Q&A
Impact of inflation and interest rates on project financing and timelines
1:50:13
·
149 sec
Council Member Farías raises concerns about backlogs on closings and maintaining approved financing for projects. Kim Darga from HPD explains the challenges posed by inflation and rising interest rates on project financing and timelines.
- Extreme inflation has dramatically increased the cost of building real estate
- HPD's capital budget has grown to help keep pace with production work
- Other financing resources have not grown, leading to longer financing times for some projects
- HPD remains committed to achieving agreed-upon affordability levels, despite changing economic conditions
Amanda Farías
1:50:13
Okay.
1:50:14
I think we'd love to continue that conversation.
1:50:16
Okay.
1:50:17
I'd like to just jump into just one question on backlogs, on closings, and the connection of maintaining the approved financing.
1:50:28
I think for most of us when we approve a project and we agree on financing or unit count or the affordability levels with AMI as the majority of what's stated, we end up with a 2 year, 3 year, 4 year development of that building that over time, sometimes, most times, changes how the financing looks for that development team and the benefits that the community gets.
1:50:54
Is it capacity or resources within HPD outside of maybe some of the financing issues that you've already kind of went around, looking at closings, and looking at deadlines on how to move project do that are maybe more on time or could be more beneficial to the community?
Kim Darga
1:51:11
Yeah.
1:51:12
So I think the the big channel I mean, I think we all fortunately, interest rates, the Fed voted, I mean, agreed yesterday to reduce.
1:51:20
But in the last 4 years, we've experienced extreme inflation, and that has meant that the cost of building real estate has gone up pretty dramatically.
1:51:33
And the impact of that, fortunately, as we talked about our capital budget, has grown dramatically, and that has helped us keep pace with some of the production work.
1:51:45
But the other resource that we rely on to finance our housing have not grown.
1:51:50
And so it does mean that it's taking longer to finance some of our projects than it did before.
1:51:58
Doesn't mean that we don't remain committed to the project, and we certainly are committed to achieving the affordability that was discussed and agreed upon.
1:52:09
You know, expenses grow and AMI has grown.
1:52:14
And so, you know, it's we know that that means that the rent we thought was 30 percent AMI 5 years ago, and the rent that it is today isn't necessarily the same.
1:52:25
But we you know, we don't control the operating costs, growth, and, you know, and so we need to make sure that projects are financially viable.
1:52:33
The commitments that were agreed to are commitments that we absolutely intend to keep.
1:52:40
Sure.
1:52:40
Maximum Oscar if I
Alysha Habib
1:52:41
may have a few more minutes.
Amanda Farías
1:52:42
Yes.
