REB 139: A Working Public/Private Partnership Addressing the Housing Shortage

I have been seeking a real life example of a partnership between government and the private sector that offers a viable solution to addressing the housing shortage in the US.  Nick Khamsopa is doing just that.

Transcript

SPEAKER_00 0:00

All right, everybody. I would like to welcome Mr. Nick Camzopa to Real Estate Bytes. Did I say that correctly, Nick?

SPEAKER_02 0:07

Yes, you did. Yep.

SPEAKER_00 0:08

All right, excellent. And uh Nick is the president and co-founder of Hudson Housing Lifestyle, and they're attempting right now to build uh 5,000 units of housing in the Hudson Valley in New York State. Um and so, real quick, uh, you know, most of my audience here, Nick, is uh Northeast Ohio. I've got people that stretch from Pennsylvania, I've got viewers in California, but um, you know, most of my folks are here in Northeast Ohio. And the reason why I felt this conversation was important is because, you know, housing and specifically affordable housing, it's a problem in the United States, right? And we I continuously talk to people about how do we develop more affordable housing here in Ohio. And our state has passed legislation. In 2023, they passed legislation to incentivize builders to build affordable housing. But as government oftentimes does, it's very clunky and difficult, and it wasn't very attractive to most developers, so much so that right now in the Ohio State House, they are working on new legislation to basically renovate and fix the legislation that was passed in 2023 to make it more attractive. You, on the other hand, have already started this process in the state of New York and you're doing things. So I say all that to talk to my folks who are who are watching out here. Um, you know, when when we when we hear New York, we immediately think of the city, but you're not necessarily working in the city. You the two flagship properties that are projects that you have in pre-development right now are in the towns of Peekskill and Middletown. And I believe what Peekskill has a population of about 25,000 people, Middletown a population of about 30,000 people. So these projects in these communities are something that's easier to wrap your head around because it's not this giant metropolis of New York City. So um please explain to me, Nick, how you know, I know you did this in Florida. How did you start this process in the state of New York and in Hudson Valley?

SPEAKER_02 2:27

Are you getting uh recording pause? Um Yeah. I like that discussion because uh you asking the right question, right? So it in Ohio, if the government passed the uh legislation to assist um under uh in 2023, let me ask you this before you go into detail. How did the government or how did the state um assist Ohio with the um with the with the affordable? Do they give some some form of grant grant or subsidy?

SPEAKER_00 3:04

Well, the subsidization came in the form of tax credits, right?

SPEAKER_02 3:08

Okay, tax credits.

SPEAKER_00 3:08

So yeah, it was not it, they were not granting dollars out.

SPEAKER_02 3:12

I got it. I know what it is. So in New York State, the governor came in, uh, launched a mission statement. Her first day, this new government signed 1 million unit affordable housing. And then uh it passed legislation in April 2025 to build 800,000 units. But prior in the last three years, they had implemented a massive momentum fund for affordable housing, which a grant subsidy, that we have to build this affordable housing. As a developer, I build this affordable, I build this market rate rental, but I have to keep it in an AMI. That's what affordability means. Meaning it's not a Section A or voucher program. It just meant that um for a developer to be able to charge um average medium income in the county, right? Quote unquote, my county is $2,400 for two-bedroom, uh, give or take, and then say Westchester is like $2,600 for two-bedroom. I cannot charge above that. Uh for me to be able to do that. We um for the first time the governor is actually launching a massive grant subsidy to the Momentum Fund New York Housing Affordability. We can secure up to 40 to 45% of the grant money from her. That's how we can do it. We can afford it. And that's the most important thing, couple that state, then you have local IDA who give tax and if we're developing a company uh a TOD, which is we can get some of the capital from TIFA loan, right? Transit-oriented development TOD causes within walking distance to train stop or bus stop, or we have train certain part of Hudson Bay have train stops that uh that run through uh that take you right into the city because where I live, we're about one hour, one and a half hour north of Manhattan. So that's important to understand that now. The greatest thing about this is um, you know, President Biden um passed a law for Litech financing, and then President Trump came and extended Litech. Lig tech is a tax credit. So with the tax credit in place, for tax momentum fund, local IDA and local um uh uh minute of uh the tax grant for um when you stack the all the capital together, we can secure up to 80% of the capital for the developer to come on to do this. And it's a when New York State have this program. So yeah today, the governor have $25 billion in New York State funding this type of structure. Her mission statement is 2030, 800,000 units must be built.

