Closing the Affordable Housing Gap: Q&A with Illinois Housing Development Authority Executive Director Kristin Faust November 23, 2022

For Kristin Faust, the “aha moment” that would define her professional life occurred in a Harvard University classroom while pursuing a master’s degree in city and regional planning. Having grown up in a racially and economically diverse community in northern California where there was no shortage of quality affordable homes, Faust was drawn to the program by a desire to understand why disinvestment occurred in neighborhoods after seeing firsthand the lack of community infrastructure in several major cities elsewhere in the country. As a guest speaker discussed the Community Reinvestment Act, Faust saw a future for herself in banking getting to “push the envelope on how credit decisions are made” to ensure access to capital in neighborhoods like the ones she’d seen in New York City and Boston.

Faust spent the next 15 years doing exactly that at several banks in Chicago before transitioning into a series of leadership roles with the State Treasurer of California, Enterprise Community Loan Fund, Partners for the Common Good, and Neighborhood Housing Services of Chicago. Since 2019, she has served as the executive director of the Illinois Housing Development Authority (IHDA), which has facilitated the creation of roughly 250,000 affordable homes across the state since its founding in 1967 by deploying more than $20 billion in financing to developers through the Illinois Affordable Housing Trust Fund, Illinois Affordable Housing Tax Credits, and the allocation of federal Low-Income Housing Tax Credits and HOME Partnership funds, among other vehicles.

A longtime partner, IHDA has supported a variety of IFF development projects over the years, including more than 300 accessible, supportive apartments created through Home First – IFF’s full-service development group focused on housing for people with disabilities. Because of IHDA financing, Home First has been able to establish a sustainable model for development that has reduced barriers to the successful completion of projects. After the recent groundbreaking for the latest Home First project – Access Health & Housing in Maywood, IL – we sat down with Faust for a wide-ranging Q&A focused on structural barriers to closing Illinois’ affordable housing gap, how IHDA is working across the state to reduce these barriers, and more.

IFF: As the State of Illinois’ chief affordable housing official, what do you see as the biggest barriers to increasing the supply of quality affordable housing to meet the existing demand?

Faust: One structural barrier is the pipeline of developers who want to create quality affordable housing units and are equipped to execute the projects, which is something we’re actively working to address at IHDA. One example of this is a permanent supportive housing institute we’re funding that offers classes geared toward nonprofits that provide social services, most of whom are located outside of the Chicagoland area and are agencies that haven’t completed a housing project before. We’re also especially interested in increasing the number of developers of color and women developers in the pipeline, because it needs to be representative of everybody in Illinois.

Another challenge is the number of rules and requirements involved in developing decent, safe, and affordable housing, from zoning and city codes to federal regulations. In most cases, the regulatory requirements are individually well-intentioned and helpful, but they create a cumulative burden that’s challenging to overcome. When you layer those together to complete a project, the costs escalate, which makes it more difficult to create affordable housing units. If the cost per unit increases because of additional regulations, but the amount of funding available for affordable housing development decreases or remains flat over time, there are fewer units being developed each year.

Nobody wanted the pandemic, but it did catalyze additional short-term funding for affordable housing through the American Rescue Plan Act (ARPA). Because of ARPA, we are going to be able to support more permanent supportive housing than we can normally during our next RFP cycle. For the first time, we’re also going to release an RFP focused on creating more non-congregate housing in the state, which is temporary shelter for people at risk of homelessness. It’s exciting to have those extra dollars available this year to do more of what we have in the past and to explore new ways to close the housing gap.

Overall, though, if you look at the levels at which the federal government has funded affordable housing over the past 50 years, we are not at the peak right now. There’s currently a bill in Congress that would increase the Low-Income Housing Tax Credit (LIHTC), but I don’t know if it will end up being passed. To do more to close the affordable housing gap, policy changes like the LIHTC increase that expand the resources available for the preservation of existing units and the creation of new units are still needed.

