Latest / ChangeMakers with Katie Goar / Episode 119: Bob Simpson, the Founder of Simpson Impact Strategies and CEO of the Multifamily Impact Council

Transcript

Episode 119: Bob Simpson, the Founder of Simpson Impact Strategies and CEO of the Multifamily Impact Council · ChangeMakers with Katie Goar

0:05
Speaker 1: This is change Makers with Katie Gore finding the right
0:09
Speaker 1: solutions for the affordable housing community.
0:13
Speaker 2: This week's change maker is Bob Simpson, the founder of
0:16
Speaker 2: Simpson Impact Strategies and CEO of the Multifamily Impact Council,
0:22
Speaker 2: a nonprofit dedicated to advancing impact investing principles in the
0:27
Speaker 2: multifamily housing industry. With over twenty five years of experience
0:31
Speaker 2: and affordable housing, Bob is a nationally recognized leader who
0:35
Speaker 2: has shaped housing finance and policy, including his twenty year
0:40
Speaker 2: tenure at Fannie May, where he pioneered innovative financing solutions. Bob,
0:46
Speaker 2: welcome to the podcast.
0:48
Speaker 3: Thank you, and thank you for having me. I really
0:51
Speaker 3: appreciate it.
0:51
Speaker 2: It's great to have you here. I am eager to
0:55
Speaker 2: hear the multifamily side of things, and I really appreciate
0:59
Speaker 2: you taking the time here. You've had such an extensive
1:02
Speaker 2: career in housing, finance, housing policy of operations. Quite a menu,
1:09
Speaker 2: if you will during your time, let's start off talking
1:13
Speaker 2: about the Multifamily Impact Council. If you don't mind, tell
1:18
Speaker 2: us what it is and what it does. Just give
1:21
Speaker 2: us all the details.
1:23
Speaker 3: Sure, So, the Multi Family Impact Council is a nonprofit
1:29
Speaker 3: membership organization, and we you know, we founded the organization
1:36
Speaker 3: to help establish industry standards around impact investing in the
1:41
Speaker 3: multifamily space, so that we could increase the flow of
1:45
Speaker 3: private capital to support more affordable and sustainable housing and
1:50
Speaker 3: do it in a way that you know, improves lives,
1:54
Speaker 3: strengthens communities, and also you know, delivers strong financial returns.
2:00
Speaker 3: That's the primary goal of the organization. So we've put
2:05
Speaker 3: out a multi Family Impact Framework, which is which are
2:08
Speaker 3: those industry standards and principles that we now maintain. They've
2:12
Speaker 3: been downloaded by more than three hundred and sixty organizations
2:15
Speaker 3: across the multi family sector in the last year and
2:18
Speaker 3: a half, folks who are using that to build into
2:22
Speaker 3: their strategies and their due diligence and their product development measures.
2:26
Speaker 3: So I'm really happy about that. We spend a lot
2:29
Speaker 3: of time building an ecosystem and a platform where multi
2:35
Speaker 3: family owners, operators, investors, service providers can share information in
2:39
Speaker 3: best practices so that they can learn from each other,
2:43
Speaker 3: develop partnerships and do more. And then we also work
2:46
Speaker 3: a lot with our partners and research institutions around the
2:50
Speaker 3: country to be able to take our metrics and kind
2:53
Speaker 3: of the impact initiatives that people are doing and really
2:56
Speaker 3: help quantify the financial value of doing good. And that's
3:03
Speaker 3: really you know, geared towards you know, really so we
3:05
Speaker 3: can help tell the story that, you know, if you're
3:08
Speaker 3: really looking to make a good investment in commercial real
3:12
Speaker 3: estate and you want to make an impact and you
3:14
Speaker 3: also want to you know, meet your fiduciary responsibilities, we
3:18
Speaker 3: think multi family impact investing is a really good place
3:21
Speaker 3: to start.
3:23
Speaker 2: One metric that I hear a lot is the need
3:26
Speaker 2: of heard estimates of like four point three million brand
3:31
Speaker 2: new apartments or are needed? And what is the landscape
3:35
Speaker 2: as far as the need? Is that what you're hearing
3:38
Speaker 2: as far as volume or what are the headwinds as
3:42
Speaker 2: far as the need?
3:45
Speaker 3: Yeah, I mean there's a couple of things. I mean clearly,
3:47
Speaker 3: you know, whether it's seven million or four million or
3:49
Speaker 3: two million. You know, if you're if you're a family
3:53
Speaker 3: and you're waiting and you're stuck on the waiting list
3:56
Speaker 3: for an affordable housing unit in your community, you know,
3:59
Speaker 3: the only number that really matters is one, and that's you. So,
4:03
Speaker 3: you know, I think it's I think once you get
4:05
Speaker 3: past any any I think every estimate will tell you
4:09
Speaker 3: that were we need at least two million units, and
4:12
Speaker 3: so I kind of don't count after that. I just
4:15
Speaker 3: think we need to build more units. Yeah, there's a
4:18
Speaker 3: I mean, the headwinds are you know, affordable housing multi
4:22
Speaker 3: family housing in general is complex, but but it can
4:25
Speaker 3: be boiled down to some very simple things and that's
4:27
Speaker 3: where you see some of the challenges. I mean, number one,
4:30
Speaker 3: it costs more to build today than it did five
4:32
Speaker 3: years ago. It also, you know, you know, in order
4:36
Speaker 3: to make a property cash flow and make it bible
4:38
Speaker 3: as an investment, you have to be able to collect
4:41
Speaker 3: enough in rental revenue to justify the cost of building,
4:45
Speaker 3: and then order to offset that. Subsidies are needed at
4:48
Speaker 3: some level for a lot of properties, and it could
4:51
Speaker 3: be a federal locome housing tax credit, it could be
4:54
Speaker 3: project based Section eight. But there's a lot of other
4:57
Speaker 3: things that we see going on in state and local
5:00
Speaker 3: governments who are looking to really leverage more investment in
5:05
Speaker 3: their space through property tax, debatements, tax except bond financing.