SPEAKER_00 6:11

Yeah, so you do you think without those subsidies from government that the mission would be possible at all?

SPEAKER_02 6:20

No, not even close. Oh, I won't be doing it, it doesn't happen, it's impossible. And I'm glad you're here in Ohio. Yeah. Here in Ohio in Ohio, yeah, in Ohio that that is light tech financing. The first level on the first capital you need to queue. Lite tech is a four percent or nine percent uh tax credit, meaning that if some fortune finding company, big you know, company or private institution sells something or they have liquidated something, they have this capital gain. So what they'll do is they give it to a poor capital uh investment group that take that money and we pay them six or seven percent on their capital instead of paying the bank, we're paying la tech. And they do not pay tax on that money. So in 10 or 15 years, based on the structure, when we sell the portfolio, we pay back the principal to that, you know, to that um to that investor who uh took the capital from. So that's approximately a trillion dollars in LaTeX. That's why President Trump extended because his colleague is actually the one that asked for this thing. So they don't, you know, the riches get richest, and instead of paying capital gain, they're putting the money back. But then again, you gotta look at this way. When when um you know money spent in this community like this is seven fold of going back to local community. So it's it's a win-win for everyone, you know?

SPEAKER_00 7:47

Yes, sir. And the monies that are granted out, you you know, this are those available to you for construction, for engineering, for planning, and for construction, or are those only granted post-production?

SPEAKER_02 8:00

You know what? Um, when you talk about engineer architect and um, you know, pre-development, we call it pre-development. In a custom home, we call um the capital for pre-development, it takes us approximately six to nine months to secure the grant. So we we raise the capital with Wall Street against that uh momentum fund or that grant money, and we secure um the capital approximately three to five million per location to implement. So in six months to nine months, when the project is fully entitled, and it's fully approved with a set of drawing, because we spent about two million on the drawing. We have come to municipality approval it, but same time we have commitment from the bank to close on the construction. So in nine, six to nine months, we're closing on the construction loan to give it successful construction to report to the construction. Um, and the best thing about this is that uh we are accessing this to AFL CIO Union Pension Fund. So Newman Pension Fund Housing Investment Trust is standing by to purchase the mortgage upon completion. So the Newton Pension Fund, AFL CIO purchased the mortgage, and then we get so much subsidy from the state. So we're doing this project 100% union for local jobs, must be local to stay local. So this is truly sustainability, sustainable project for local development and local uh, you know, uh labor force.

SPEAKER_00 9:56

Yes, sir. And and so what is tell me about the capital cycle. So you're raising funds on the front end to get through pre-development and to get underwriting done. At what point in time do you begin to collect the grant monies? To and is that during construction? Is that after the the property is built? You know, what so how quickly does the grant cycle turn around so that you can begin the next project?

SPEAKER_02 10:20

That's a great question. So the the the strangest thing about this, most people, the way you speak is how they go from the bottom up. I went to accent. I say, hey, new and buddy. You know, I'm a union guy myself. I understand that housing investment trust was formulated. You guys fund a close to you know 15 billion in portfolio and you got another 20 million in escrow. If I buy the if I build this, will you buy it? They say yes. I say, what bank would you recommend me to work with to do financing and construction? They give me two banks, and I have identified that bank, which is Merchant Bank, which is gonna come out of the Midwest. Merchant Bank is going to underwrite the construction and then exit it to head, right? So that's done. Third thing is I need that um momentum fund, right, which is five to seven million to get started on this project. And I don't have that. So I went to CAP Race Investment Bank out of Manhattan to raise $100 million, which we just got term sheet, came in commitment. The $100 million is to go in a pool to draw down five million per location, so allow me to ramp up prototypical 20 location in the next 18 months. That makes sense.

