Pictured:Rich Devaney and Dara Koller 

The HAND network is hard at work to address the growing housing affordability challenge across the Capital Region. Five Minutes With is a series highlighting these members and other stakeholders. This informal conversation delves into their recent projects, the affordable housing industry, and more. In the latest edition, we have a conversation with EagleBank‘s Rich Devaney, Senior Vice President and Dara Koller, SVP & Deputy Director. They chatted with us about their extensive experience in the affordable housing and community development industry and how they landed in this space. Rich highlights past challenges, lessons learned, and his advice to emerging leaders seeking to make an impact. Dara shares key takeaways from her experience, what she is bringing into her new role, and other her interest outside of affordable housing. Check out our dialogue below:

HAND: Both of you have extensive experience in the affordable housing and community development industry  – Can you tell us about your professional journey and how you landed in this space?
DK: I have 20 years of industry experience, working in leadership roles at Freddie Mac and agency lenders supporting Fannie Mae and Freddie Mac multifamily executions, primarily focused on affordable rental housing executions for both agencies, including new construction and preservation of affordable rental housing properties.  While at Freddie Mac, I was also involved in the development and roll-out of  a few new products supporting the affordable rental housing industry as well.  When I first began working on affordable rental housing transactions, it was not the most well understood or popular asset type in the industry compared to market rate rental housing, but I always believed it was extremely important and I was excited to be part of an industry focused on solving the growing need for affordable rental housing in the U.S.  
RD:  I began my career just after the passing of the CRA legislation and immediately prior to LIHTC legislation being rolled out, working with and for some of the most respected and innovative industry icons in the DC market.  It was an exciting time, fusing the tension between regulatory pressure in the banking industry and innovation and expansion of and in the community development and non-profit sector intent on increasing its impact in significantly underserved neighborhoods.  My focus and vision was grounded in building high-impact community development and affordable housing businesses within and with large institutions (Bank of America, Fannie Mae, top 5 Life Companies) under the rubric of profitability, sustainability and scalability.  My experiences took me through the capital stack and from neighborhoods to national presence.  Throughout, my greatest experience to date was setting up this FHA business within EagleBank, coupling the best of financial strength, innovation and flexibility in its ability to deliver capital within the community it serves. 

HAND: Rich, you launched EagleBank’s FHA Multifamily Lending Division in 2015, in addition to several other investment initiatives for the bank. Can you tell us about one of your largest challenges over the past six years and what you have learned?
RD: Our FHA Multifamily business is a product line that falls squarely within the Bank’s commercial real estate span of lending.  As such, our task was to integrate this business in a collaborative way, not competitive, with the balance sheet lending activity, getting the buy-in from the line lenders and alignment in goals and objectives…..”Enlightened self-interest”.  Having set up multiple businesses over my 35- year career, this one presented unique challenges, including how to integrate.  It took a solid 3 years of repetition, “proving the thesis” and trust building to get to the point where the value chain is clear and tangible.  Presently, every single transaction within the FHA pipeline will touch the Commercial Real Estate balance sheet.  Lesson learned was that you can get buy-in strategically at the highest level, but you must get buy-in tactically where the rubber hits the road with the people who make the business happen. 

HAND: Dara, you are fairly new to the bank – what key takeaway(s) from your experience thus far are you bringing into your new role?
DK:

• There is a continuing need for safe, decent affordable rental housing and supportive services in our local communities and EagleBank has made a significant contribution to the growth across the Washington D.C. market and in communities throughout the Mid-Atlantic over the last 20 years. EagleBank continues to play an important role in financing affordable multifamily rental housing, which has helped build and maintain safe and economically stable communities which significantly improve the quality of life for its residents. 
• We have a tremendous opportunity to continue to make a contribution to the local community to provide much needed affordable rental housing through our deep relationships with affordable housing developers and investors, as well as EagleBank’s FHA multifamily business, which allows us to do business anywhere in the U.S. We are a community bank, with national capabilities with our FHA multifamily licenses.  I think that is a powerful combination.
• My strong affordable housing and multifamily experience will augment EagleBank’s growing FHA multifamily business. In this new role, I will be dedicated to FHA loan originations, business development as well as serving as a resource for the Bank’s focused efforts on affordable rental housing. 