5:10
Speaker 3: So that's one of the challenges. I think we've also
5:13
Speaker 3: created a system that's become extremely time. It takes a
5:21
Speaker 3: lot of time, and it takes a lot of complexity
5:24
Speaker 3: to figure out affordable housing. I'm not sure we need that,
5:29
Speaker 3: you know, I don't. You know, it takes far too
5:31
Speaker 3: long to get housing projects approved at the local level,
5:36
Speaker 3: at the state level, at federal level. That adds cost,
5:39
Speaker 3: and so that's also a big challenge, and there are
5:43
Speaker 3: ways in which we can streamline that. We try to
5:46
Speaker 3: identify some of the best ways to do it so that,
5:49
Speaker 3: you know, we think that the state and nobile governments
5:52
Speaker 3: are always looking to maxifize taxpayer dollars and make sure
5:55
Speaker 3: they're spending it the most efficient way possible and also
5:59
Speaker 3: doing it in a way hopefully they can bridge private
6:01
Speaker 3: capital to come in. And so really the regulatory issue
6:06
Speaker 3: is a big one as well, but they all drive it.
6:09
Speaker 2: Are the private investors Are they seeing the barriers and
6:16
Speaker 2: the risks louder, bigger carrier now or you know, is it,
6:23
Speaker 2: you know, just the same kind of barriers you mentioned,
6:26
Speaker 2: you know, the time, the cost, the ability to the complexity,
6:31
Speaker 2: the ability to leverage some of those private components. I mean, like,
6:35
Speaker 2: give us a perspective from the private investors piece of this, you.
6:40
Speaker 3: Know, I think from a cost perspective, everyone sees the
6:43
Speaker 3: same thing, and it's cyclical, right. You know, we saw
6:47
Speaker 3: a ton of building new construction starts and now you're
6:51
Speaker 3: seeing those being completed now in the multi family sector
6:55
Speaker 3: and a lot of key markets, those deals were started
6:58
Speaker 3: three years ago, I mean complete today, and you're seeing
7:01
Speaker 3: rent growth, you know, really stabilizing those markets. And then
7:06
Speaker 3: you know, you reach a period of time now where
7:07
Speaker 3: it costs more and so you're going to see less
7:10
Speaker 3: less building without you know, any additional subsidy coming in.
7:14
Speaker 3: I think what we've seen is I don't think that
7:17
Speaker 3: barriers are any more or less challenging. I think because
7:23
Speaker 3: we've seen an influx of private capital and new investors
7:28
Speaker 3: come into this space, they're noticing it more. And so,
7:33
Speaker 3: you know, if you're an investor who's used to doing
7:37
Speaker 3: a traditional conventional market rate deal that is does not
7:43
Speaker 3: have affordability restrictions put in, you're used to a certain
7:47
Speaker 3: timeframe to go get your deal approved. And now all
7:51
Speaker 3: of a sudden, you're working through you know, income certification,
7:55
Speaker 3: state and local programs, you know, getting public input and
8:01
Speaker 3: approval all of these things, and you're looking at this
8:05
Speaker 3: and saying, okay, how come it's taking me six seven,
8:09
Speaker 3: eight months? Longer, and how come it's costing me more
8:12
Speaker 3: per unit to do this deal. That's that's affordable versus
8:17
Speaker 3: market rate. So I actually think it's a great perspective
8:20
Speaker 3: because I think in the affordable space, a lot of
8:22
Speaker 3: folks who are used to this just get used to
8:24
Speaker 3: the stuff you have to do. And so I think, actually,
8:29
Speaker 3: you know, the lack of patience is a good thing.
8:34
Speaker 3: The willingness to look at things from a new perspective
8:36
Speaker 3: is a good thing. So it's just it's good to
8:39
Speaker 3: get some new blood, some new perspective into the industry
8:41
Speaker 3: in the affordable housing world. And so that's what I
8:43
Speaker 3: think we're saying. I don't I don't think the problems
8:47
Speaker 3: have gotten any worse. I think that the demand has
8:51
Speaker 3: gotten higher, right, so the supply issue has gotten worse.
8:56
Speaker 3: But that's you know, yeah.
8:59
Speaker 2: A lot of people want to build our way out
9:01
Speaker 2: of this, but then the realists come in and say,
9:05
Speaker 2: you know, we can't, we can't build fast enough. What
9:09
Speaker 2: is a more realistic way to try to curb some
9:13
Speaker 2: of that graph that shows the demand has outpaced supply.
9:19
Speaker 2: What is the council Multi Family Impact Council saying, or
9:23
Speaker 2: what is it that you guys are strategizing as a
9:27
Speaker 2: way to break that down, you.
9:29
Speaker 3: Know, I think the first thing we always say is
9:32
Speaker 3: there is no one solution, right. I mean, if you
9:35
Speaker 3: look everywhere you read today about affordable housing, you'll see
9:38
Speaker 3: the headline. You know, subject X is the solution to
9:42
Speaker 3: affordable housing. Right, Whether it's repurposing shipping containers, whether it's
9:48
Speaker 3: ad us, you name it, Yeah, that's a that's a
9:52
Speaker 3: that's that binary way of thinking is really not productive,
9:56
Speaker 3: and so you really have to say we have to
9:57
Speaker 3: take a multi here to approach. You want to be
10:02
Speaker 3: able to build units at the lowest possible price point
10:05
Speaker 3: that allow you to make rents affordable to the highest
10:07
Speaker 3: amount of people. You can do that in a number
10:09
Speaker 3: of ways. In some markets, that may mean it makes
10:13
Speaker 3: the most effective use of your dollars to build something
10:16
Speaker 3: from the ground up. It may include factory built homes,
10:20
Speaker 3: it may include modular homes. All of that's a great
10:23
Speaker 3: part of it. None of them are the total solution.