IFF: You referenced IHDA’s specific desire to diversify the pipeline of developers in Illinois. How is the agency working toward that goal?

Faust: One of the ways we’re focusing on achieving that goal is through our “Next Gen” Initiative, which is going to provide funding for CDFIs to work with BIPOC developers. This is a program that I’ve been interested in launching since I joined IHDA in 2019, and we went through a deliberate process to design the program before releasing a request for applications over the summer to ensure that it provides the types of supports that are most needed by the developers we want to reach. That included lots of research, as well as a series of roundtable discussions and one-on-one conversations with developers of color over an 18-month period.

IFF: How did those learnings inform the design of the Next Gen Initiative?

Faust: What we heard through that process is that for BIPOC developers to get into the business of developing affordable housing and to stay in the business, greater access to pre-development capital is a necessity, as is highly specialized technical assistance to navigate tax credits, specifically. Someone who’s interested in developing affordable housing has likely completed other real estate deals in the past, but they may not be comfortable with all of the intricacies of tax credits or other technical aspects of affordable housing projects. And for someone who hasn’t had the privilege of working with an organization like IFF as a development partner to gain that knowledge and experience, it’s a real barrier.

There are existing programs you can go through that are meant to address this, but most provide classroom training where a participant is attending a weekly or monthly session over a set period of time. It’s likely they have MBAs already, and the input we received is that it would be far more helpful to have access to customized coaching driven by their individual needs.

The costs associated with developing affordable housing can also be prohibitive, particularly for developers of color who don’t have established relationships with financial institutions that provide access to affordable capital. We estimate that it costs about $50,000 to put together a full application for a nine percent LIHTC round. We can only fund 50-60 percent of applications during each round, which means there’s no guarantee that those up-front costs will lead to a return. Even if someone can assemble the capital needed to successfully complete their first deal, the financial burden continues to grow because of the amount of money that’s being tied up over a long period of time. The way to grow as a developer and to gain additional experience is to do more and more deals, and that working capital becomes critical.

CDFIs are really well positioned to be the purveyor of the pre-development loans, and we’re interested in working with them to further design the program. IHDA’s board of directors has approved $5 million to devote to the program, and we expect a large chunk of those dollars to go out in pre-development loans that remove access to capital as a barrier for the next generation of BIPOC developers interested in taking on affordable housing projects.

IFF: Beyond capacity building for developers, what value do you see in public-private partnerships to close the affordable housing gap in Illinois?

Faust: We’re at a point now where we’ve never seen the rents for housing get so high, nor such a limited inventory of single-family homes for first-time buyers. In many ways, the challenges are bigger than ever, and Illinois is far from meeting the current demand for affordable housing right now. The private sector can’t solve the problem alone, and the public sector can’t either. But by coupling public-sector resources, nonprofit organizations driven by mission, and the collective power of the private sector, it becomes easier to get deals done. The goal is to facilitate more of those types of partnerships and to keep finding ways to make them more effective than they are already.

IFF: Are there any projects IHDA has supported that stand out to you as particularly effective examples of how diverse stakeholders were integrated into the development process to bring new affordable housing to fruition?

Faust: It’s challenging to pick one example out, but IFF’s Access Health and Housing development in Maywood certainly qualifies. What I love about that project is that it’s new construction of quality housing for residents with disabilities, which there’s not nearly enough of, and that it’s creating one-to-four-unit properties, which is also needed in communities throughout the state. There was lots of attention paid to designing and building something that fits in with the neighborhood, all of which was done very intentionally while considering input from the community. The project was possible because of a partnership between IFF and Trinity Health, and leveraged the Cook County Land Bank, which is how the lots needed for the project were acquired. Purchasing the lots through the Land Bank supports their mission in turn, including work with more than 500 rehabbers – predominantly BIPOC – who are focused on improving the existing supply of single-family homes in the county. It’s a great example of how partnerships bring affordable housing projects to fruition, and it showcases some of the tools that have been created that support the development process.

Learn about affordable housing projects in Illinois supported by IFF