HAND: Rich, do you believe there is a “secret sauce” to addressing housing affordability and creating more equitable communities in our region? If so, what do you think that is? What do you think is the largest obstacle?
RD: I believe the private financing vehicles and resources are readily accessible and in sufficient amounts to have great impact.  There needs to be, and always has been, focus on equity in the delivery and availability of affordable housing.  One of my greatest mentors emblazoned in my mind “you are what you measure”, so to solve issues related to equity, we need goals, transparency and accountability….period!  My perspective is that the largest obstacles in the production of affordable housing are the public entitlement process, zoning, planning, and permitting.  Some municipalities have processes that take up to 3-5 years which infuses risk, uncertainty and viability to the process. 

HAND: Rich, what advice would you give to emerging leaders who are seeking to make an impact in this space?
RD: Be flexible – issues are rarely binary choices, every situation is a learning experience – accept set-backs as a gift and surround yourself with diversity – holistically.

HAND: Rich and Dara, what are you most looking forward to over the coming months at EagleBank? Are there any projects or programs that you are particularly excited about?
RD & DK: Furthering the synergies within the Bank, our investment in the Washington Housing Initiative and further coupling our balance sheet and FHA business. 

The FHA Multifamily Group is an emerging contributor to the strategic goals and objectives of the CRE Group and EagleBank. 

EagleBank financed a handful of key affordable housing projects in the Washington D.C market including:

• More than $81 million in financing to support a key affordable housing project in Bethesda MD, which includes 401 multifamily housing units situated on five separate land parcels.
• Phase I of Addison Row Apartments, Capital Heights, MD a planned community consisting of a 321 unit multifamily building. The project is currently in lease-up. The community caters to workforce housing needs and in addition to affordability, offers large unit sizes compared to new construction in Washington, D.C. Phase II will add 327 units. 
• A construction loan used in conjunction with 4% LIHTC to rehabilitate a 60 unit LIHTC affordable community located in the Barry Farms neighborhood of Southeast Washington, DC. After completion, a HUD FHA Section 223(f) refinance application to exit the bank construction loan.
• A $50 million construction loan for a to-be-built low income housing project above retail space located in the Capital Hill area of Washington, DC. The project will utilize 4% LIHTC and a long-term rental subsidy contract with the DCHFA.
• EagleBank is currently working on a few notable affordable housing transactions, including the renovation and recapitalization of a project-based Section 8 property located in the Anacostia neighborhood in Southeast Washington DC utilizing 4% LIHTC.

HAND: Rich and Dara, if you weren’t working in this space, what might you be doing?
DK:  I have always been interested in architecture and design, focused on creating and transforming spaces to meet the needs of a building’s occupants and looking for solutions to present and future issues, such as climate change.  Incorporating sustainable and green building design in construction projects is increasingly important to reduce the carbon footprint and use our energy and water resources more efficiently.
RD: I have been consistent in responding to this question when asked over the past 30 years.  I would be dedicating 100% of my time working in programs that focus on disadvantaged youth, focusing on education and financial literacy.  To me, one of the biggest gaps we have racially and socio-economically is knowledge of and access to financial tools, products and services. 

Photo by William Iven on Unsplash

Listen to this Areaprobe podcast which details financing affordable housing using grant funding from the Federal Home Loan Bank.