10:27
Speaker 3: There's also a really strong case to be made that
10:30
Speaker 3: you have to preserve the existing supply that you have,
10:33
Speaker 3: and so making sure that we're the properties that are
10:37
Speaker 3: affordable today remain affordable tomorrow is also very important. There's
10:41
Speaker 3: also a lot of markets where you're seeing significant growth
10:46
Speaker 3: in the number of property owners who are coming in
10:48
Speaker 3: and buying market rate properties that are a little older
10:52
Speaker 3: and then working with the state and local governments to
10:55
Speaker 3: place rent restrictions on those units so that you're converting
10:59
Speaker 3: units to afford you know, so there are a lot
11:01
Speaker 3: of units in the country which we clearly need new supply,
11:05
Speaker 3: and we clearly need to build more. But when someone
11:08
Speaker 3: says that we have a seven million unit shortfall of
11:11
Speaker 3: affordable housing, you know they're not. You know, it's not
11:15
Speaker 3: as if there are seven million people out there who
11:17
Speaker 3: don't have an apartment. They do have an apartment, they're
11:20
Speaker 3: just paying too much. And so how do you then
11:24
Speaker 3: take some of the existing affordable units as they go
11:27
Speaker 3: through the for sale process in the markets where it works,
11:31
Speaker 3: in the properties where it works, and put affordable restrictions
11:34
Speaker 3: on it. So, you know, on the one hand, you
11:36
Speaker 3: can get lost in the complexity because there's so many
11:39
Speaker 3: different ways to address this. I always just think, you know,
11:43
Speaker 3: how can you spend you know, make the most efficient
11:45
Speaker 3: use of the resources you have available to buy and
11:50
Speaker 3: improve or build a property at a price point that
11:53
Speaker 3: allows you to make it affordable to people who rent it.
11:56
Speaker 3: It's you know, that's the way you do it, and
11:58
Speaker 3: any any option works.
12:00
Speaker 2: You mentioned rank control. It's very controversial. Some communities are
12:06
Speaker 2: really pushing for it on the ground floor level. Other
12:10
Speaker 2: communities have said, hey, we tried it, it drove up costs.
12:14
Speaker 2: It scared off developers. I'm sure it's probably a little
12:19
Speaker 2: of both, if we were being honest here, And it
12:23
Speaker 2: differs from community to community based on what the need is, right,
12:27
Speaker 2: what is your take and what you're seeing in the
12:30
Speaker 2: rent control What is the council official response on that?
12:37
Speaker 3: Yeah, I mean the way we look at it is,
12:40
Speaker 3: you know, if you really want to create more affordable housing, right,
12:46
Speaker 3: the concept of rent control on paper sounds great, it
12:51
Speaker 3: makes you feel good. The reality is that when you
12:56
Speaker 3: place those artificial restrictions in the market, it really has
13:01
Speaker 3: two big effects in the market. I mean, number one,
13:03
Speaker 3: it makes it really really hard for property owners to
13:06
Speaker 3: reinvest in the properties, especially vacant units, and that's that's
13:12
Speaker 3: something that you really have to think about.
13:13
Speaker 2: Yeah.
13:14
Speaker 3: And the second thing is that makes it harder for
13:16
Speaker 3: private capital to come in, even if the rent control
13:20
Speaker 3: limit is let's say twenty percent rent growth. You know,
13:24
Speaker 3: you can increase rands by twenty percent. Sounds reasonable, But
13:27
Speaker 3: as an investor, all of a sudden, you have to
13:29
Speaker 3: there's an additional layer of questions to say, okay, well,
13:32
Speaker 3: this laws on the books. It makes sense today. What
13:35
Speaker 3: if the next city council puts it down to two percent,
13:39
Speaker 3: and all of a sudden, I have to go tell
13:41
Speaker 3: my investors, many of whom may be teachers and retirees
13:45
Speaker 3: on pensions, that oh, by the way, this investment isn't
13:49
Speaker 3: working anymore. So you add that in, it just makes
13:51
Speaker 3: it more likely that they're going to invest somewhere else.
13:53
Speaker 3: There's a better way to do it, Yeah, I mean,
13:56
Speaker 3: you can put rent restrictions on units in reach turn
14:00
Speaker 3: for the subsidies that you're putting out. If you restrict,
14:03
Speaker 3: you know, if there's a property and you're doing a
14:06
Speaker 3: property tax abatement and you say, look, I want half
14:08
Speaker 3: of these units to be affordable to low and modern
14:10
Speaker 3: income households, you know, the rent will only at that point.
14:16
Speaker 3: If you set it to that level, rent will only
14:18
Speaker 3: go up the incomes go up. And that's a much
14:21
Speaker 3: better form of solving for the affordability issue, you know,
14:26
Speaker 3: manner that the market is familiar with, and that they
14:28
Speaker 3: already know how to underwrite, and they already know how
14:31
Speaker 3: to assess the risk and as opposed to just a
14:35
Speaker 3: straight up b Rent control policy. So good intentions, really
14:40
Speaker 3: bad execution.
14:42
Speaker 2: Yeah, And in that example you gave, it also provides
14:45
Speaker 2: some consistency and some predictability, which, of course you know,
14:49
Speaker 2: it was what the investors and the builders and they like.
14:53
Speaker 2: So speaking on that side of the investors, I noticed
14:57
Speaker 2: that you guys are creating a standard dies approached or
15:03
Speaker 2: that's kind of one of your goals is to have
15:06
Speaker 2: this standardized approach to impacting investing in affordable housing and housing.
15:12
Speaker 2: What exactly does that mean for the practitioners or communities?
15:17
Speaker 2: What's that look like?
15:20
Speaker 3: Yeah, I mean it's really what we always say is
15:22
Speaker 3: that if you're going to, you know, do impact investing
15:26
Speaker 3: in multifamily and you want to consider yourself an impact
15:29
Speaker 3: fund or an impact investor, you know, you really have
15:32
Speaker 3: to first answer three what I would call very fundamental questions.
