Developing affordable housing is challenging. Developers have to identify appropriate sites, find financing for their projects, jump through several regulatory hoops and juggle various stakeholders, all of whom often have contradicting opinions. Now imagine pursuing this process in a foreign land, for foreign people, with their own distinct culture, processes, legalities, and so on.
As a new real estate graduate from New York University, Brian Halusan undertook this challenge and moved to Rwanda to develop affordable housing for local communities. Brian’s story is unique and his journey from Rwanda to St. Nicks Alliance in Brooklyn, where he is now the Director of Real Estate Development, is fascinating and inspiring. The Builders Patch team sat down with Brian for a fireside chat. We are excited to share Brian’s story with our readers.
What can you tell us about the affordable housing development landscape in Rwanda and how did you navigate that space as a foreign developer?
I was heading the development of an affordable housing project in Rwanda back in 2012. Back then, the construction industry was less regulated and building plan approvals and permits were generally not required outside of Kigali. However, over the years, that has changed. Rwanda established the One Stop Centre in 2009, increased their experience and capacity, and now has strict building codes that every project has to comply with. Construction drawings are meticulously reviewed and procedures are standardized. Although I was not a local developer, I never struggled in navigating the development space there. Many architects and engineers were brought in from abroad to train and build local capacity, so there were a lot of us there.
We often collaborated with local engineers on the projects and what was always incredible to me, was how ingenious the local engineers were. They knew the landscape, climate, and local building materials much better than foreign engineers and they came up with innovative solutions to use local materials in the construction. Most of the fabrication of materials was done on-site and we also experimented with a fair bit of alternative, advanced materials, for optimal climate comfort.
In terms of the social aspect of navigating the space as a foreigner, I did not have much trouble with it. There was no language barrier since the people I mostly interacted with for work, spoke fluent English. As a foreign developer, I did enjoy a certain degree of respect and authority, which wasn’t the same for local engineers. As a result, it was easier for me to get meetings, obtain senior-level authorities' cooperation, and so on. Another interesting aspect was the upskilling program that ran parallel to our development projects. We mentor locals and teach them various construction techniques and after they demonstrate proficiency with their skills, there is a requirement to employ them in the project. Moreover, we have a requirement that 30% of the construction workers need to be women and we seek to train a subset of this population for higher-skilled work.
Having started your career as a developer in Rwanda, when you moved back to the States and took on projects here, what were the unique challenges you had to face?
There is a lot of red tape that you have to navigate around in the US. The red tape and the bureaucracy are major challenges for any property developer here in America. The regulatory challenges of getting the right permits, securing all the required approvals, and so on can take a very long time. It is also much harder and time-consuming to get meetings with agency officials and those delays can impact the project timeline.
Another challenge that we often face in this space is managing the different perspectives of different stakeholders on our projects. The lending agency players have their own opinions, the architect’s vision is different, and the GC might have some other opinions - managing and satisfying each party takes time, and effort and makes the process more complicated.
You have now worked at St. Nicks Alliance for more than 3 years. Can you tell us a little more about the organization and its branches?
I joined St. Nicks Alliance in March of 2019 because I resonated with their mission to build more affordable housing in Brooklyn. We are a non-profit community development organization and we run a few different programs. We have a development wing that is focused on developing affordable housing, primarily in North Brooklyn. We have a division that provides Elder Care services to seniors who need help with their daily activities and these services allow seniors to age in place. Our workforce development department provides free construction and other skills, education, and financial training to the community. Lastly, St. Nicks also has a Youth and Education department that serves over 6,000 young people each year. I am only involved in the affordable housing development side of things at the organization but as you can see, we invest in improving the quality of life of the local community.
As someone involved in affordable housing financing, would you say funding for development is easy to access for most developers?
I wouldn’t say that funding is easy to access for all developers. As you know, the market is very competitive and there is a limited amount of government funding that developers can access.
Big developers generally have more resources to apply for and secure funding than small developers. This is also because the process of applying for funding and securing it is very cumbersome and requires significant organizational resources.