You can also listen to it in segments here:

• Providing Housing for Homeless Households
• Federal Home Loan Bank Scoring Criteria 

About the Speaker
Megan Krider started working at the Federal Home Loan Bank of Pittsburgh in 2013 in the Community Investment Department and now serves as Manager, Affordable Housing and Community Development. In this position, Megan has the responsibility of managing the Affordable Housing Program which has supplied more than $263 million in efforts to support affordable housing development. Additionally, by managing the Bank’s Blueprint Communities® initiative, Megan has been able to support community development and the capacity building for communities. Megan received her Bachelor of Arts in Communications from John Carroll University as well as a Master of Public Management from Carnegie Mellon University.

Photo courtesy of Scott Lewis

By Lisa A. Sturtevant, PhD

In the aftermath of the recession and housing market downturn, residential construction activity has been increasingly fairly steadily. However, the pace of new housing construction remains below long-term levels and the types and prices/rents of new housing being produced does not sufficiently meet demand. As demand for home ownership increases, the population of younger renters grows more slowly, and the number of lower-wage workers expands in the region, there is a great need for lower-priced home ownership opportunities and apartments and other rental homes with lower rents.

Some key findings from the residential permit data released from the U.S. Census Bureau:

Residential construction activities to grow steadily but still remains below long term levels regionwide. Over January through November of last year, there were about 22,000 permits issued for the construction of new residential housing units. The 2016 residential permitting activity included 4,321 building permits in the District of Columbia, 5,806 building permits in Suburban Maryland, and 11,739 building permits in Northern Virginia. Residential permitting activity in the region has been increasing steadily since 2009, but remains below the 2000-2016 annual average (~25,000), suggesting that new home construction has not been sufficient to meet the demands associated with population growth.

One-fifth of the residential construction activity in the region was in the District of Columbia in 2016. While residential construction activity has increased throughout the region, the District of Columbia still accounts for one-fifth of new permits. About a quarter of the permits were for housing in Suburban Maryland and a little over half were in Northern Virginia. By contrast, before the recession, only about five percent of permits for new residential units in the Washington DC region were in the District of Columbia. The District’s share of new permits has slipped slightly, to 20 percent in 2016 from 23 percent in 2015.

Multi-family construction remains strong though new single-family construction is on the rise. In 2016, 44 percent of permits for new residential construction in the Washington DC region were for multi-family units, including nearly all (93 percent) of the permits in DC, 35 percent in Northern Virginia and 28 percent in Suburban Maryland. Historically, over the past 16 years, about 38 percent of permits in the region were for multi-family units so the current share remains higher than average. However, over the past two years, the share of multi-family units has declined somewhat, generally because of a slight decline in the share of permits issued in DC.

Home prices and rents in the Washington DC region continue to climb. Recent data from MRIS have shown that home prices in the metropolitan area have now matched the record high set during the housing market boom. The median sales price in December 2016 was $410,100, slightly higher than the previous record high price of $408,000 in 2014. As typical, there is wide variation in home prices throughout the region that reflects location as well as home types. For example, in the District of Columbia, the median sales price was $550,000. In Fairfax County the median home price was $470,000 and in Prince George’s County was $265,000.

Rents have also been on the rise, and new multi-family construction has skewed substantially towards luxury, higher-rent apartments. Even as concessions at new apartment buildings have increased, rents in buildings, particularly in DC and in the closer-in suburbs, are often only affordable to very high-income renters. According the 2015 American Community Survey data, the median rent in DC was $1,417 in 2015; however, the median rent for units built in 2014 and 2015 was $2,334. A household would need an income of more than $93,000 in order to afford the median rent in a new apartment building in the city.

Homelessness remains an intractable problem in the District of Columbia. Even as new residential construction increases, there remains insufficient housing affordable to all residents in the region. A recent survey by the U.S. Conference of Mayors found that Washington DC has the highest rate of homelessness among the nation’s 32 largest cities. The ability for the region to expand the housing supply will depend not only on land use and zoning changes that encourage more housing, but also policies that promote the development of housing for our region’s most vulnerable residents.

Photo courtesy of the NAACP Legal Defense and Educational Fund, Inc.