15:38
Speaker 3: And the first is is the investment that I'm making
15:41
Speaker 3: is improving the life of the person who lives in
15:43
Speaker 3: the property right are they are they are they able
15:46
Speaker 3: to get more housing stability, are they able to build
15:48
Speaker 3: their financial health? Is the property going to be well
15:52
Speaker 3: maintained and safe? And are they going to be paying
15:54
Speaker 3: affordable rents? You have to be able to say that,
15:56
Speaker 3: and you have to be able to prove it. The
15:58
Speaker 3: second is are you building or renovating that property in
16:01
Speaker 3: a way that makes that property safer and more resilient
16:06
Speaker 3: to weather events and in a way that conserves energy
16:11
Speaker 3: and water and other precious natural resources. And the third
16:15
Speaker 3: is does the investment allow you to meet your fiduciary
16:18
Speaker 3: responsibility to your investors? So it has to make money.
16:24
Speaker 3: I always say the most impactful thing a teacher's pension
16:27
Speaker 3: fund can do is make sure that the teacher who
16:30
Speaker 3: has that pension gets paid every month. It's very important
16:35
Speaker 3: and it just so happens that you can do all
16:37
Speaker 3: three of those. And that's the way we think about
16:40
Speaker 3: is like you have to keep those three things in mind.
16:44
Speaker 3: They don't fight with each other. We think it's like,
16:47
Speaker 3: you know, financial returns and impact is like peanut butter
16:50
Speaker 3: and chocolate. They go really well together. And so our
16:57
Speaker 3: goal is to help make sure people understand how that
16:58
Speaker 3: works and why and then how to.
17:00
Speaker 2: Do it, and that standardized approach really can materialize for
17:06
Speaker 2: and more units that are affordable that are improving people's lives.
17:10
Speaker 2: So you know the community is going to benefit when
17:13
Speaker 2: you guys can rally the investors around those three principles, right.
17:19
Speaker 3: Yeah, And it's also just making sure everyone's speaking the
17:21
Speaker 3: same language. That's how you get to scale.
17:24
Speaker 1: Right.
17:24
Speaker 3: And so you know, if you're thinking about this from
17:27
Speaker 3: an investor perspective and you want to understand, Okay, this
17:31
Speaker 3: person says they're driving, you know, creating more housing stability,
17:36
Speaker 3: what does that mean?
17:37
Speaker 2: Right?
17:37
Speaker 3: Does that mean a couple flashy pictures on their impact
17:40
Speaker 3: report and a couple anecdotes, or does it mean that
17:45
Speaker 3: your vacancy rates are going down, that your turnover costs
17:51
Speaker 3: are going down, that lengths of stay are going up,
17:55
Speaker 3: that people are paying more rent on time, or your
17:57
Speaker 3: bad debt costs are going down. That's a real indicator
18:01
Speaker 3: housing stability and financial health. Uh, you know, in terms
18:05
Speaker 3: of you know, the living environment. You know, how often
18:09
Speaker 3: are you doing property uh inspections? What's your cap X?
18:14
Speaker 3: Are you keeping your your CAPEX budget funded? You know,
18:17
Speaker 3: all of those sort of things are very tangible and
18:19
Speaker 3: those are things that you need to look at as
18:20
Speaker 3: an investor and they and they're very directly correlated to impact.
18:24
Speaker 3: Mm hmmmm.
18:26
Speaker 2: Well, this is the part of the podcast where I
18:29
Speaker 2: ask you to get out your crystal ball here. I
18:33
Speaker 2: want to I want to talk about policy. What policies
18:37
Speaker 2: do you see on the horizon that are going to
18:40
Speaker 2: impact both the investors and the communities and what you
18:43
Speaker 2: guys are doing here. Do you have priorities that you're
18:49
Speaker 2: you're watching, Policies that you're watching speak to we mentioned
18:55
Speaker 2: earlier headwinds, speak to headwinds that are out there right
18:58
Speaker 2: now for us to navigate in this industry.
19:03
Speaker 3: Yeah, I mean, I think the first you know, policies
19:07
Speaker 3: who were really looking at and following is all of
19:13
Speaker 3: the work that's being done at the state and local
19:15
Speaker 3: level right now to really incentivize the preservation and creation
19:22
Speaker 3: of more affordable housing. I think there's a lot of
19:24
Speaker 3: amazing things going on with state and local governments, and
19:27
Speaker 3: so the more that we can help provide guidance and
19:32
Speaker 3: feedback on, you know, property tax abatement programs that can
19:37
Speaker 3: help people preserve units and create more units that are affordable,
19:41
Speaker 3: being able to make use of your tax exempt bond
19:44
Speaker 3: authority to put out lower cost financing ways in which
19:48
Speaker 3: you can really rethink the regulatory process to make sure
19:51
Speaker 3: that those deals get done quicker but also more in
19:55
Speaker 3: a more cost effective manner. I think that's a really
19:59
Speaker 3: big part is what's going on at the state and
20:01
Speaker 3: local level now as it relates to the federal side.
20:05
Speaker 3: I think there's a lot of opportunities around regulatory streamlining today,
20:10
Speaker 3: you know, and especially if it's done in a way
20:11
Speaker 3: that's thoughtful and really you know, tries to achieve the
20:17
Speaker 3: objective is are we making sure these homes are safe,
20:21
Speaker 3: that consumers are being protected, but you know, really making
20:25
Speaker 3: sure that we're not that we're taking a close look
20:29
Speaker 3: at regulations that may not be having the consequences that
20:33
Speaker 3: we initially thought they would have. Right So, you know,
20:38
Speaker 3: I think some of the environmental protection laws that were
20:41
Speaker 3: passed in the early seventies that probably you know, there's
20:47
Speaker 3: ways in that you could streamline that, There's ways in
20:49
Speaker 3: which you could create an exemption process for affordable housing.
