…to us that we're implementing the the mayor's priorities. Um, but but basically, um, you know, what we're about at Hackla is building creating affordable housing for people in LA. We focus only within the city of Los Angeles. Okay. So, we use all these different tools that we have. I'm sure we'll get into that, but that's basically our mission. Affordable housing primarily for people of lower income, very low income, etc. The other thing that I think we'll get into and I'll just touch on is we run the section 8…
…to go back to school and I went to school uh on the East Coast for a master's program, but I kind of had the idea that I wanted to work in this affordable housing space cuz I had been really exposed to it
uh in New Orleans because a lot of the focus was we want to rebuild and build units, but we need affordable housing, too. And there was a lot of tax credits and things that came up around that. And so, I kind of went in with that idea that this is kind of the field that I want to be in. And I really focused my time there on taking all the classes I could, you know, networking, doing internships, etc. that were focused on that. And I kind of realized like, yes, this is a field that I really enjoy. Um, when it came…
…Companies. Yeah. I worked for Jeff Jagger working on doing what they call west coast production which is kind of running deals on the west coast affordable housing acquisition rehab tax credits section 8 all that stuff I had been doing in Boston I did it out here um but fast forward um and that was a fantastic experience which you know
of shelter in LA, which believe it or not did not exist. Wow. We've built technology for the whole ecosystem and we got into housing. So I started investing with affordable housing developers including Model Mhm. Z development. So I would started initially with Sola Housing Mhm. and working with Sola Impact on their projects and then Martin Muoto came to me with the idea for Model Z. I became the lead investor Mhm. for Model Z
with the first check written. I thought it was an incredible idea to build a modular manufacturing facility in South LA Mhm. to do affordable housing in LA. Yeah. And that's been a really effective program that I think is transformative for the space, which will dramatically lower the cost of building affordable housing and thereby enable much cheaper rents as it comes to affordable housing.
And you're like, "What the heck is this?" Yeah, so then I got even deeper into it with starting the Better Angels Affordable Housing Fund where we are literally ourselves now co-general partners with developers building affordable housing in LA. And the goal is to build it at a third of the cost in less than half the time of what the city is doing today.
…but there's clearly an opportunity in this model to also enable master leasing, Mhm. which we think is much needed by the city. My head of housing, Andre Bueno, comes from HACLA, Mhm. which understands the need for more affordable housing, the need for more workforce housing, the need to to leverage tools like master leasing to speed up the entire process and to stabilize faster. So, all these things enable not just the more rapid building of housing, but private sector market-rate returns
…for that. These guys are you know, they need to heal. Yeah. and and some of them may never heal. Yeah. You know, but the least we can do is get them housing. Yeah. That is the very least, you know, and I think the whole affordable housing model is absolutely broken. I mean, the the VA, I mean, the you know, when they do these deals with the affordable housing developers for the permanent support of housing, they're they're it's like a million bucks a unit for on a ground lease, you know, and you're kind of going,…
You know, so and the other part is just the capital stack. The capital stack is you got like six sources, you know, of of different layers of capital for these affordable housing deals. So, it's like a game with the developers where they piece together these these grants and tax credits and the bond financing and the ching ching ching ching. I mean, it's it's it's broken. And the ULA tax, God almighty, it's brutal.
It was called the mansion tax. They didn't read the 29 pages. Should we tax rich to pay for affordable housing? Yes or no? Well, yes. People are out there lying, saying it's created 10,000 jobs, which is absurd. When Measure ULA took effect, transaction volume in the city of Los Angeles above $5 million where Measure ULA works fell by 50%. Well, they projected would be up to a billion a year.
900,000 is all that's been spent on affordable housing. That has grave impacts to our economy that the people who drafted measure ULA did not fully account for.
…to society. and they added in all of these investment properties, office buildings, apartment buildings, movie studios, manufacturing centers, even affordable housing that's not owned by nonprofits. Um, all of that now is in this bucket and it's getting taxed at between four and five and a half%.