By Lisa A. Sturtevant, PhD

Fair housing never emerged as an issue in the presidential election; however, the new President and his HUD secretary and Attorney General will have responsibility for overseeing the enforcement of new fair housing laws, including the Affirmatively Furthering Fair Housing (AFFH) rule and the disparate impact court decision. There is uncertainty about what a Trump Presidency will mean for housing nationally, but given his selection of Ben Carson as HUD Secretary, it seems more important than ever to re-commit to working regionally to support the goals of fair housing and access to opportunity here in the Washington, DC metro area.

It has been over a year since the U.S. Department of Housing and Urban Development published the Affirmatively Furthering Fair Housing (AFFH) rule that established a new housing needs assessment process (replacing the analysis of impediments) with the Assessment of Fair Housing (AFH). The AFFH rule lays out a new procedure for local jurisdictions to assess areas of concentrated poverty, to identify disparities in access to good schools, transit and other amenities, and to evaluate unmet housing needs among certain subpopulations, including racial and ethnic minorities and persons with disabilities. In addition, for the first time HUD is providing a trove of local data to help localities identify patterns of demographic change. The goal of the AFFH rule is to bring greater guidance to localities for “affirmatively furthering fair housing” as mandated in the Housing Act of 1968.

Despite some of the rhetoric, the new regulations reflect only an incremental change to HUD’s approach to enforcing fair housing and is designed to encourage a more intentional assessment of whether the goals of the Fair Housing Act are being met. However, the AFFH rule has been castigated as a vast overreach by the Federal government into local autonomy, and the change in leadership at the Federal level will likely give broader voice to those claims.

During the campaign, President-elect Trump said he wanted to dismantle the AFFH rule. Donald Trump’s company has been sued by the Justice Department for violating fair housing laws in New York. In the 1970s, Trump’s father was arrested in Prince George’s County while allowing an apartment complex he owned fall into disrepair and for subjecting African American tenants to deplorable housing conditions. It’s not likely that a President Trump will take the lead on promoting fair housing from the White House. Trump’s pick for HUD Secretary, Ben Carson, has given every indication that he will not be a champion for fair housing at the Federal level either. He has called the Affirmatively Furthering Fair Housing Rule a “mandated social-engineering scheme” and a policy indicative of a “communist” country.

The Region Should Be a Leader in Promoting its Own Fair Housing Goals

With likely backpedaling on AFFH at the Federal level, the Washington DC metropolitan area should remain committed to advancing fair housing in the region. Now, more than ever, local elected officials need to be leaders for promoting access and opportunity for all members of our community.

Regional discussions about AFFH are already underway. Last spring, the Metropolitan Washington Council of Governments partnered with Enterprise Community Partners and the National Housing Conference to host a full-day training and information sharing session around the AFFH rule. The primary objective of the convening was to discuss the data component of the assessment tool but the conversation shed light on the entire AFH process. At the meeting, we had representatives from HUD, as well as from the Baltimore area, which recently completed a regional housing plan.

This meeting led to further discussions among local Housing Directors at the Metropolitan Washington Council of Governments (MWCOG), but momentum around AFFH slowed over the summer. Given the road ahead, now seems like a good time to re-energize regional partners around fair housing. The lack of Federal leadership is one important reason for mobilization. But there is increasing evidence that regions that are more racially and economically integrated have stronger, more resilient local economies.

There are several things we can do now which would not only help support housing options and integration throughout the region but could also allow us to act proactively—to do something!—in the wake of the unprecedented Presidential election:

Produce data on housing needs and opportunities more efficiently. We learned in our March AFFH meeting that HUD is providing a tremendous amount of data to localities, but jurisdictions are advised by the new rule to make use of locally-generated data. Rather than each jurisdiction analyzing its own data, MWCOG should facilitate a regional data analysis exercise that can help with local housing plans but also help jurisdictions connect regionally.