20:52
Speaker 3: I think there's a tremendous opportunity on the regulatory streamlining
20:56
Speaker 3: piece and obviously, every time there's a tax bill, you
20:59
Speaker 3: want to see more tax cris. I think that would
21:01
Speaker 3: be great. I think one of the challenges with the
21:03
Speaker 3: long come housing tax credit program today is that there
21:06
Speaker 3: have been so many other tax credit programs since then
21:11
Speaker 3: that really took all the lessons learned from the low
21:15
Speaker 3: income housing tax credit and they improve their structure so
21:19
Speaker 3: that those tax credits, like in the solar space and
21:21
Speaker 3: the green space are actually more competitive and more attractive
21:25
Speaker 3: to investors today than long come housing tax credits. So
21:28
Speaker 3: it would be nice to figure out if we're going
21:30
Speaker 3: to increase the allocation, that we could make that the
21:33
Speaker 3: credit itself more competitive in the market, because we want
21:38
Speaker 3: to make sure that it's competitive in the market.
21:41
Speaker 2: Are you allowed to brag about communities or that name
21:45
Speaker 2: them out that you say, hey, this is they're on it,
21:49
Speaker 2: they've done a great job, they've got the right blend,
21:52
Speaker 2: they've got the right momentum, they're growing, they've got their
21:55
Speaker 2: zoning in order. Are you allowed to call any of
21:58
Speaker 2: them out there? Oh?
21:59
Speaker 3: Yeah, you know. The nice thing is I don't I
22:03
Speaker 3: don't have a filter, so I say whatever comes to mind.
22:08
Speaker 3: But well, there's a couple of places. I mean, like,
22:12
Speaker 3: you know, for instance, you know, I think that the
22:15
Speaker 3: city of Dallas, Dallas, Texas is doing a really nice
22:18
Speaker 3: job in terms of, you know, putting together a housing
22:24
Speaker 3: finance corporation that is able to provide tax breaks, do
22:28
Speaker 3: tax exempt bond financing to really help ensure that you
22:32
Speaker 3: can convert existing market rate deals to affordable I think
22:35
Speaker 3: they've been very good about, you know, using their taxpayer
22:40
Speaker 3: dollars in a really smart way to get private investment in.
22:43
Speaker 3: I think Minneapolis has done a really nice job around
22:45
Speaker 3: so and uh. And they've also done a really nice
22:48
Speaker 3: job of how they think about rent restrictions versus right
22:51
Speaker 3: control and so I think they're doing a really great job.
22:55
Speaker 3: So there's a lot of communities like that out there.
22:59
Speaker 3: Every day see someone new, you know. Oftentimes what you
23:03
Speaker 3: read about are the folks that aren't doing it right right,
23:07
Speaker 3: But there's a lot of communities out there that are
23:09
Speaker 3: doing a really nice job. I think Los Angeles has
23:11
Speaker 3: done Obviously, they've had a significant number of challenges, which
23:15
Speaker 3: is you know, to be expected when you have a large,
23:18
Speaker 3: you know, a community of twenty million people. But I
23:21
Speaker 3: think they've done a nice job over the last couple
23:23
Speaker 3: of years of really you know, prioritizing affordable housing, looking
23:27
Speaker 3: for a way to streamline that approval process. They still
23:30
Speaker 3: have a long way to go, but I think they're
23:32
Speaker 3: doing a really nice job. So I think there's a
23:34
Speaker 3: lot of communities out there. Austin's done a great job
23:39
Speaker 3: in the same way. So you could go to about
23:41
Speaker 3: any place in the country and someone's doing something right.
23:46
Speaker 3: You just need to The challenge for a lot of
23:50
Speaker 3: communities today is everyone wants to do their own everyone
23:53
Speaker 3: wants to be unique, right, and so it's really thinking
23:57
Speaker 3: about like what works everywhere, what's always going to be true? Right?
24:02
Speaker 3: Property tax abatement is a property tax abatement. Your mill
24:05
Speaker 3: leven may be different, the amount of property tax may
24:08
Speaker 3: be different, but it's all the same. And what you
24:11
Speaker 3: really want to say is like, well, how many units
24:13
Speaker 3: do I need? What's the best way to use that,
24:15
Speaker 3: what's the best way to forego that tax revenue to
24:18
Speaker 3: build or units that eventually down the road will end
24:21
Speaker 3: up increasing.
24:22
Speaker 2: Tax rep You've also seen cities like Columbus, Indianapolis, Phoenix, Miami.
24:28
Speaker 2: You know, their rents in the last five years have
24:30
Speaker 2: completely changed prior to what they were previously. Do you
24:35
Speaker 2: see a lot of other cities embracing multifamily housing differently
24:40
Speaker 2: now given their own need and their supply dynamics.
24:48
Speaker 3: Yeah, I think they're starting to. I think that, you know,
24:54
Speaker 3: every you're always going to have neighborhood battles. I think that,
25:02
Speaker 3: you know, change is hard, but I think you are
25:05
Speaker 3: starting to see it, and I think people One of
25:06
Speaker 3: the reasons people are seeing it is because it's getting
25:10
Speaker 3: very hard to live in some of these communities, and
25:13
Speaker 3: I think so maybe less you know, I think that
25:17
Speaker 3: you can make the case that a multi family development
25:20
Speaker 3: in a single family neighborhood isn't going to have a
25:23
Speaker 3: positive or negative effect on housing values in that area.
25:29
Speaker 3: If you want to live in a city that's a
25:30
Speaker 3: vibrant and growing, you know, traffic is gonna there's always
25:33
Speaker 3: going to be issues with growth. So that's one thing.
25:37
Speaker 3: The issue really is, how do you think about policies
25:40
Speaker 3: like parking, How do you think about creating a vibrant downtown,
25:48
Speaker 3: you know, how do you ensure that that young folks
25:50
Speaker 3: who want to come to a community and get started
25:54
Speaker 3: and get and become a part of a housing continuum
25:57
Speaker 3: have a place to rent so that someday they can
26:00
Speaker 3: and I think those are all the things that are
26:02
Speaker 3: much more important. It's just recognizing that multifamily and single
26:07
Speaker 3: family rentals are a part of the housing continuum, and
26:11
Speaker 3: that you know, not everyone, I don't know hardly anyone
26:15
Speaker 3: who ends up at the first home they're buying being
26:18
Speaker 3: the home there event for the rest of their lives.