SPEAKER_00 11:38

Okay, it does make sense. So you um that's excellent. Uh, you know, you it you said you went to the unions first. So that was a clearly one of the one of the the the key relationships that you had to develop um to start these projects, yes? We are having consistent technical difficulties here. So let me let me repeat.

SPEAKER_02 12:05

It's very wind, it's very windy where I am. It's like strong wind. I mean, if you're by getting the same thing, like uh there's a like almost like a tornado that came in this morning. Uh like you look outside right now, you can see through the tree. Stop and go. Yeah, yeah, the same thing. I'm very, I'm very interested in uh your question. That means you understand because I I've been on a lot of this topic we don't have to anything so far. There's hope out there, right? So when you got when you're done with the conversation, I can especially with a federal government I do.

SPEAKER_00 12:58

Okay, let me ask the first question again. What was the most critical relationship that you pursued when you began these projects? What was the first one? Was it the capital? Was it the contractors? Was it the unions, or was it the government?

SPEAKER_02 13:13

The union. Okay. I'm a guy. I'm an ex-union guy. Union local union is what created the job. Um, local union leaders is what tied to local IDA, local county partnership, allowing it to be uh economic development for Hudson Valley economic development, New York State Economic Development, that local union. And on the other side, I have a lobbyist that is tied to the governor's desk that's tied to the all this government agency. So both of those guys are dear friends and have a passion to help the governor. So it's a relationship from 35 years in the making. It doesn't happen overnight.

SPEAKER_00 14:00

You know, sure, sure. So you you approach the unions, you pitch them an idea, a vision, and you basically leverage the power of the unions to put pressure on government, to put pressure on state and county government to begin to grease the wheels of government to make these incentives happen, to make these programs available for the construction. Does that sound about right?

SPEAKER_02 14:26

Yes, but you don't want to use the word grease the wheel because New York State passed a mission statement. Okay. So I'm just answering the call, the mission statement. Passed the legislation of 800,000. Out of the 800,000, 160 to 180,000 is built already, already turned key in the last three years. I'm only developing 5,000 in my valley, right? So 5,000 of 800,000 is really nothing. But you know, instead of doing this and trying to go out and take all the credit for myself, I want it to be a true community because I want to create jobs for my union, and I believe in union pension is what built America, right? Built road bridges, infrastructure. So uh securitize assets. You went blank. So they're buying the market for security asset, allow that asset somebody's standing by to purchase when it's completed. So that's very unique structure. Most people don't stand there. So if you want to develop something, you could tie up the you secure the property and you go into pre-development, and then you have to look for construction financing, and not only that, you have to find a permanent uh permanent and that's and then third thing is how you're gonna build it. You know, I mean, if I do one location, I can say um that's one, but if for me to scale this up prototypical 100 to 150 units per location, think of big done from one one town, one village to another village, and all these, by the way, uh the location is a um in Ohio Valley as well, it's all abandoned building for a warehouse or a mill, right? So all this mill or this warehouse is now dilapidated in the middle of the village. So the governor said, take that, I will help you with the zoning to expand the parking in needed, give you money for stacked parking, and secondly with the municipality to upzone it if they don't have the you know the zoning issues. Well, buy them a fire truck so this way we can have housing because it's a major issue. Because you don't have this affordability, you know, I state gonna have a major problem.

SPEAKER_00 16:48

Did you repurpose those buildings or did they get torn down and rebuilt?

SPEAKER_02 16:53

Uh some of them are re um repurposed, some of them will be torn down to the ground, like an old structured warehouse. You know, we do it, but some of these have it's like uh a mill that is built with brick, uh with with the um historic look, you know. So we go in there, we'll put the lentil in, and we'll put the stall to hold the uh the brick together and then go inside metal stuff there out to do um electrical and mechanical. So we want to keep it integrity of the historic look because all these portfolios are in the village because they have access to water and sewer and electricity. We're not going into the township district and gout the tree and cut the tree to plant a building going up because that doesn't work. To make the truly integrated community, you know, this five to seven or ten eatery thousand square foot uh eatery, we want to put in a different ethnic city food. So you have retail downstairs and restaurant downstairs, and then you know, uh two uh three-story garden style above it. But yeah, these eateries open to the village where we inviting the village to come in. So you have truly integrated community that you can walk to a bus stop or train stop. So it's a truly just a true uh mixed-use TOD uh development.