Consider a regional assessment of fair housing. HUD recommends, though does not really incentivize, a regional approach to assessing housing needs and developing strategies. While each local jurisdiction in the Washington DC area will still develop its own financial, land use and other tools to meet local housing needs, there may be some degree of regional assessment that could be undertaken. Local elected officials, along with housing and planning directors, should become better informed about what it would take to do a regional assessment of fair housing, and whether some type of regional approach is possible.

Share best practices. At the very least, local jurisdictions in the Washington DC region need to do a better job at sharing best practices for expanding housing options. In the last few years, many jurisdictions in the region have conducted housing studies that have led to the development of policy recommendations. The policies and plans should be shared across jurisdictions through MWCOG or another regional body so that jurisdictions can learn from each other and possibly help promote consistency in policies and regulations throughout the region.

Focus on community engagement. There is no silver bullet that we have yet to discover that will solve our region’s housing challenges. Jurisdictions in the Washington DC region are among the most innovative communities in the country in terms of affordable housing tools. We know what needs to be done. The major obstacle that remains is building political will and responding to community opposition to housing, particularly multi-family housing and housing affordable to low-income individuals and families. We should work together to solve the NIMBY (not in my backyard) issue by figuring out how to respond to concerns about density, schools, and parking; how to provide elected officials with education and information they can use at public meetings; and how to have conversations that promote inclusion and tolerance.

On that last point, I think there would be a lot of people in our region who would want to be part of that conversation right now.

By Lisa Sturtevant, PhD

You can’t hide from media reporting on Millennials and home ownership. But the message tends to be oversimplified and often contradictory. Millennials are getting set to jump into home ownership. Millennials are walking away from home ownership. Some reports say student debt is the reason Millennials can’t buy a home. Others say it’s not.

The attention to Millennials housing choices is justifiable. The generation of Millennials—those roughly age 18 to 34—have surpassed the Baby Boomers as the nation’s largest generation and are in prime household formation. Furthermore, surveys of Millennials uniformly find that the vast majority of this population wants to be home owners. For these reasons, Millennials will potentially have an enormous impact on the nation’s housing market.

As we know, however, housing markets are local. The Millennial population in the Washington DC region tends to be more highly educated and have higher incomes than Millennials in other parts of the country. But home prices are also substantially higher in the region than they are in other places. So what are the prospects for home ownership among 20- and 30-somethings in the DC region and how will their choices and the constraints they face impact their ability to accumulate wealth through home ownership?

There are about 1.5 million people between the ages of 18 and 34 in the Washington DC metropolitan area. The shares of Millennials tend to be higher in closer-in jurisdictions like the District of Columbia (35%) and Arlington County (34%), but Millennials make up substantial shares of the population in the region’s suburbs, for example in Loudoun County (20%) and Montgomery County (21%). The housing choices this group is making now and will make in the future depends on their economic situations and choices about marriage and family, as on the available housing opportunities in the region. These factors combined will determine the extent to which young adult households in the Washington DC region will be longer-term renters than past generations—or will move out of the region where they find more affordable home ownership opportunities.

There are two key decisions individuals make that are relevant to understanding home ownership potential among Millennials—whether or not to form an independent household (measured by headship rates) and whether to rent or buy (tenure choice).
Headship

Headship
Headship rates are defined as the percentage of people that are heads of households. The main way young people become the head of a household is when they move out of their parents’ home. Households are also formed—and therefore headship rates are higher—when roommates that are living together decide to live on their own. Headship rates decline when individuals living alone get married or move in together.

Headship rates for the 25-to-34 year old population were lower in 2014 than in 2005 or 2000. (The focus in this section is on the older Millennial population who are most likely to be looking at home ownership.) Therefore, young adults in the Washington DC region are not forming independent households at the same rate as they did at the height of the housing market or even back during a more “normal” housing market. The biggest decline in headship rates were in Prince William and Prince George’s counties. These are the jurisdictions that were hardest hit by the foreclosure crisis and also tend to have lower household incomes that in other jurisdictions in the region.

