New York's Banks, its Largest Non Profit Developer and Help from New York University.

For my last few days in New York I met with Dan Nissenbaum and John Olson of Goldman Sachs, Andy Ditton of Citi Bank and Adam Weinstein who is the director of New York's largest non profit developer, Phipps Houses. I also met with Katherine O'Regan, Ingrid Ellen, Mark Willis and Becky Koepnick of New York University.

I discussed Goldman Sach's LIHTC operation with Dan and John. GS have a modest investment in LIHTC (c. 40 deals pa) which is managed within a larger team who manage range of other Community banking and investment. Goldman Sach's team are funding the Social Impact Bond linked to Reiker prison. (A version of this is being run in the UK at Peterborough prison). Dan outlined some of the issues the banking industry has had with LIHTC. Many banks made losses during the market crash and are still carrying these losses forward. This means in turn that investment in Tax Credits does not work for them as they need to be making a taxable profit for the Tax Credits to create a return on their investment. Dan also advised that where a corporation is claiming tax deductions there are strict rules in which order these deductions are taken.  Unfortunately, Low Income Housing Tax Credits are not very highly prioritised, so are more risky to investors than investments in other tax exempt investments that are more highly prioritised.

Andy Ditton at Citi Bank explained their strategy. Citi Bank had incurred significant losses during the market crash and on the face of it, based on Dan's analysis would not benefit from Tax Credits. However, the effect of the Community Reinvestment Act (CRA) encourages Citi Bank to continue to participate in the LIHTC programme. Citi Bank, like many banks in the US, needs to maintain a high CRA rating to ensure it minimises regulatory resistance around merger and acquisition activity in the US. Citi Bank has been setting up Low Income Housing Tax Credit deals and quickly selling the tax credits on to other investors before construction completion. Citi Bank are well placed to do this as they are the largest trader of municipal bonds in the US.

Andy also outlined Citi Bank's work more generally in community investment. They recently set up a fund with sponsor Andre Agassi to invest in the development of charter schools, and have also been investing in developing community health centres in poorer areas. Andy sees a potential programme of Community Health Centre's in poorer areas because of the medical Assistance Act (Obama Care). Andy also mentioned a very successful meeting Citi Bank had hosted with 70 billionaires to develop proposals and funds for social impact investment (including affordable housing).

Both Dan Nissenbaum and Andy Ditton expressed an interest in discussing further a possible UK Tax Credit system for affordable housing. Both City bank and Goldman Sachs have operations in the UK (also Bank of America who I met in Washington DC has UK operations and would be interested in discussing a possible UK system as well).

I met with Adam Weinstein at Phipps Houses. Phipps is New York's largest non profit developer. It was founded back in the early 20th Century. Phipps owns and manages more than 6,000 homes, has 1,000 in construction and has a further 3,000 in various stages of planning.

Adam explained how the affordable housing development system worked in New York. Developers needed to have a reasonable level of net worth as an organisation in order to satisfy investors and New York City and/or state.

Nearly all the sites Phipps has secured within their development and construction programme have been secured through city or state requests for proposals. The only sites that they are buying from the market are sites to assist with land assembly around sites acquired from the City and state. A developers experience of the LIHTC and low income bonds is also seen as vital by New York City when it is allocating funds.

I met a group of academics from New York University - Mark, Becky, Kathy and Ingrid  to discuss their views on the US LIHTC system and what they could identify in terms of publications, papers and other materials that might be useful to my work. There is surprisingly few studies in the US of the overall impact and performance of the LIHTC programme. However, there are a small number of useful papers. In addition, some further contacts were identified including one at the US Treasury that I will follow up. I had heard prior to the meeting that  congratulations were in order as Kathy (O'Regan), who was one of the group I met, was in the process of being ratified by Congress for a very senior post as Assistant Secretary for Policy Development and Research at the Government Department of Housing and Urban Development (HUD).