Furthermore, land acquisition costs are very high these days and small developers simply do not have the capital or balance sheet to acquire land and start developing a project on it. Having said that, we have been largely successful in securing the funds we need for our projects. That is because we have a very strong balance sheet, which inspires confidence in our ability to complete the project and makes us a sound contender for the development funds. If our balance sheet wasn’t as strong, we would have a much harder time securing acquisition, pre-development, and construction funding.
I would also say that my combined experience of working at HPD, in underwriting, and development makes a difference. It allows me to better understand the expectations of the lenders and agencies in terms of documentation and project financials
When you joined St. Nicks in 2019, what were the issues you identified within the organization? Have you been able to overcome these issues?
When I first came in, I realized that people were lacking a more sophisticated understanding of underwriting. This knowledge equips you to negotiate with lenders and syndicators better. Reading and negotiating legal documents was another challenge. These documents are long and dry and they did not receive the kind of attention they deserved.. Furthermore, our property management team was not properly trained to extract relevant information from these documents to properly perform their responsibilities. This compounded the challenges of tracking tenant rents and increases while navigating different regulatory requirements on each project. We also had a couple of troubled preservation projects with vacancies that needed investments in order to get them repositioned.
Leveraging my background in underwriting at Forsyth, I was able to train the staff on how to negotiate with lenders and syndicators. I prioritized the knowledge of underwriting and financing across the development team since I believe that is a strong asset for us developers.
I also realized we needed to update the technology we were working with. This is why I brought in Builders Patch, to streamline our operations and use technology to make our work simpler. Currently, I am encouraging behavioral changes in my staff to adapt to the new software and that’s an ongoing process of course.
From an asset management perspective, which would you say are the main challenges for St. Nicks Alliance?
St. Nicks Alliance owns and manages over 100 buildings; however, the majority of these buildings contain 10 units or less. Moreover, our portfolio consists of mainly extremely low- and low-income tenants. Therefore, the lack of economies of scale that are gained from larger buildings and the low rents that we collect from our tenant population creates an extraordinary challenge for our portfolio to generate net cash flow. Thankfully, we locked in our electric and gas rates before significant increases in energy rates. This is helping our portfolios perform better than others. A second challenge is the lack of HPD subsidy available for rehabilitation (and new construction) projects. We have some portfolios that require rehabilitation; however, many HPD subsidy programs are oversubscribed and they are not accepting new projects. This requires our organization to tap into limited building reserves to fund expensive repairs instead of being able to address the entire building's deficiencies.
We at Builders Patch have created a product that serves multiple purposes for developers like yourself. From your experience of using our software, which features have you found most useful?
One of the things I love about the software is that I can see the pro forma metrics very easily. It makes it easier for me to compare deals across several categories.
I like the asset management side analytics function, insights from which will allow me to intervene in the project management side of things.
A feature that has proved very useful is the chat feature within a task. I can have conversations within the task with multiple people and I do not need to look through different email threads to find the relevant conversation anymore. Lastly, the memo functionality has allowed us to standardize our reports and communications to our senior management and board of directors. We can present more sophisticated reports in a fraction of the time.
To end this discussion, we want to get your opinion on how things are going for affordable housing development in Brooklyn specifically since that’s your primary market. Do you think it is getting harder to build affordable housing in Brooklyn?’
In my opinion, land acquisition is one of the hardest things in Brooklyn. Sellers want a market rate for the land and as you can imagine; however, affordable housing projects generally are not financially feasible if the land cost exceeds $70/BSF. . We have developed new relationships with lenders who are also mission-driven and have supported our acquisition efforts so we may continue to meet our community’s housing needs by building more affordable housing in Brooklyn. Another concern is that the city-owned land is dwindling. This is making the RFP process more competitive than ever and it’s quite a cut-throat market. Despite these challenges, we hope to continue our mission of building affordable housing for Brooklyn’s local communities for as long as we can.
We are excited to bring you more inspiring stories from non-profit developers across the country. Stay tuned for more!