NYUSPS Schack Institute Adjunct Instructor Richard Ross got his start in real estate on Wall Street. While working at Bank of America in the 1990s, Ross became involved with nonprofit boards, which piqued his interest in affordable housing. He moved to Community Development within Bank of America, lending to affordable housing projects. That work led him to a role as the president of SoBRO’s bank that lends to small businesses, and as the head of SoBRO’s real estate development. SoBRO is a nonprofit organization that focuses on economic investment and development in the South Bronx.
Today, he teaches affordable housing and multifamily finance, and manages a consulting business that helps for-profit developers understand how to finance affordable housing. Schack sat down with Ross to discuss his work, and New York City’s affordable housing landscape.
Schack: Can you tell me about your background in real estate, and how you got involved with it and the finance side?
Ross: My background is in Wall Street. I started working out for FINRA (formerly NASD) as an examiner. Then I worked with Bank of America, starting out in risk management and volunteering on various nonprofit boards, and that got me interested in affordable housing. I asked to move to Community Development within Bank of America.
Richard Ross, Adjunct Instructor, NYUSPS Schack Institute of Real Estate
S: What was that like, coming from a straight finance background?
R: That was great. I got a chance to see the operations of affordable housing—how they were financed, the type of people that worked in that industry, so I found out about affordable housing developers specifically.
I wanted to learn more about the industry from a hands-on standpoint. I’m from the Bronx, and one of my board members at the nonprofit I was volunteering with at worked at SoBRO, and they had a community development bank that needed a new president, and they also did affordable housing development. I made the leap [to] SoBRO in 2000. From SoBro I went to work for a for-profit development, called Cottage International Development Group.
S: As the city has become so expensive, must be very interesting to see how affordable housing has developed in NYC now versus 2000.
R: Oh it exploded. There are so many more tools available now than back in 2000, and specialized programs such as senior citizen housing, which is affordable, former offender housing, [and things like] housing for specifically grandparents and those taking care of their grandchildren.
S: Do you think that grouping has benefits?
R: My answer is mixed. For certain populations, like seniors, I think it’s good to be grouped together since there’s a lot of medical and counseling services that come with seniors, and a counselor can hit many households at once. Or you can have project-based services that are available on site.
But in regard to just lower-income folks, now the model is to mix the incomes—50-30-20s and 80-20s, and it’s good to have that mix. It makes for hopefully a more diverse social environment.
S: What does it look like when you put together a project?
R: It depends—in some neighborhoods, market-rate housing generates very high income, and those make the projects easier to finance. [With some affordable] now you’re bringing in a portion that’s subsidized with tax credits or grants, so it makes for a nice combination. Whereas in a lower-income area, what’s deemed market-rate might not generate a lot of rents, so it’s better to have more affordable that generates more tax credits, grants, subsides, lower-interest loans and the like from HPD (New York City Housing, Preservation & Development) so you can make the project financing cash flow positive.
S: What has been really useful for affordable in the past few years?
R: New York City is probably one of the best areas to develop affordable because we just keep increasing the financing programs out of HPD that are available. Another area is affordable housing for low-density buildings. I worked on a project in Brooklyn where we renovated nine buildings which were all four stories or less. We used very low-interest debt—I think the loan was a quarter of a percent.
With that program from the city we were able to finance the renovation of those buildings; two of them were gut renovated, in fact. Without any tax credits, just pure debt from the city. This was in the heart of Bedford-Stuyvesant. The idea was to maintain the character of the neighborhood while renovating buildings that had been mishandled by the previous landlords. We could keep it affordable because of the low-interest financing, and keep those tenants in place.
[W]e put in incomes from 30 percent AMI (Area Median Income) up to 140 percent AMI depending on where the building was located. [B]uildings were located in Bedford-Stuyvesant, Crown Heights, Fort Greene, and Park Slope. That was completed in 2018.
S: As you’re teaching here do you see students interested in affordable housing specifically?
R: Yes, some of them are very much. And because of the way the city is almost encouraging mixed-income buildings, a lot of them, even if they’re working in a firm that encourages market, you’re still going to need to incorporate some small amount of affordable. So you need to know how that works, and what the requirements are.
S: Of course the city is becoming extremely expensive—do you think there is a best way to stem the tide?
R: What the city has been doing is multifold: they have tax abatement programs like 421-a, which encourages developers to build mixed-income developments. They have a program called Affordable Neighborhood Cooperative initiative. [Using] buildings the city had to take over because of lack of tax payments, they are selling the units to existing tenants for $2,500, and they’re training them on to how to be cooperative owners. [T]hen the units that are vacant in those [buildings] are being sold at a more competitive price in order to raise equity for the building.
S: Tell me a bit about your consultancy now—are you working on affordable housing specifically?
R: Yes I work on affordable housing projects with for-profit developers, guiding them into how to raise financing, how to interface with the city. Developers have to know how to negotiate, how to give and take, and that’s what I try to help with. I let them know where you can advocate, because at the end of the day they are trying to make a profit, and the city is trying to get affordable housing built. And with the programs there’s enough to make both ends.
S: Is there more awareness now that affordable housing needs to be built? Do you think credits are the best way to realize this?
R: There’s definitely more awareness now. More for-profit developers that are interested in that affordable sector.
I think it’s worked very well. Because the application process requires the developer to go out and essentially finance the building, so that you know if you do get the tax credits you’re ready to go. It’s worked very well. The city has begun to better scrutinize developers so you’re seeing stronger developers win the credits. All the developers are very well vetted by the city.
S: With the students [at Schack], do you think on the whole it’s a good time to become aware of the rules and regulations governing affordable housing?
R: It’s very important because the number of mixed-income buildings is just going to increase so people understand why it’s important to have folks live together from different income bands.