…the mansion tax. Nobody read all 29 pages before deciding to vote yes or not. They just they just said, "Should we tax the rich rich to pay for affordable housing?" Yes or no? Well, yes, obviously. Yeah. And um unfortunately, because Measure ULA uh is so so tightly crafted, it can't really be fixed by the city council of Los Angeles. Um now, I I I I should say what what needs to be fixed about it. Yeah. Um you Okay.
…estate markets in the world Southern California enjoy welcome to the podcast my name is Taylor Ven and my esteemed guest who knows everything about affordable housing in Southern California Dan tabom is here to tell us about everything he was actually on the inside of the city and dealt with the city council and worked on some boards and governments and so he's going to tell us all about that Dan thank
you for being here glad to be here I'm there are better affordable housing Specialists than I but maybe not ones that that only manage uh an an own market rate department so that that'll be my Niche yeah exactly so so tell
affordable housing sure so um I mean I moved here in 1992 so it's been quite a while okay so you're La native yeah and and if you come from Montreal the weather aspect is important part but the other part actually was the entrepreneurial opportunity opportunity to start off in a new place and and kind of feel like it's an environment where you may not know as many people but that if you can make things happen and you can you know you can do something in fact so in that way the American dream and the California…
awesome um so then walk me through how you became part of this affordable housing you know U how how you became part of Los Angeles affordable housing community because you eventually ended up working for hacka right the city of Los Angeles and so walk me through how
new proposals to tackle the city's affordable housing crisis California is the pain of the a to Bill change of zoning in La it's almost impossible to develop right now in today's market interest payment that you're paying property taxing what you're paying and you're seeing no cash flow you can't give me the land for free and I won't develop it why why are they saying that so the interest just shot up like crazy so now each month you're paying double what you anticipated that you would be paying everyone always…
…it's it's executive directors one it's a mayor Karen bass I I I really like this program um when she first got into office she's like we're in a housing crisis we need to build more housing more affordable housing which is what we were already leaning towards with building uh no amenity type building so we can have charge a a lower price point uh price per foot uh for the render and that's where really the demand is and in the more affordable space everyone can build super luxury and that's where most of the…
…so in some ways it's terrible in other ways it could be a benefit um I hope it doesn't happen yeah because one of the things we want to see is more affordable housing and I think what we've learned in the past and historically is that more regulation like this limits the supply which actually increases prices which is actually the exact opposite what I think these people want to do yeah um and so I think it's not founded in actual
…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?
…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…
…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…
…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.
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.
…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…
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…
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…
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…
…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…
bunch of lists like I'll get an email about all the housing stuff and all affordable housing stuff all the state level stuff and they're great articles that you could just like you know there's studies and yeah so what um before we wrap
It doesn't allow for affordable housing to naturally take place. And so, that's why, you know, look at the rents in Santa Monica, you know, West Hollywood, that the rent control cities are the highest rents.
provide more affordable housing, but all everything else all the headwinds make it almost impossible to actually build something like that. So, I'm interested to follow what some of these state bills are going to be doing from an affordable perspective if they're going to be allocating certain bond funds. And I mean, they have what 20 they they spent $24 billion on homeless housing, which I don't know where that went. Um, so there's money to be had, right? So I'm curious, uh, because there's so many conspiracies…
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…
…We have another one that we're working on and I'm looking at new projects there. So, I like San Diego. I like Ventura. Um, and then we have a lot of affordable housing projects actually in front of us. So, I have one that's uh we're looking at closing next month and then I have one that closes the following month and then one after. Okay. And um I I'm trying to create a little bit of I'm trying to actually tap both sides. The state is under supplied. We know that, right?
operating affordable housing, that's what I do. I operate affordable housing. How do you how am I going to operate affordable housing when you make it unaffordable for me to operate my affordable housing? Yet the city council members can't figure out that as they squeeze the life out of the property owners and values continue to drop because there's no net operating income and during co you don't allow us to collect rent for three years. So that cost me 7 million.