Talking Heads, Edward Golding, HUD: New Principal DAS for Housing discusses priorities
By Darryl Hicks
10 min read
On his first day as Principal Deputy Assistant Secretary for Housing, Edward Golding was asked by the Office of Public Affairs to sit for his official photograph – instead, as a playful joke, he considered sending over a photo of Albert Einstein.
Five weeks later, when I shook Golding’s hand prior to sitting for this interview, I noticed the resemblance right away. And while he may not be a world-famous physicist, Golding is a gifted economist, who has spent the past quarter century working in the mortgage finance industry and advocating for policies that strengthen access to affordable housing.
Most recently, he was a Senior Advisor to the Secretary of Housing and Urban Development and one of the chief architects behind the Administration’s policies on housing finance reform. Golding began his career at the Federal Home Loan Bank Board during the Savings and Loan Crisis and then joined Freddie Mac, where for the next 23 years he held a variety of senior positions from investor relations to strategy and research.
Prior to his service at HUD, Edward Golding was a Senior Fellow at the Urban Institute where he played an instrumental role in launching the Housing Finance Policy Center, a leading research voice on housing finance matters.
In one of his first public interviews, Golding sat down with Tax Credit Advisor to discuss his affordable housing priorities for the balance of the Obama Administration.
Tax Credit Advisor: What are your multifamily priorities going forward?
Golding: My main priority will be ensuring the completion of the work currently underway in the Office of Multifamily Housing. We are in the fourth quarter of the administration and we still have so much work to do. According to HUD’s Office of Policy Development and Research, roughly one-third of all renters contribute half of their incomes toward monthly rents, while half pay one-third of their take-home pay toward rents. Our efforts will focus on improving access to quality, affordable housing, which is why we have programs, like RAD, which
help rehabilitate public housing. The other component is energy efficiency, which fits in nicely into the President’s climate change agenda.
TCA: How would you like to change the current course?
Golding: I have tremendous respect for my predecessors, going back to Dave Stevens who started some of these initiatives. My goal is to complete what we have on our plate and drive towards execution. A lot of this job is about leadership and execution and supporting the very good staff I have in this area.
TCA: How do you see FHA fitting into the multifamily financial landscape in the future?
Golding: This question cuts across both single-family and multifamily. As the last “Great Recession” demonstrated, FHA played a tremendous countercyclical role. Private capital fled the markets for safer investments, such as Treasuries or Ginnie Mae securities, instead of taking on new credit risk. Being there to support that counter cyclicality was very important and while nobody expects a repeat of the last recession, it’s important that we have a strong multifamily program that has the technology and the people to respond to future crises. During nine recessionary periods, we played a very important role supporting affordable properties. Private capital tends to focus more on professionally managed properties situated along the coasts, whereas, FHA serves underserved markets.
TCA: What do you see as your greatest obstacles in accomplishing your goals and vision going forward?
Golding: HUD, and FHA more specifically, has always been challenged with getting the necessary funds to invest in proper technology and training. As a result, it’s very difficult to implement systems changes around here and therefore we don’t always have the flexibility that one might expect. One reason why the multifamily “transformation” is taking so long is the constraints of being able to hire and train people.
TCA: I heard at a conference last week that FHA originated $2.5 billion in multifamily affordable transactions (up from $500 million 2 years ago). A lot of the credit for this expansion is due to the 223(f) Tax Credit Pilot Program. I understand that FHA is moving towards expanding this type of processing to affordable 221(d)(4) deals. What is the anticipated timeline for this to take affect? What other plans are you considering to continue to prioritize affordable transactions?
Golding: We’re doing a lot to support affordable development. Along with being a countercyclical source of capital, filling underserved parts of the market, including affordable housing in many parts of the country, is our primary mission. We started with the LIHTC Pilot in 2012. Since then we’ve been continually refining that initiative. We expanded the group of approved pilot lenders last year and early this year we published a series of clarifications around subordinate debt, developers’ fees and vacancy rates that align us with industry practice. In the draft MAP Guide—it’s a mere 800+ pages—you’ll have noted that we went even further with affordable there. We propose to permit affordable projects with six(6) months of operating experience to use our 223(f) product. We’re really excited about the potential opportunities this opens for developers.
