead, we will sell you that house for $1. But it has to remain as a affordable housing unit that you live in for a period of a minimum period of five years. We’re also just in the last six months, we’ve instituted a program where we’re selling units for a flat $1,000 for fixed rent, but those units have to be affordable units. And we check to make sure that they are finished properly, and that they are rented at a price that makes them affordable. 

Lee, 48:20 

So we have a question from Jack Grasberg how much of the housing shortage is due to wealthy people buying up housing because the interest rates are low? 

Gorman, 48:33 

I do think that that’s in a pardon me, guys, if somebody else wants to jump in. But I do think that that’s a factor, I’m not sure, you know, investors are a big factor in the market. And we know, and by the way, there’s we’re gonna have a session, I believe it’s Wednesday at 4pm, on the inventory crisis, and what we all need to do about it. So I hope those of you who have an interest in this panel, please, please join us next Wednesday at four o’clock. Our our sense of this is the investor class, which can take the form of the big sort of BlackRock type investors, to the mom and pop investors really do account for a significant significant portion of what I think is skimming in the low mod space, because this is the greatest return for the buck for them. And so prices are rising quickly, because they underwrite these properties as rentals. And they look at it strictly from a net operating income basis. They don’t really care about the intrinsic value of the house as an owned house. And so we’re seeing more and more of that activity. But we know that starting just after the Great Recession, between 20 and 30% of the available inventory was being skimmed by the investor class for a period of almost 10 years. So when you look at the market, and by the way, when you couple that with the lack of homebuilding that occurred, but 10 Usually, in the affordable space, I’ll give you one fact. And I think it’s a home builder fact. But it’s I think it’s a good data point. In the 1970s, we built 425,000 starter homes a year. Today, we’re down to 60,000 a year. So when you couple those two things, plus you skim the top off the market, with investors turning houses, owned houses, into rental, this is why we need to build our way out of this problem.  

Lee, 50:33 

So here’s a really good question from Dr. Robbie Smith, how can you increase the available housing stock when the cost of building from the ground up is constantly rising? 

Gorman, 50:46 

Got that, right. So 

Gessner, 50:53 

I think it comes a couple different ways. One is I think the biggest thing is zoning. If you look at why affordable housing, housing doesn’t get built it you can usually go right back to the to a problem with zoning. And and that’s across the US, that’s not just one specific city or region. And then, you know, what I’m looking at what we’re looking at in Delaware is it can you use modular to bring down both the time it takes you to build and also the cost per unit. And I think that’s something that, you know, it’s, it’s in its infancy, but I think we’re gonna see that as a bigger factor going forward. 

O’Callaghan, 51:36 

And we’re working one 800 square foot homes starting to do cottage communities. So if you can design well create a two bedroom, one and a half bath home, and it’s half or third the size of the predecessor homes. That’s really green. It also makes sense. You know, at the end of the day, the country needs housing, or we’re going to have a bunch of homeless people, you can, you know, add and add. I’ll disagree a little bit on the subsidy today, you’re counting on subs that you aren’t going to get to my scale. But if we can prove success, which we are proving there is subsidy that goes into low income housing tax credits, and they are vouchers that provide income there. And in my market and in most markets in the country, the amount of subsidy, philanthropic grant, governmental tax forgiveness, direct governmental subsidy, the amount of subsidy that goes into creating an apartment for 15 years is a fraction of the subsidy that we need, decorate a homeowner shop. And in Atlanta, you were talking about the impacts we measured. Yeah, we need to measure what we do. Our homeowners had been there at least five years. And when we measured none had been there more than seven, they had $88,000 of wealth. Another great path is small business and home ownership. How’s that? But that, you know, the average small business anyway, has $53,000 of wealth, most significant numbers. The renter is not a small business owner doesn’t have either. So we need to think where we put those public resources and balance. We do more rental than we do homeownership. But there needs to be a balance and National Design. 

Lee, 53:28 

So I have an interesting question myself, which is that Congress and the Biden administration, do you see any movement with the fact that the mortgage interest deduction is the largest largest subsidy for people who are house then in most cases can be very wealthy? And do you see any movement for the interest on mortgage deduction? Basically, you know, the the tax exemption to be switched so that lower income people moderate income people can benefit more from homeownership. 

Gorman, 54:10 

Well, that’s what few few pieces to untangle there. One is. Yeah, I you know, once upon a time, I thought, if you messed with the mortgage interest deduction, you’d really destabilize the market, just not true. I think time is shown. I think we’ve capped it at what is it 750. Now, the mortgage interest deduction has kept, you know, and that really didn’t have any impact on the market, capping it. Obviously, the deductions that are available for mortgage interest deduction apply to everybody, but you get it. You know, you either itemize or you don’t only 25 20% of Americans itemize these days. So one might think that it’s not going to have a big impact if you if you really mess with the mortgage interest deduction. I still I mean, the point raised by the earlier question, Dr. Smith, is still I think the one we all struggle with. And that is, how do you keep things affordable when prices continue to rise on materials, when your delays in delivery when you have labor shortages? You know, and that’s a struggle. But the thing that’s masking it are low interest rates. I mean, I think we have this historic opportunity, while the Fed continues to keep its pedal to the floor, on buying, you know, debt, that, that we’re gonna keep interest rates low. And, and folks now who are making 80% or less of area median income can afford, it used to be two and a half times in gross income, right? But in fact, you could probably go to four or five times gross in sorry, yeah, gross income, or you take your 30%. And it’s amazing how much value can buy that’s also pushing the prices of houses up. So in the end, I think John’s right, I think we have to build smaller workers, right, I think we have to build differently, I do think steel frame becomes an issue modular and panelized becomes an issue. And frankly, if we care about climate change, we really need to do invest more in that technology. 

Lee, 56:21 

So we are nearing the end of our session. And I was wondering if Rick and John, if you each want to give an ad, if you each want to give a one minute, one minute.  Final thoughts. 

O’Callaghan, 56:36 

So, So I’ll start and dream big, it is better to shoot for a larger scale, do it yeah, fiscally responsibly, and reach because this work is so important, and come a few units short, then so we’re gonna continue building we started with sex would have been very easy. Keep doing those six units every year. And if you do that, you’re going to be forced to adapt and change and grow and get some bumps. But But we all need to do it. The country people left out are counting on us. Right?  

Gessner, 57:16 

Yeah, I think, you know, my message would be scale and partners, you know, you need to have scale to have an impact. You need partners, because you’re not going to do everything while yourself. So find out what you do well, and then bring in the partners that do those other things. Well, I think also, you know, ncrc is a great organization for all of us to share our best practices, because we can learn from each other. And I think that’s something that, you know, let’s not just let’s not hide our great ideas, let’s share those with others. And I think that’s going to have that can have a huge impact on affordable housing throughout the country. 

Gorman, 58:01 

Ditto, John. Thank you, Rick. Great panel. Thank you, Sharon. 

Lee, 58:05 

Thank you, everybody. Thank you. 

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