SPEAKER_00 18:19

Okay, I want to ask one more question about the process, and then I want to ask you, uh, I want to return and ask you about the building, what you had just addressed. So the chicken or the egg, which came first? You know, the the state of New York issues a mission statement to build a million affordable housing units throughout the state. Did that come with legislation, or did they then go and seek private partnerships to help them draft the sort of legislation that they needed to make this project work? Do you know what I mean, Nick? Did they did they say, hey, we have this mission to build a million units, here's the law and how it's got to be done, or did they say, here's our mission? Developers, come speak with us and and let's talk about what is it that the state needs to provide to make it possible for you to develop these units?

SPEAKER_02 19:08

Yeah, that's a good question. When sh when we first launch it, everyone in the right mind, much order of me in this power is sue her. Because you say, This is what I'm gonna do, and here's the law. So I'm gonna I'm gonna re-zone, I'm gonna upzone, and you're gonna have to do it. They're like, Oh, I'm gonna sue you. Then when they find out what it is, everyone in the all of this power is like, I'm open up, governor, I want this housing. Because they think of section eight. No, affordable is section eight. You know, it's just but this is a market rate.

SPEAKER_00 19:44

I imagine you're talking about so just to reiterate, because we had that lag again, uh they came out, they they issued the mission, they issued the um they issued uh the law, and then there was some back and forth between private developers to to correct that law or to to refine it to make it more easy to work with, or no, the municipality.

SPEAKER_02 20:22

Yeah, the municipality was suing the suing the state. Say, I don't want these in my backyard. I see, but I see they didn't know what it was.

SPEAKER_00 20:33

Understood, and then so it was the it was local government that then started to work with state government to fix those up. So local government sought input from developers. How do we make this thing work? Then local government reached out to state government and said this is the way the legals need to be structured to make this program work. Okay, excellent, that makes sense. Yeah, okay. So you're you're designing mixed use. Why mixed use as opposed to simply a hundred percent residential units? Why restaurants and other things like that?

SPEAKER_02 21:04

Because uh a lot of this um village doesn't have that that eatery, right? So the younger generation is you can't just build a box for them, you have to build a lifestyle for them, you know. So these food is we're not talking about uh big restaurant. We're talking about you know 700 square feet to thousand square feet, like a food truck type deal, but yet it's in underneath the resident. So it's a thousand, average a thousand square feet of um Chinese, you know, Thai, sushi, uh, cafe, whatever it is, that's the second phase that I'm putting together to make this polo typical across the Hudson Valley. So this way, when they come home from work, you know, some of them may not want to cook, but they need a place to eat. So instead of going out and also have the town come and uh sit down and eat, you know. in in this eager because what draw the community is food. Food is what gets the neighbor to talk about the neighbors. And without food there's no true community.

SPEAKER_00 22:24

Yeah, I'm filling this gap here. Um I love what Nick's saying there. You know, one thing that certainly New York City but but New York in general is is is well known for is the walkability of neighborhoods, of communities. You know, I know you have a strong emphasis on building these properties near rail lines so that people can leave their home, they can hop on the rail they can go to work they can do their shift they can come back home. They've got a place very close to home that they can eat or shop. Everything is walkable you don't necessarily need a vehicle um and that's that's a very intelligent and very effective design uh sort of protocol because walkable cities are the most successful communities in the world whether it's in the United States or overseas if if your town is walkable if you can get everything you need within walking distance of your home those are the cities that seem to thrive and and and really sustain themselves over long periods of time. And you're designing that Nick and and that is a a brilliant way to design you know another thing that you just said is um you you want to make it prototypical right so you design one thing and for the most part you can do that over and over and over based upon that model.

