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Taylor Avakianat 0:08

Bob Buente is president and CEO of 1010 Development Corporation, a Los Angeles faith-based affordable housing developer and property manager.

Taylor Avakianat 0:42

…and not even worry about condominiums? Is there one skill set that you think is the most important when it comes to actually developing this affordable housing? I would say This episode is sponsored by Loan Titan, a leading residential financing loan company specializing in both conforming and non-conforming mortgage solutions. Loan Titan offers Fannie Mae, Freddie Mac, non-QM, and private money, hard money loan programs, helping borrowers who need flexibility beyond traditional lending guidelines or speed-driven…

Taylor Avakianat 1:41

…there. Recently, you've retired. Yes, I have. were introduced by a mutual friend. And, why I wanted to have you on the show is because you are an affordable housing provider, owner. Not one of these massive, huge organizations, more of a smaller shop, right? 400 or so units. So, walk me through 1010 Development. That's your That's your company.

Bob Buenteat 2:15

…were able to do one project uh at Pico and New Hampshire, called um Casa Shalom. Casa Shalom. It has never been vacant. Well, the one thing about affordable housing is you don't have market risk. And, that has always been an attraction

Taylor Avakianat 48:38

New tax dollars, new investments, new people, affordable housing. Right? Like let's let's make it a little bit easier for us to do what you said you need to do.

Taylor Avakianat 49:03

…at in that whole pendulum swing, but I'm really hoping so because uh I mean, you know, 2 weeks ago there was a a vote that changed the way that RSO housing is rental increases, and I did a video on um, 1920s buildings. And I've historically, that's where I started my business was selling a lot of these brick buildings in Koreatown. And that's some of the most affordable housing in the city. And they just basically chopped its knees off by not allowing it to have the excess rent increases because it's master…

Taylor Avakianat 50:00

…how about you run this and you lose money? And um we're going to make it so you lose a little more money now coming up. So, thank you for providing affordable housing. It's like, no. No one in their right mind is going to be Uh you know, giving losing money on an investment. These are investments. There's risk associated with that. Um Why would anyone spend their money to go and do that? And it it just kind of baffles me that These are these are the decisions that are being made by uh people who say one thing and…

Martin Muotoat 1:56

…realized sort of right around 2020 that despite having built and and rehabbed and and improved these buildings, we had not added one unit to the housing stock of Los Angeles. And what has been a throughine of uh you know the last 15 plus years is how do we solve the affordable housing crisis?

Martin Muotoat 5:24

…construction. You know, for for many years we um avoided government programs and we avoided um historically we've avoided things like low-income housing tax credits because very complicated, incredibly long timelines and to some degree drive up costs. Mhm. Um and hence the you know the headlines of of affordable housing being built for 700800 you know a million dollars a unit. Um but but opportunity zones was was different. It was a it you know despite some criticism it really has led to uh the creation of a large…

Martin Muotoat 32:52

…myself that. You want to explain what it is first? Yeah. So, Model Z, you know, takes a unique approach to creating what we refer to as radically affordable housing. For us, it's all about basis. You've got to drive down the cost of construction. It is one of the major issues facing Los Angeles. It's one of the major issues facing California and the country, right? and and and when when the prices are getting to $700 to a million dollars to house someone, you know, that that barely has an income, it just is not…

Martin Muotoat 36:25

…no sense. No manufacturing company would be structured that way. Yeah. And so what we do is we build the Honda Civic or the Toyota Prius maybe of affordable housing we can build at scale. It's repeatable. We were very fortunate um to hire a bunch of SpaceX SpaceX engineers and and people from the automotive industry that came with an incredible amount of manufacturing discipline. They set up the factory. They run the operations. They have done incredible things um to drive down the cost.

Marc Menowitzat 4:52

that's 40% of it's affordable housing and 60% of it is conventional housing. Capital A affordable. Like LIHTC LIHTC, Section 8.

Marc Menowitzat 9:13

It's based on a uh arbitrage that we do between the affordable housing rents going from Section 42 to Section 8.

Marc Menowitzat 11:26

And that just doesn't make sense for No, and it's all tenant favored, so you know, no matter what you do, the tenant's always right. So, it it's it I wouldn't invest a dime here. The only advantage investing in the state of California is is you don't pay property tax on affordable housing.

Taylor Avakianat 51:31

affordable housing. Interesting.

Jeff Gleibermanat 15:09

…year and uh two of them were in LA. Yeah, and uh both of them actually went to buyers that are doing the NOAH naturally of um naturally occurring affordable housing program. So, they've been very aggressive buyers and really kind of saving the California market right now. And to for us to buy in LA today, it would have to be a very, very special, unique deal. There's just a lot of regulation and risk with um the mansion tax. Um that really put a damper on the market. And LA is just a market that we don't know if…

Jeffrey Jaegerat 0:00

7.4 million homes underserved in terms of housing in the country. Whoa. Right? And what that translates to is that 50% of renters in this country pay more than 30% of their income on rent. Jeffrey Jaeger is the co-founder and principal of Standard Communities. And for over 20 years, he has led more than $6 billion in real estate transactions, helping build one of the 50 largest affordable housing portfolios in the US with over 30,000 units across 22 plus states. My boss is here, the seller is here. This broker's…