Another thing we’ve done is examine staffing: We understand that underwriting LIHTC and affordable deals is a specialized skill. That’s why, as part of our MFT transformation, we’ve created dedicated affordable teams in each of our new Regions. Our Affordable teams in Fort Worth and Chicago are up and running and folks experienced and trained in LIHTC. Similarly, we’ve created dedicated RAD teams in four of our offices who will work closely with our LIHTC teams on RAD/LIHTC deals. Right now our team is working on designing on-going training for these teams, so that they stay on top of the pulse of innovations within the affordable housing industry.
Our next step is expanding the Pilot to our 221(d)(4) product, which is already happening in California.
Recently, California raised its minimum rehab threshold for 9% deals to $40,000 and many sponsors do much more than that. That’s a good thing, but it meant that these developers wouldn’t be able to use our 223(f) Pilot. We had planned to expand to the d4 and decided that California would be a great place to test that effort. Our first 221(d)(4) LIHTC Pilot project will come through the loan committee soon. Our team is studying the experience in California and designing a national product that we hope to roll out by the end of the year.
TCA: What is the timeline for the updated MAHRA renewal guide? What changes are under consideration?
Golding: Revisions to the Section 8 Renewal Policy Guide are expected to be released by the Department very soon. We have given careful consideration to the many comments received when the Guide was posted for public comment last year. In general, the updated Guide streamlines the renewal process and offers owners greater flexibility in selecting renewal options that best support long-term preservation of their properties as affordable housing.
TCA: The new RAD notice is expected any day now. Can you describe any major changes we should be expecting? Can you share any lessons learned from the initial batch of transactions that have closed?
Golding: The notice is in departmental clearance and will hopefully be published soon. It will streamline the process and provide greater clarity for submitting applications and financing terms. Hopefully this will speed up the process and ensure we get all of these projects to completion.
TCA: What are your thoughts on the future of funding for project-based Section 8? As you know HUD has been managing the less than full funding of the program over the past couple of years through various mechanisms (utilizing residual receipts to offset Section 8 payments, spreading funding over two fiscal years, etc.) but many in the industry are concerned that there is only so much play in the budget and if sequestration is not lifted then the impact on future years’ funding could be very problematic.
Golding: In the President’s budget, we asked for additional funds, but we are also cognizant of how tight money is in this budget environment. Directionally, these are the folks we need to be supporting. Many of them make less than 30% of area median income, or $15,000 a year. They work minimum wage jobs, while supporting families, and they need this type of housing. Another priority relates to the location of project-based Section 8 properties. Research conducted by several Harvard professors, that was based on HUD PD&R data, demonstrated a need for assistance, but also that we need to make sure that the locations of the properties are in low-crime neighborhoods. So it’s not just about more money, but also money in the right locations.
TCA: Can you provide an update on the “transformation” of multifamily both in the field and in HQ and new timelines for full implementation? What is the impact this is having on business in offices going through transition – and how is work being allocated during the time that offices are transitioning?
Golding: The “transformation” of multifamily combines certain functions into five offices for what we have called Multifamily for Tomorrow. It’s a very important way of making sure we are as efficient as possible and also consistent across the country in the underwriting of multifamily properties. Two of the hubs – in Chicago and Fort Worth, TX – are operational; two more are well under way – in Atlanta and New York – and we expect the San Francisco office to be completed next year. We are already seeing some positive results in terms of how the staff is viewing their workloads, sharing of projects across regions, and more consistent underwriting. Change can sometimes be a painful process and we have tried to ease the transition pains, whether it’s relocating people or managing employee buy-outs, but we are moving in the right direction and it will soon be easier to get properties approved.
TCA: One of the biggest challenges our members face is financing new construction affordable housing projects in high cost markets. Is FHA considering any additional steps to become a more active lender in this market segment?
Golding: As I noted, HUD is currently piloting the expansion of our LIHTC Pilot into the 221(d)(4) product, our new construction/sub rehab mortgage in California and later this year, nationally. The 221(d)(4) is a cost-based program that, when combined with equity raised through the tax credit program, can be a powerful driver of new construction in any market, and in particular, in high-cost markets. Further, the draft MAP Guide published in February includes a proposed change to the 223(f) program specifically for affordable properties. The change would shorten the three-year stabilization period historically required of a property prior to refinance with an FHA-insured mortgage, to a stabilization period of six months. This change will create a long-term, permanent refinancing source for properties in any market after six months of sustained occupancy, when market, occupancy, and value can be established.