SPEAKER_02 23:49

Obviously some details change based upon geography location etc but you're basically designing the same sort of structure and lifestyle for the the the future residents it's a plug-in yes we want it to be plug-in we want to take this and encourage people in Ohio as a plug-in I can't go to Ohio because I have to spend the next 30 years build that local relationship but hopefully we can take this prototypical go to a developer in Ohio that is already looking to do this and collaborate with them and plug into their system bringing in the prototypical and bringing in our financial structure so this way we can help you know truly help uplift this affordable housing throughout the United States we need it so bad.

SPEAKER_00 24:36

I mean we can't build them fast enough right now my county we're short 3000 units you know it's the truth I mean I talk to people about the market all the time I said there's only there's only two ways that affordable housing gets relief in this country either the builders catch up which is not going to happen anytime soon or the the there's the worst case scenario and that's a large job loss recession where people are forced to liquidate their homes because they can't afford it anymore and that's not good for anybody, right? So housing is very unhealthy in this nation right now. And the things that you're doing this partnership with local and state government is is brilliant and it's what needs to happen more and more around the country and I would love to see um people in Ohio take this on um and uh I'm gonna begin to start trying to make connections to to see if we can work things out. Before we hang up Nick before before I let you go is there anything else about this process about the style the structure the the capital that you think is important that people need to know as soon as you come back we'll get on that the wind in New York right now Nick is in the Hudson Valley of New York State um connecting to this broadcast and uh that's go ahead you know what um that's that's good uh that's a great question because uh for the first time in 65 years if we don't do this I call it national security meaning New York State is doing this at a scale because we're losing so many uh talent after the kid graduate they're going to Texas Arizona they're going to Carolinas they're going to Florida and Alabama because the stand of living the cost of living is so high if we don't trap the uh trap the talent uh compatible for right so without without headcount workforce housing you can't afford to uh to compete against New York State is rank number nine now on economic and no definite ohio you know I mean Ohio Ohio viol you guys is not a far away from us and we're losing our youth and our talent if we don't make it affordability then it's gonna be a major issue so for the first time in history Elizabeth Warren pushes the house to pass this Affordability Act Housing Act and President Trump just executed so this program is coming nationally I didn't know when it's coming nationally that's why he extended Litech L I T C H you can google look at that he extended extended Litech program for the subsidy of the um you know financing structure so with that you can take that couple with uh local municipality to um put on top of it to cost to bring the cost of the construction down without the government subsidy um you know our future generation is we dead in the water that's excellent um Nick I would love to reconnect with you and do this again um when you're promised you I'll get a better connection yeah yeah I really like the conversation I really do I appreciate it I do too it's it's important to have these conversations yeah yeah and it's the most realistic conversation I ever came across and you can I can tell you you're intelligent because most people do podcasts just for marketing but your podcast is asking the right question that uh that impresses me and make me appreciate about more you know I appreciate these are I mean these are important issues I as a broker I think about it every single day I might be the only real estate agent broker that that people hear that says how housing prices need to come down they need to come down um and uh you know I want to see Americans do great I want to see my neighbors do great and success yeah me too and this is important so I would love to reconnect when you're deeper into these projects and and you know you're breaking ground and now you're coming across issues real time and let's talk about that because every step that you're going through there's something incredible and important to be learned and I'd love to reconnect with you Nick we'll pick um a different day when it's not so windy in New York State we'll pick a time when when you're deeper into these projects and uh if you're open to it again I would love to reconnect yeah I definitely would definitely for we just committed from financial institution 100 million so we're closing on 100 million to launch in 90 days from now I think we should I would love to come back every quarter just to get you up to date to to whatever it is opportunity for me to um to be on to network with the local if you have local developer that's interested some you know um taking my brain that's why my assistants are lobby my assistants aren't here that we want to collaborate I want to teach them how to do what's the sense you know I'm not here to say oh I have I'm gonna charge you all my legs and then do do a capital raise or cap rent I listen I went through three months of this guy you know because my background is private equity I understand finances that's very important to have that finance background to become a developer you know wonderful I appreciate it I'm gonna stay in touch I I'm really interested in what you're doing and I want to I want to continue to learn from you. I thank you very much for coming on today Nick we will reconnect in the future I appreciate it thank you awesome thank you