How Affordable Housing Gets Built With Brad Wiblin

BRIDGE Housing, Bay Area, TRI Commercial, Northern California, San Francisco, Bay Area, East Bay

By Teddy Swain

I first crossed paths with BRIDGE Housing during preliminary site investigations at a property in Oakland which my partner and I were preparing to take to market. Nearby our site there were some large mixed-use buildings which had recently completed construction and, as part of our initial due diligence, we researched them. Come to find out, BRIDGE housing was the developer of the affordable component and was also, in effect, the master planner for nearly the entire city block along with several other market-rate developers. The project was so large that discovering this opened my eyes to the size, scale, and complexity of some of the affordable housing projects we read about in the paper. I reached out to Brad Wiblin, Executive Vice President of BRIDGE Housing, to hear about their experience at this location, and of course pitch our site. We weren’t able to make a deal happen but I was able to convince Brad to share some of his many insights into the affordable housing industry.

Brad has 26 years of experience building affordable housing and has been with BRIDGE since he took the job after grad school. He has a wealth of knowledge in the non-profit housing space and was kind enough to break down some of the most complex aspects of how affordable housing gets envisioned, built, and paid for.

In your 26 years at the organization, how have you seen BRIDGE change?

BRIDGE was sort of big for its britches back then but really, we were only in the Bay Area at the time. Part of my initial role turned out to be moving to Southern California and opening an office. So, I took my laptop and a box full of business cards and it turned out to be really good timing. San Diego at the time had a big inclusionary program and we were able to come in and solve a lot of the home builders’ problems and we built 2,000-3,000 units. I came to learn that I really related to the home builders on the market rate side; I thought that when I came out of grad school, I would end up working for one of them. Our presence in San Diego led to us opening another office in Orange County and then five years ago I started going up to Portland and finding opportunities in that market. We hired staff and that turned out to be really good timing as well. So I’ve seen the organization grow from the Bay Area to more of a West Coast organization.

BRIDGE Housing as an organization is involved in the acquisition, ground up development, and long-term management of low income housing. Is that correct?

Yes and that might be a flaw or a real asset, it’s hard to say sometimes. We rarely ever sell anything; in 37 years we’ve sold two buildings, but that’s changing a bit now. We are really looking at our portfolio and trying to be selective. We own a couple of outlier projects that we’ve built over the years and we are looking at potentially being a seller of some of those outliers.

We really are a developer in the DNA of BRIDGE. The whole mission when this adventure started was quantity, quality, and affordability. So the idea was to build as much as we could build and our board has kept their foot on the gas pedal throughout this time. We have 11 buildings under construction right now. The cyclical nature of the funding we receive tends to lump these projects together at different points in the cycle and unfortunately, we haven’t been able to flatten the curve on that throughout all these years.

So with 11 buildings under construction in the midst of a pandemic, how has your outlook changed, if at all?

We were really lucky that we were considered an essential business from day one. So all of our buildings were more or less able to maintain their rough schedule and stay under construction without the fits and starts that a lot of other job sites had to deal with. In general we are seeing that everything is on pace; it is just running generally about a month behind.

We are constantly trying to fill our pipeline. I run our business development team and I am trying to feed this machine which is voracious in its expectations. We just finished entitling 1,100 units in the city of San Francisco on a pretty unique piece of land known as The Balboa Reservoir. Avalon Bay is our partner on that one and that’s a 50/50 deal. They’re going to build 550 market rate units and we’ll build 550 affordable units. On our side we’re bringing in some affordable housing partners like Habitat For Humanity and Mission Housing and they also will build a piece. Right now, I am trying to figure out how to finance $25MM worth of infrastructure so that we can get vertical on that building hopefully by 2022.

Let’s touch on the financing side of things because from the outside looking in it can be a bit opaque and confusing to understand. Can you take us through how these deals are financed?

Yeah it is a little bit opaque from the outside. I have a home builder friend of mine who calls it secret sauce. He wasn’t a finance wonk and won’t try to attempt to understand. He just picks up the phone and calls me saying, ‘Hey Brad, can you bring some of that secret sauce over here!’. That secret sauce really revolves around the low-income housing tax credit. BRIDGE is a non-profit – we don’t have a tax appetite so we will sell these tax credits to a variety of investor types. The banks are all big investors because not only do they buy the tax credit but they want to provide construction loans and it’s a robust business for all of the large banks. They also get CRA credit for doing it and they make money along the way.

What is the affordable housing gap?

