The ribbon is cut. The doors are open. A group of deserving renters eagerly stride into a safe, clean, and affordable property that’s poised for a successful 15-year tax credit run.
That’s the expectation, of course. The construction phase can be a stressful time in the development of an affordable housing property, consumed with unexpected costs, delays, and labor shortages. It’s easy to see why lease-up and everything beyond it might not always receive the time and attention it deserves.
Just ask Alissa Rice. At any given time, she and her team of nine asset managers and analysts juggle up to 150 affordable housing projects in various stages of development. As head of development risk management for Boston Financial, one of the nation’s longest-standing syndicators of low-income housing tax credits (LIHTCs), it’s her job to work with her developers to make sure each project is successful and meets the expectations of investors and other stakeholders. “You face something different every day. You’re constantly challenged,” the 23-year industry veteran says.
Alissa Rice, Head of Development Risk Management for Boston Financial
Challenge is putting it mildly. No project is easy today. “We often say that leasing up a property is as tough as building it,” Rice admits. “But it should be smooth sailing after that,” referring to her team’s hand off to the next link in the firm’s stewardship chain, the stabilized asset management group. Stabilized asset management supports the property through its 15-year LIHTC compliance period.
What lessons does Rice have for developers working on LIHTC projects? Here are her top five:
- Over Communicate. “There needs to be a clear line of communication between developers and the property management agents on expectations,” advises Rice. “Especially if you’re working with a third party. They may not understand what credit delivery projections were promised to the investors. Credit delivery is specifically tied to lease-up and without clear communication, there can be a big disconnect there and that impacts investor benefits.”
- One At A Time. Rice says to avoid the temptation to open leasing across all buildings in multi-building developments. “Be disciplined. Make sure to fully lease one building at a time,” she explains. “Otherwise, you may end up with each building not achieving full unit qualification. That could mean a delayed delivery of credits or reducing their value because lease-up wasn’t handled properly.”
- Signed Lease Timing. Should you hand over the keys on the second of the month or the last day of the preceding month? Whenever possible, go with the last day of the month for a lease signing, Rice recommends. “You can claim credit for an entire month. That has a real impact on the credit benefit.”
- Qualification Sweet Spot. Lining up qualified tenants just in time for the property opening is part art and part science. The worry is, says Rice, if you qualify applicants too early and then the opening gets delayed, it could leave residents disappointed or angry – ‘But I need a place now.’ Look for the sweet spot. That is normally about two to three months prior to opening.
- Rent Concessions. Be very careful here, the development risk expert warns. “How are you ever going to achieve stabilization if you concede $100 or $200 a month in rent over 12 months?” asks Rice. “You’re better off promoting one month of free rent because you are likely to reach your target NOI and convert faster by taking the hit upfront.”
Rice says Boston Financial doubled down on asset management following 2008’s recession. “Make sure your properties, all your properties, deliver. Strong asset management before the ribbon cutting is a lasting win-win for everyone.”
Learn more about how Boston Financial supports affordable housing.
