Instruments of Change: Where Do We Go from Here?

As one administration comes to an end and a new one begins, it is timely to consider: where do we go from here? During the last 12 months I have observed best practices at four different public housing agencies (PHAs) and gained insight into the tools and tactics they use to rise to the next level. Here are a few findings.

First, it is paramount that a Strategic Plan drive performance and innovation within a PHA’s operation, not HUD compliance. Compliance with HUD regulatory and spending requirements are a baseline. For optimum performance involving local decision-making, PHAs must be laser focused to:

1. Advocate to simplify and ease the workload of the regulatory operating framework.  This must include discussions and efforts to find common ground with low-income advocates to develop effective tenant protections that are not counterproductive to PHA workload and increasing administrative staffing costs.  
2. Build the capacity and expertise within our industry involving in-house property management, real estate development planning and finance practices.
3. Enhance self-finance practices involving applying for LIHTCs or securing debt and equity from the multifamily capital and bond markets
4. Build self-evaluation and performance monitoring practices more in line with the private multifamily industry going through the transition process to prepare to be rated by agencies such as Standard & Poor’s or Moody’s to access the capital markets.
5. Plan a PHA operation designed to focus on alternative performance benchmarks like those adopted by multifamily owners and investors in the private real estate industry.

These lessons learned were gleaned from working with four different PHAs over a 18-month period. Two of these agencies were Moving-to-Work agencies and two were non-MTW agencies: Atlanta Housing, Everett (WA), Wilmington (NC) and the Greensboro (NC) Housing Authority. Each highly devoted to strategic goals involving self-development and finance that will allow them to increase their affordable supply and earn non-Federal revenue through co-development and locally, owned affordable and market-rate assets.

One agency in the Pacific Northwest had acquired a market-rate garden-style apartment complex by issuing tax-exempt debt to finance the acquisition of a $118 million market-rate residential property. A second recently acquired a hotel that will be rehabilitated and converted to a multifamily assisted rental property in a prime downtown location. There is a national trend where PHAs are issuing debt to acquire multifamily assets for preservation and investment purposes.

Key Bank is the leading underwriter for PHAS that issue multifamily revenue bonds. In 2023, Key Bank issued nearly $500 million in tax-exempt financing. As more PHAs wait in a queue to secure oversubscribed LIHTCs, tax exempt financing and building the capacity to access Freddie Mac and Fannie Mae loans or local bank financing are increasingly viable to finance rehab, replacement construction or multifamily acquisitions.

In an effort to respond to market demand and to enhance its service delivery, each PHA had clear strategic goals:

• production goals to increase the affordable supply;
• a strategic desire to acquire market-rate or work force multifamily properties to expand the agency portfolio;
• actual or transition plans to self-manage its portfolio to generate non-Federal revenue;
• self-finance practices involving use of private debt and equity or issuance of multifamily revenue bonds to finance acquisitions or new construction because the Authorities wait in a queue year-over year to apply for tax credit financing that is oversubscribed and inadequate to address total development needs.

Many small PHAs have limited capacity to apply for LIHTCs; limited private developer interest and in many states smaller PHAs are disadvantaged under the competitive Qualified Allocation Plan (QAP) process where there are no set-asides for PHAs.

To achieve our strategic goals and successfully navigate through our challenges, we must innovate and do the following to become “good to great” organizations in our industry:

We must be strategic and committed to seeing beyond HUD mandates and the pattern of underfunding.

We must enhance our operations regardless of HUD or what SEMAP and PHAS say. They are not the “gold standard” for PHA operations and meaningful results-oriented performance involving real estate development, portfolio management or delivery of resident services needed in your local community. That is for you to decide what matters most in your community. It is critical you go through a strategic planning process with your Board in consultation with your local political leadership.

Your priorities should consider performance benchmarks tied to your mission and strategic goals like what will be your goal to generate non-Federal revenue. One Authority generated between $3 to $5 million annually.

1. How fast can you lease-up and get newly built properties stabilized?
2. Does your property management operation respond to emergency work orders in under 24 hours?
3. Does your agency respond to work order maintenance requests in under 1 week or two weeks. Would a market-rate tenant be satisfied with your response time?
4. What is necessary to lease-up voucher holders in less than 90 days? Can you answer this self-evaluation question?
5. Within your organization’s culture, how do staff respond to new assignments? Are they willing to take on new duties tied to agency and department strategic goals?
6. Are your executive leadership team and middle-managers able to follow-through and implement innovative new initiatives or enhanced business practices that will increase your agency operations or revenues from co-development or property management. If not, why not? My recommendation is look to the future to change this.

Let’s be the very best at meeting our challenges, adapting to change and the market conditions we are confronted with.

Major S. Galloway, III is the CEO and Principal at the Belvedere Dale Group, a real estate development advisory and management consulting firm.  He is currently working as Director of Real Estate Development for the Wilmington (NC Housing Authority and Chief of Strategic Initiatives for the Greensboro (NC) Housing Authority.  Previously, he served as Vice-President of Regulatory Affairs for the Atlanta Housing Office of Strategy, Policy and Regulatory Affairs for 7 years.  Prior to that he served as a Senior Adviser for 15 years in the HUD Office of Policy, Programs and Legislative Initiatives (OPPLI) in Washington, DC during the Bush, Obama and Trump Administrations. He served as a Policy Analyst and spokesperson for the National Association of Housing and Redevelopment Officials (NAHRO) from 1997 to 2000.