In a typical project the equity requirement might be 40% of the project capital stack which is a heck of a place to start. The first mortgage often is a tax exempt bond execution and really, it’s the biggest supportable mortgage that we can muster. The banks will loan us 1.15 debt coverage on these affordable deals. So, now you’ve got 40% of your stack in equity, you’ve got another 40% in debt, and that last 20% is the affordable housing gap. Our first stop is always the local jurisdiction, City of Oakland, City of Berkeley, City of San Francisco. Their money invariably needs to be the first in, it’s kind of the riskiest if you will but once I’ve got the City to buy in then I can go talk to the County and ultimately the State. California has an incredible array, too many to be honest of funding programs. They are little known to the outside world but are incredibly important to our business so we will go and compete for those soft funds.

One of the biggest unknowns or misnomers of our business is that somehow, we are in a wash with public money and this must just be a slam dunk. I will say that this business is as competitive as any other that I’ve been in. We have to compete for land with the private market, pay market prices, put money down, and waive contingencies after 30-45 days of due diligence. All these things that are adding risk but BRIDGE has working capital to do that.

I am often not only shopping for the right real estate – hopefully something near transit – but there are other kinds of inside baseball issues that we are up against. Something called a Difficult To Develop Area ‘DDA’ and these are designated census tracts which change every year. In a DDA I get a 30% boost on my tax credit basis, if I am across the street and not in a DDA I’ve just walked away from 30% of the equity that I might have otherwise had. I want to be near transit, I want to be in a DDA, I want to be in a city that has some political will and hopefully some money. We are not averse to taking risks but we are careful like a lot of folks. Nothing like being caught with 11 buildings under construction in a global pandemic to put some fear in you!

Can you explain the state’s homeless housing requirements along with the affordable housing requirements?

Yes – one of the big challenges today, and we all see it, are the tents on the street outside of every big city. The homeless population. The state and most local jurisdictions require that if you are going to borrow their money you must deliver 10%-30% of your building to be set aside for permanent supportive housing. We are bringing in formerly homeless people into a building that is otherwise full of working people and they come with some challenges. They’re on the street for a reason, they may have drug/alcohol issues, be self-medicating, and they may have mental health issues on top of these other challenges. When we incorporate 30% of that population into a family building, we bring a bunch of services with them to kind of wrap around to help them become stable and ideally productive.

That is happening all over the state and causes a lot more concern for our neighbors. I mean, people used to not be so happy with us anyway because I am building affordable housing, building large apartments, and now I am bringing homeless people to their neighborhoods. So, the entitlement challenge is real, even in this day and age when the Bay Area is a very progressive and very welcoming place for the most part. But that doesn’t mean if it comes next you, you’re going to support it.

This is a statistic that we hear a lot, and the answer isn’t always so clear. Why is there such a large delta in the construction costs between building affordable housing vs market rate housing?

Look, we’ve looked at this ourselves very carefully and hard over many years. The state of California has done a massive data dump on 20 years of tax credit projects that got built to try to understand why that is happening. I can say without any question a couple of big factors that come in; one is anytime we borrow state money we are going to pay prevailing wage. The scale that we’re building at many times it’s not just prevailing wage but we are in a territory where we have to sign a Project Labor Agreement. Balboa Reservoir will have a PLA there and that is not a traditional market transaction and there is a pretty big delta in hard cost pricing there. To compete for funding we are exceeding the title 24 energy standards by 10-20%. So we’ve got a portfolio that is unbelievably efficient from an energy standpoint.

I would also say that we get asked by jurisdictions, not out of malice, but they ask us to do a lot of things that I think are the right things but they may not be housing. We are building infrastructure or we’re building other things that are not necessarily housing related and get added on. I think those are some of the big factors that lead to the delta in costs. Another factor that bothers me is that we’d like to see a bit more competition on the general contractor side. If I want to build an affordable housing building there’s about three of four guys that I can talk to. I would like to put it out to a dozen or at least a new group of folks who would add a bit of competition to the mix.

About the Author

Teddy Swain is a commercial real estate adviser at TRI Commercial Real Estate Services in the San Francisco East Bay. His expertise lies in the acquisition and disposition of East Bay Area Multi-Family and Mixed-Use property as well as Entitlement and Development Opportunities.

Teddy also serves as the Technology Officer on the board of directors for the Certified Commercial Investment Member’s Northern California Chapter (CCIM).

DRE# 02067677 

Email: teddy.swain /at/ –

Direct: 925.296.3360

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