26:20
Speaker 2: Right, So maybe our grandparents that yeah, yeah, that generation.
26:26
Speaker 3: Maybe maybe my mom and dad. So yeah.
26:30
Speaker 2: But one of the things about myths about non truths
26:35
Speaker 2: about multifamily, you know, you hear crime, it doesn't fit in,
26:40
Speaker 2: there'll be too much traffic. Can you speak to debunk
26:45
Speaker 2: some of those myths about multifamily, either theoretically or through
26:50
Speaker 2: some analysis that you've seen, Yeah.
26:54
Speaker 3: I mean, I think the analysis is pretty clear. I
26:57
Speaker 3: mean it's just it's in some areas where you see
27:01
Speaker 3: high crime, you know, it's not high crime because there's
27:04
Speaker 3: a lot of multifamily there. It's it's there's a lot
27:07
Speaker 3: of multifamily there because you know, the zoning has been
27:11
Speaker 3: so exclusive to the areas where there's been a lot
27:14
Speaker 3: of economic growth, and so yeah, of course there's you know,
27:17
Speaker 3: that's sort of a it's it's it's kind of the opposite, right,
27:21
Speaker 3: And I think that's the way it is in a
27:22
Speaker 3: lot of larger cities. I think obviously, you know, there
27:25
Speaker 3: was some pretty you know some you know a lot
27:28
Speaker 3: of the policies in the in the seventies around really
27:33
Speaker 3: concentrating poverty. I think that created a lot of problems.
27:36
Speaker 3: And so you could look to that and say, oh, well,
27:39
Speaker 3: then multi family housing must mean more crime, or you
27:44
Speaker 3: could say, hey, we're human beings, we learn from our mistakes,
27:47
Speaker 3: and we haven't done that aget. Right, there's a you know,
27:51
Speaker 3: the focus on developing mixed income apartments where you have
27:55
Speaker 3: a wide mix of incomes, making sure that you're creating
27:58
Speaker 3: more opportunities for people to of low and moderate income,
28:01
Speaker 3: to live in good school districts. Those are all things
28:04
Speaker 3: that are firmly ingrained in our policy mentality today. And
28:08
Speaker 3: so if you think that that we never learned from
28:11
Speaker 3: our mistakes, then I think that thesis holds true. But
28:15
Speaker 3: you know, that's I don't know what reality it is,
28:17
Speaker 3: but it's not mine. So that's why I think about crime.
28:20
Speaker 3: I think that in terms of sure, it changes the
28:24
Speaker 3: the the way your neighborhood is of course it does.
28:30
Speaker 3: I think the question is do you want to make
28:32
Speaker 3: sure that the people who live in your community and
28:35
Speaker 3: work in your you know, can afford to pay groceries
28:38
Speaker 3: right and can't afford to buy your home when you move,
28:42
Speaker 3: and can you know, contribute to the economy, and do
28:44
Speaker 3: you want to make sure that they're going to be
28:46
Speaker 3: able to be financially stable enough to to to not
28:51
Speaker 3: have to, you know, rely on the social service safety
28:55
Speaker 3: that that we have in place, or that the folks
28:58
Speaker 3: who work downtown don't have to live thirty miles away.
29:01
Speaker 3: That seems to be much more important. But you know
29:04
Speaker 3: it's Yeah, of course, the character your neighborhood's going to change.
29:07
Speaker 3: I think it'll change for the better. Yeah, but that's
29:11
Speaker 3: what I don't know, that's what growing means.
29:14
Speaker 2: So and there's so many beautiful ways to design buildings
29:18
Speaker 2: that can be reflective of the community. It doesn't have
29:21
Speaker 2: to be the concrete tomb like it was in the
29:24
Speaker 2: sixties and the seventies either.
29:27
Speaker 3: Yeah. Absolutely, I mean, I hope I'm not around for
29:30
Speaker 3: when that architectural style comes back, but yeah, I mean
29:34
Speaker 3: some of the things they are doing around building today,
29:36
Speaker 3: whether it's duplexus you know, garden style apartments, even high rises.
29:43
Speaker 3: You're seeing some beautiful buildings for mixed income housing. What
29:47
Speaker 3: you're seeing in the manufactured and modular home space today,
29:51
Speaker 3: they're just wonderful looking buildings. And so I think sometimes
29:56
Speaker 3: we get hung up on on those things, and it's
30:02
Speaker 3: sometimes it really you really do need to take a
30:04
Speaker 3: deep breath and say, Okay, what's really the issue here?
30:08
Speaker 3: And from an affordable housing perspective, it's like if I'm
30:11
Speaker 3: if I'm owning a business in my community, I want
30:13
Speaker 3: to make sure that there are more people living in
30:15
Speaker 3: my community who have residual income to spend money at
30:19
Speaker 3: my business. And the best way to do that is
30:21
Speaker 3: to make sure that they're not paying fifty percent of
30:24
Speaker 3: their income on rent. And so is that a good
30:29
Speaker 3: trade off for you know, not having every single house
30:35
Speaker 3: in my neighborhood look like a single family house. Sure,
30:39
Speaker 3: I mean, you know, you look at a lot of
30:41
Speaker 3: I would say that in a lot of neighborhood's most
30:43
Speaker 3: single family homes like the same. So, you know, I
30:48
Speaker 3: think that's I think that's my perspectives. I don't think
30:51
Speaker 3: I think we should focus more on making sure that
30:53
Speaker 3: people have the ability to make a living and give
30:58
Speaker 3: back to the community.
31:00
Speaker 2: One of the things I've said is that affordable housing
31:03
Speaker 2: policy is good economic policy. What is your take, Because
31:08
Speaker 2: you're dealing with the private sector and investors, you're really
31:12
Speaker 2: really in the thick of that, what would be your
31:14
Speaker 2: take on how affordable housing is good economic policy?
