Affordable Industry Needs Creative Financing

NEWPORT BEACH, CA—“The industry of affordable housing has faced some headwinds ever since the demise of the redevelopment agencies of California,” the Richman Group of California Development Co.'s EVP Rick Westberg tells GlobeSt.com exclusively. As we reported recently, the firm has appointed Westberg to spearhead the company's expansion of affordable and mixed-income housing from its new Newport Beach office. We spoke with him about his new role and issues involved with investing in and developing affordable-housing projects in Orange County.

GlobeSt.com: What are your goals in your new role at the company?

Westberg: The Richman Group is unique in that we build affordable and market-rate housing, as well as mixed-income housing. The company, which is one of the nation's 10 largest residential property owners, has 15 regional offices and operations in 49 states. In California, we have established a pipeline of urban-infill mixed-use housing developments, which will require oversight and execution, but I'm really focused intently on building the affordable-housing component of our business in California. The Richman Group has a long history of building and financing affordable, and my goal is to identify opportunities in California to further develop this basic core competency.

GlobeSt.com: What advice would you give to investors/developers of affordable-housing projects in Orange County?

Westberg: The industry of affordable housing has faced some headwinds ever since the demise of the redevelopment agencies in California. Affordable developers have implemented different strategies in order to react to a dwindling amount of public funding. As legacy redevelopment projects are closed and developed, it will affect the competitive nature of tax-credit applications, strain other available funding sources and hopefully pressure policymakers to find a more permanent solution for the development of affordable housing. There is a lot of optimism now about different programs sponsored at both the city and state level that will provide for the future development of affordable housing—and I share that optimism. In the meantime, however, affordable developers are forced to be extremely creative about finding financeable opportunities and cobbling together the necessary financing.

GlobeSt.com: How does affordable-housing development differ in Orange County as compared to San Diego or other Southern California markets?

Westberg: For the majority of my career in affordable and market-rate development, I've been headquartered in Orange County, but I've worked on developments throughout the state. Similarly, the Richman Group has tasked the California division with really scaling a regional and ultimately statewide business, so we track multiple markets and keep a fairly broad view. That said, Orange County has its own unique challenges. Of course, the typical constraints of finding opportunities, competition and timing of entitlements apply throughout Southern California. I think the overriding consideration here is similar to other markets, and it's the stretching of subsidy dollars that presents the biggest challenge.

GlobeSt.com: What is the most-challenging part of this type of development, and how do you meet that challenge?

Westberg: For many conventional real estate players facing an affordable-housing requirement and elected officials with affordable-housing mandates, the nuances of low-income-housing tax-credit development can be very complicated and obscure. Education is often the most difficult, but always the most important, first step in creating a pathway for a successful outcome for all parties.