Taylor Avakianat 1:55

Let Citizens focus on your wealth so you can focus on your world. Connect with a banker at citizensbank.com/novacancy. Member FDIC, Equal Housing Lender. This episode is with Jeff Jaeger. It was absolutely incredible. Jeff is one of the smartest people I know when it comes to affordable housing. His company, Standard Communities, owns 30,000 units across the entire country and wants to get to 50,000 by 2030. We talked about where affordable housing was when he started back in 2001 to where it is today and what that…

Jeffrey Jaegerat 16:24

Is where we first you know, kind of And and also at the time in the affordable housing market, Fannie and Freddie were the largest buyers of tax credits. You know, they're probably buying 60% of the tax credits across the affordable housing space. And that all stopped come 2007. And so, when that happened, the tax credit market also in affordable housing ground to a complete halt. So, we then were kind of retooling and thinking, "How do we take advantage of the situation?" We knew it was a generational opportunity…

Jeffrey Jaegerat 17:59

…in multi-family. Mhm. And over time, I mean, if you look back from even, you know, kind of World War II on, it's been this slow progression of housing being this quintessential, you know, infrastructure effectively in the country. And, you know, governments, local governments, and state and federal have been getting more and more involved as as that's been progressing over time. Yeah. And so we sort of just this light bulb went off for us of like, "Hey, we need to focus on figuring out how to get involved and…

Vicky Schiffat 1:06:58

How much easier will it be to build? What's that going to do to to real estate regulations? U does it solve the housing crisis? You know, all of these things that and what's the downstream of solving the affordable housing crisis in the short run? you know, with with the homeless issue. I mean, a lot of that is substance abuse and mental issues. Um, but some of it is affordability certainly. So, how are all of these things and technologies, if we had to fast forward, what's the world going to look like in 20 years?…

Steve Ludwigat 32:14

No. Arthur Win Communities on the East Coast. Uh one of the if not the biggest affordable housing developer and manager in the country. Um you know, I fortunately got to know him as a kid. Uh, and uh, and uh, over when I first started real estate, I would call Arthur and I would just ask him advice and he would give me like two or three words. Yeah. You know, like in 2007, I bumped into him in Nucket. I was like, Arthur, it's so great to see you. I was like, what do you think of the market? And he goes, "Cash is…

John Drachmanat 1:53

California that we had dealt with before because uh we do a lot in the affordable housing development uh space. And so uh a group uh up in Northern California had figured out that if you had a joint powers authority take title to an asset based on um California law, the constitution of the state of California, you can get a property tax exemption. And so they figured out a structure where you could raise taxexempt municipal uh bonds uh to acquire existing market rate housing uh in a structure where the joint powers…

John Drachmanat 3:35

…idea how this group put together this capital. Kind of don't know how it all worked. Uh but um you know, my business partner is really an expert in affordable housing finance. Yeah. And said, you know, you guys, you and John are pretty smart. Maybe you can figure this out. And so um to to use a basketball analogy, we uh you know, went into the lab, my partner specifically, and then COVID hit and so we you know, we had a lot more free time because we're all at home. So really went into the lab reverse engineering…

John Drachmanat 4:20

and it was a really good blend for us because we had done a lot of market rate housing at that point. Um we had done a lot of commercial acquisitions at that point. Um, and we had done a lot of affordable housing and these workforce housing projects, they had a very nice blend of affordable housing and market rate housing because you were buying market rate housing. So, you had to understand how market rate housing works, how market rate sellers work, but then you were also converting it to workforce, not…

John Drachmanat 5:05

Um we got connected to CSCDA who is a joint powers authority in California who was thinking about doing these programs. We had done work with them on affordable housing bond financing in the past. Um they connected us to Goldman Sachs became our bond underwriter and we started underwriting projects. We had a relationship here with the seller uh LAR um and um we you know had a great relationship with the city of Long Beach. City of Long Beach had a mandate uh from a a housing report they' put out a couple years…

Nadine Wattat 44:44

…a little more geographically. I have investment in City of LA through I'm a co-GP with a group called Thrive and they're doing a lot of workforce housing, I'll say, not 100% affordable with a capital A, but workforce housing. And um, I have a couple hundred units that I'm developing in Waikiki under Bill 7. They're, you know, have a very tax-friendly um, mandate and are really working. Obviously, I have a partner on the ground there that makes that feasible, but um, and it's it's workforce uh I think it's 80% AMI,…

Taylor Avakianat 49:16

…have to pay ULA transfer tax, which is a big one. Um which makes the the numbers a little bit juicier. Have you guys ever thought about going into affordable? I know affordable is a big, big talk right now with California and LIHTC and the way that housing has become so unaffordable that there's a lot of programs,

Steve Ludwigat 21:51

…are like invest invest invest because beyond that so to to uh uh the government says uh you should spend no more than 30% of your income on housing. Mh. So to be able to afford that $900,000 house, you have to make $200,000 a year. How many people in California of 39 a.5 million residents we have, how many people in California make over $200,000 a year? The answer is 2.6 million.