Tenure

Home ownership rates have fallen pretty substantially since the height of housing market and the declines have been biggest among young adult households. Perhaps, surprisingly, though, home ownership rates have rebounded more quickly in the District and Arlington—places with some of the highest housing costs—than in many other places in the region. For example, the home ownership rate among 25-to-34 year olds in the District was 18.9 percent, lower than the 2005 rate of 27.2 percent but not too much lower than the rate among this age group in 2000. In Arlington County, the home ownership rate was over 30 percent for 25-to-34 year olds in 2005. The 2014 rate of 21.1 percent, however, is in line with the rate in 2000. The biggest drops in home ownership have been in Montgomery and Loudoun counties. One conclusion from these trends may be that home ownership opportunities have rebounded for the highest income Millennials who are able to buy in the District and close-in locations but remain limited for young adults with more modest incomes.

Home Prices
Most young adult households do not earn above the area median income and the vast majority of homes on the market are unaffordable to them. In 2015, the median income for a household headed by someone age 25 to 44 was $92,326. (Data were not available specifically for the 25-to-34 year old population; however, the median household income for this younger cohort will be lower.) Under standard assumptions, a household with an income of about $92,000 could afford to purchase a home priced at about $370,000 (four times income). However, options are few in many parts of the region. In the District, the average sales price of a condo in August 2016 was nearly $520,000 and the average townhouse price in the city was over $740,000! In the broad Suburban Maryland and Northern Virginia regions—which includes Frederick, Charles and Calvert counties in Maryland and areas south to the Fredericksburg area and west to Fauquier and Clarke counties in Virginia—prices were lower. The average condo in Northern Virginia was about $300,000 and it was about $230,000 in Suburban Maryland. The average townhouse sold for $406,000 in Northern Virginia and $293,000 in Suburban Maryland. But prices were much higher closer in and in areas well connected to jobs, transit, and amenities. For example, in the City of Alexandria, the average two-bedroom townhouse sold for $590,000 in August 2016. In Arlington, the average condo sold for $430,000.

Implications for Millennials—and the Region

Will Millennials in the Washington DC region become home owners at the same rate as past generations? Probably not. Overall, they definitely won’t become home owners as easily or as young as Gen X’ers and Baby Boomers did. There are several implications of the delayed and abandoned home ownership among Millennials.
• Many Millennials will rent for much longer than they anticipated. As a result, many young adult households will not be able to take advantage of historically low interest rates and will not be able to start accumulating wealth through home ownership. While some may choose to rent, others will rent long-term out of necessity and will be subject to rising rents each year. Furthermore, as Millennials marry and have children, they may find few rental options that are large enough or otherwise suitable for families.
• Moderate-income Millennials who want to buy a home will move to further out neighborhoods. The desire for home ownership will supersede the desire for close-in walkable locations for at least some Millennials. Therefore, these households will “drive ‘til they qualify” to find a home they can afford. Increased demand for housing further from transit and jobs can have negative impacts on traffic congestion and environmental quality in the region, as well as on families that endure long commutes.
• Some Millennials will leave the region. Some young adults in the Washington DC metro area, including some highly skilled, college-educated workers, will choose to leave the region and move somewhere with a lower cost of living and more options for home ownership. The local economy loses out when workers are forced leave to find more affordable housing.

There are no easy solutions to increasing home ownership opportunities for Millennials in our region since this particular housing issue is so closely tied to challenges related to student debt, access to credit and wage and employment growth. However, it is important to continue to support the construction of new housing that is affordable to more moderate-income homebuyers, which could mean changing zoning to allow smaller housing units or residential buildings that fill the “missing middle.” In addition, local governments, businesses and advocacy groups can work together to help identify resources for downpayment or other home purchase assistance for first-time homebuyers.