Though it may come as a surprise to some, the U.S. Department of Housing and Urban Development—whose core mission is affordable housing—often helps private sector developers get multifamily projects funded, Business Report details in a feature from its latest issue.
Local developer Donnie Jarreau has spearheaded a number of HUD-backed projects, including Boardwalk Place in Denham Springs. But when Jarreau does a HUD deal, he doesn’t do it alone. Instead, he partners with another developer that specializes in working with HUD. That’s because while the feds can help him get attractive financing, he’s not an expert on jumping through the department’s various hoops.
“Not many people are set up to do it,” Jarreau says. “It’s a very strenuous process.”
HUD doesn’t make loans, but it insures loans by HUD-approved lenders. After the global financial crisis, HUD-backed loans were pretty much the only game in town for multifamily financing, says Brian Andrews, assistant director of LSU’s Real Estate Research Institute and principal of Andrews Commercial Real Estate Services.
But HUD doesn’t like to see its projects directly compete with each other. So after a few years of actively backing loans during the financial crisis, the department slowed down a bit, Andrews says.
“When you do so many, it’s hard to find a spot where a new one isn’t going to cannibalize an old one,” he explains.
Most people only associate HUD with affordable housing. But for a while it was getting involved with all sorts of expensive, market-rate projects, including quite a few in the Capital Region. While the department still does market-rate deals, it has gotten back to prioritizing affordable housing, says Tom Champion, vice president of real estate development with New Orleans-based Gulf Coast Housing Partnership.
GCHP is one of those developers that often partners with folks like Jarreau on HUD deals. Beyond having an experienced developer in the lead, it’s helpful for the whole development team—including the architect and general contractor—to be well-versed on HUD’s rules, he says.
“I know a number of people who said, ‘This financing looks great; we’re going to go do this,’” Champion says, “and have run into all sorts of issues of not understanding the process and not being appreciative of the amount of time that it’s going to take to get it done.”
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