31:19
Speaker 3: Yeah, I think it makes economic sense. I mean, I
31:22
Speaker 3: mean the data is very clear. When I was at
31:24
Speaker 3: Fanny May, we saw this all the time. Our affordable
31:27
Speaker 3: housing book of business always performed from a credit perspective,
31:31
Speaker 3: but always performed better than the market rate book. It
31:34
Speaker 3: was less risky, it definitely performed differently. And so if
31:39
Speaker 3: you think of like a low risk, stable cash flow
31:43
Speaker 3: investment where you're not going to see the peaks in
31:48
Speaker 3: terms of your returns, but you're also not going to
31:49
Speaker 3: see the valleys, that's affordable housing. You're getting a consistent,
31:54
Speaker 3: stable cash flow, lower risk, there's always demand, you always
32:01
Speaker 3: have higher occupancies. It's a really good low risk investment.
32:05
Speaker 3: You're not going to see the upside that you might
32:07
Speaker 3: get if you time the market right on a market
32:10
Speaker 3: rate deal, but you always know what you're going to get.
32:12
Speaker 3: So we think it presents itself very well somewhere between
32:16
Speaker 3: a fixed income investment and in a core core plus investment,
32:20
Speaker 3: So you're thinking about an allocation. It's a really good
32:23
Speaker 3: stable asset to have that will generate a good dividend
32:27
Speaker 3: and and and appreciating value over time. So I think
32:32
Speaker 3: that's good. I think the policy side is is very clear,
32:39
Speaker 3: and it's something that we continue to really focus on.
32:41
Speaker 3: Is that you're going to get stable and ali growth.
32:46
Speaker 3: You're going to have consistently better than market credit performance.
32:54
Speaker 3: And so if you're looking for that, there's if there's
32:57
Speaker 3: a place in your portfolio for that, and it's a
32:59
Speaker 3: good investment. You know it's not going to be one
33:01
Speaker 3: hundred percent of your portfolio, but it shouldn't be. So
33:04
Speaker 3: we think it's just a it's just a good option.
33:08
Speaker 2: We've covered a lot of things. Is there anything we've
33:10
Speaker 2: missed that you want to bring up before we close out?
33:13
Speaker 3: In the environment we're living in today, always keeping in
33:18
Speaker 3: front of mind that that that housing policy and investments
33:21
Speaker 3: in affordable housing, we always need to keep the main
33:24
Speaker 3: thing the main thing, and that is that we need
33:28
Speaker 3: to ensure that more people have access to affordable rental
33:33
Speaker 3: housing units than they had before, and you know, we
33:36
Speaker 3: talked about why that's important, and so I think we
33:40
Speaker 3: can get lost in a lot of other issues, and
33:42
Speaker 3: a lot of times we try to make you know,
33:44
Speaker 3: we try to use housing policy to solve every other
33:48
Speaker 3: problem that we have in the world. And I think
33:51
Speaker 3: that it's always a good time to step back and say,
33:53
Speaker 3: you know what, if we just created more affordable housing,
33:57
Speaker 3: a lot of those things will take care of themselves, right,
34:00
Speaker 3: And so if we just make sure that that person
34:03
Speaker 3: you know has fifty more bucks in their bank account
34:06
Speaker 3: at the end of the month than they did before
34:09
Speaker 3: because they're paying less than red, that's that's going to
34:12
Speaker 3: have a tangible impact on our life, far more than
34:16
Speaker 3: any esoteric policy victory that we might have scored in Washington.
34:21
Speaker 2: D c. Right. Well, when you talk about it's hard
34:24
Speaker 2: to come up with an emergency fund, it's hard to
34:26
Speaker 2: pay down credit card debt, it's hard to get a
34:29
Speaker 2: vehicle improvement to you know, commute when you're paying fifty
34:34
Speaker 2: percent of your income on rent. And so you know,
34:37
Speaker 2: these are core fundamental desires for people to have a
34:43
Speaker 2: place that they can have some economic mobility. So you're
34:48
Speaker 2: hitting the core of every individual, aren't.
34:50
Speaker 3: You Yeah, it's like, you know, do you do you want?
34:53
Speaker 3: We want to make sure that more people who live
34:55
Speaker 3: in our communities are able to go to their savings
34:58
Speaker 3: and loan or their bank to get a loan, that
35:02
Speaker 3: they don't have to go to a payday loan or
35:04
Speaker 3: a title loan shop or sell their plasma. Uh, you know,
35:11
Speaker 3: we don't. We should be trying to find ways to
35:14
Speaker 3: get extracted capital out of our neighborhoods. And I think
35:17
Speaker 3: the best way to do that is to start where
35:19
Speaker 3: people live. And that's why, you know, the rental housing
35:23
Speaker 3: place is a great, great place start. You know, you
35:26
Speaker 3: can you should be able to get your you know,
35:28
Speaker 3: when you when you pay rent on time. There's no
35:30
Speaker 3: reason why you should be able to build a credit score,
35:32
Speaker 3: right Uh and now you can't. Now you can't. There's
35:36
Speaker 3: no reason why you shouldn't have the opportunity to to
35:41
Speaker 3: save money or you know, find ways in which you
35:45
Speaker 3: can uh take your kids to daycare. I mean there
35:48
Speaker 3: are people who run daycare centers who you know, depend
35:52
Speaker 3: on folks being able to pay them every month for
35:55
Speaker 3: services and so ensuring that you have a residual income
35:58
Speaker 3: to do so, I'd just makes sense it's not a
36:02
Speaker 3: there's no, it's not a political argument, it's not a
36:06
Speaker 3: there's nothing about that. It doesn't just simply make sense,
36:09
Speaker 3: and it also happens to be a really good thing
36:11
Speaker 3: to do.
36:12
Speaker 2: I mean, some of the cities you can't that they're
36:16
Speaker 2: e mts, can't even afford to have a basic rent
36:22
Speaker 2: in those cities. So I mean we're talking about a
36:24
Speaker 2: white spectrum of people who are employed but still not
36:28
Speaker 2: able to afford the going rent.
36:31
Speaker 3: Yeah, and if you if you take that one step deeper, right,
36:35
Speaker 3: and so if you are in that community and you
36:37
Speaker 3: see that issue, right, and you think about how much
36:43
Speaker 3: does it cost to build in this community? And let's
36:46
Speaker 3: say it takes a year and a half to get
36:51
Speaker 3: through the application process from neighborhood approval, environmental regulations, making
36:57
Speaker 3: sure that you're complying, and maybe some of the these
37:00
Speaker 3: regulations are already accounted for in building cups. That's true
37:04
Speaker 3: in a lot of areas. So that adds cost. And
37:06
Speaker 3: then you add on to that, you know the fact
37:10
Speaker 3: that you may be subject to lawsuits from membi groups
37:16
Speaker 3: and that you all by then, if it costs more
37:21
Speaker 3: to build an affordable unit in town versus forty miles
37:26
Speaker 3: outside of town. You have to ask yourself why and
37:29
Speaker 3: if the regulations that you have are doing that, and
37:34
Speaker 3: you want the EMT to live in your community. You know,
37:39
Speaker 3: I think today oftentimes you know, I'm generalizing society. The
37:44
Speaker 3: urge is to write a very angry post on social
37:47
Speaker 3: media about it, right, And the answer is to stop
37:51
Speaker 3: doing that and do something and and and at the
37:57
Speaker 3: end of the day, you have to ask your if
38:00
Speaker 3: you have created more housing or not, and it's it's
38:05
Speaker 3: either yes or no, right, And there's no excuses. We
38:08
Speaker 3: should there should be no excuse for this. And so
38:11
Speaker 3: I think that's the way I think we need to
38:12
Speaker 3: look at it. It's just I think we take the
38:15
Speaker 3: gloves off and say, look, we can complain about that
38:18
Speaker 3: all we want, but uh, if we're going to be
38:21
Speaker 3: okay with requiring seventeen public meetings to allow people to
38:27
Speaker 3: appeal putting affordable housing in their neighborhood when it's demonstrated
38:32
Speaker 3: that it's not going to be shown economic harm, then
38:37
Speaker 3: then we asked for it. Then we should stop complaining
38:40
Speaker 3: and just own that, or we should do something about it,
38:44
Speaker 3: or the inverse.
38:45
Speaker 2: You know, every vote no or every films down on
38:51
Speaker 2: the construction of affordable housing, is what I say. Also
38:55
Speaker 2: accepting more homelessness in the community too, so you know,
38:59
Speaker 2: you've got this tension here as well, or staff shortages
39:04
Speaker 2: of nurses and EMTs and teachers because they can't afford
39:09
Speaker 2: to live there. So you know, society at some point
39:12
Speaker 2: has to make these links together to understand the impacts
39:16
Speaker 2: of these decisions when it comes to affordable housing and
39:20
Speaker 2: construction of it.
39:21
Speaker 3: Yeah, I think it's incumbent on us as leaders in
39:23
Speaker 3: the industry too to also make sure that we're making
39:26
Speaker 3: that case and that we're helping to put the information
39:28
Speaker 3: out there. Obviously, everyone has an obligation and responsibility to
39:31
Speaker 3: consume that information and get informed. But I think and
39:35
Speaker 3: that's one of the things that we try to do,
39:36
Speaker 3: is say, look, there is a consequence here, and it's
39:39
Speaker 3: a good one, and and and this is what you
39:43
Speaker 3: want this. Like, you know, in our community I live in,
39:47
Speaker 3: you know, we had a situation where had a lot
39:48
Speaker 3: of chronically homeless folks and in the winter time when
39:53
Speaker 3: it was super cold, the police were just you know,
39:55
Speaker 3: you know, writing them up on citations for one thing
39:58
Speaker 3: or another, just to make sure that they could spend
40:00
Speaker 3: the night in jail, so they went and freeze it up,
40:02
Speaker 3: and we went to the city and county to convince
40:05
Speaker 3: them to build a chronically homeless place, right, and we
40:11
Speaker 3: were able to just you know, we didn't talk about
40:13
Speaker 3: why this was a good thing to do. We didn't
40:15
Speaker 3: talk about why it's our moral obligation to do. So
40:17
Speaker 3: what we said is like, it's going to cost you
40:19
Speaker 3: about seventy thousand dollars a year in jail costs to
40:23
Speaker 3: do what you're doing today. If we do it this way,
40:26
Speaker 3: it'll cost you about forty thousand years. And it passed, right,
40:31
Speaker 3: So I think sometimes it's just getting just you know,
40:35
Speaker 3: putting the emotions aside and saying, look, this is a
40:37
Speaker 3: good this is why it makes sense, and then you decide,
40:41
Speaker 3: fortunately that one worked.
40:43
Speaker 2: Good business sense, good social sense, good moral sense, so
40:47
Speaker 2: it hits all the checkboxes.
40:49
Speaker 3: Yeah.
40:50
Speaker 2: Well, I have been talking with Bob Simpson, the founder
40:52
Speaker 2: of Simpson Impact Strategies and the CEO of the Multi
40:56
Speaker 2: Family Impact Council. Thank you, Bob. Has been an honor
41:00
Speaker 2: to have you here and champion affordable housing and where
41:05
Speaker 2: we need to head from here.
41:08
Speaker 3: Thank you so much. Katie I love listening to your
41:10
Speaker 3: podcast and thank you for all you do to get
41:13
Speaker 3: the word word out about this fascinating topic.
41:17
Speaker 1: Thanks for listening to change Makers with Katie Gore. To
41:20
Speaker 1: find out more about Katie, go to quad L dot com.
41:24
Speaker 1: That's qu a d e l dot com. This has
41:28
Speaker 1: been a production of Forbes Books Radio