Housing Is a Problem Even in a State With Declining Population

You can kind of understand why it's so hard to build housing in New York City. There isn't much available land. It's already pretty built up. And then, add in the fact that so many people want to live in New York, and you can understand why it's so expensive. But what's the deal with Alaska? There seems to be plenty of land. And population has actually been in a a general state of decline. And yet, housing remains strained, with many of the same affordability problems seen elsewhere in the country. So what are the specific challenging dynamics to be overcome? On this episode, we speak with Jimmy Ord, Daniel Delfino, and Stacy Barnes of the Alaska Housing Finance Corporation to understand the challenges they face, and the work they do to ease the strain. We get into both the specific logistical, political, and financial tools available to reduce pressure. Read more:NYC Approves Midtown Rezoning to Allow 9,500 New Housing Units More Estate Agents Are Reporting Falling House Prices, RICS Says Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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• 2:30Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:34Tracy Alloway?

  And I'm Tracy Alloway.

• 2:35Joe Weisenthal?

  So Tracy, I get why like a city like New York City, it's housing is really expensive. It's really difficult to build. I mean, there's not a lot of space, right? In New York City, like, I don't really blame New York City for not building a lot of new housing. Like, where would you put it exactly?

• 2:49Tracy Alloway?

  Right. Manhattan is an island, seems somewhat limited. Plus, it has a giant park taking up a good chunk of it, so there's that.

• 2:55Joe Weisenthal?

  It seems NIMBYs are keeping it so that we can't develop on Central Park. But yeah, like, I sort of get why housing is really strained in New York City. I don't blame anyone really for it. But it always seems like in the more rural locations, especially where there's not a lot of population growth, it should be really easy to, you know, just build more houses or, you know, use the houses that people left when they moved. And yet, our impression is from past trips, et cetera, that there's a lot of strain on rural housing as well.

• 3:23Tracy Alloway?

  That's right. So we've done a few field trips to places like North Carolina. And we learned that even in an area that certainly is not as densely populated as Manhattan, there are housing issues.

• 3:34Joe Weisenthal?

  Yeah.

• 3:35Tracy Alloway?

  And now, we are up here in Alaska, which, you know, if there's one thing I know about Alaska, it's that it is big.

• 3:41Joe Weisenthal?

  It's big, yeah.

• 3:42Tracy Alloway?

  Twice the size of Texas. Is that the stat that people use?

• 3:45Joe Weisenthal?

  Something like that. It's incredible.

• 3:46Tracy Alloway?

  Something like that.

• 3:47Joe Weisenthal?

  There's got to be some empty space to build houses.

• 3:49Tracy Alloway?

  You would think, right? And yet, we're up here and one of the things that people keep talking about over and over again is this idea of housing strains.

• 3:56Joe Weisenthal?

  Yeah.

• 3:56Tracy Alloway?

  Within Alaska, in Anchorage, too, which is where we are right now.

• 3:59Joe Weisenthal?

  Yeah, totally. And we have heard that multiple times. And so whatever the issue is, that sort of the story that we tell about Manhattan, there must be something more to it because it's not just a matter of no space. Because even places that are swimming in space have strains. And so I want to understand what that is. We've been up in Alaska. Listeners will remember our episode we did with Mary Daly and maybe some other ones that came out by the time this episode is coming out. But there's no, there's no way to understand a state without understanding its housing economy.

• 4:30Tracy Alloway?

  Absolutely not. And also, just because it's Alaska, the other thing I'm really interested in, and I think you might be interested in it too, as a relatively new homeowner, is just the idea of maintenance on a house in Alaska.

• 4:41Joe Weisenthal?

  Yes.

• 4:42Tracy Alloway?

  It must be insane, right? Like, imagine how often you're replacing a roof in a place like that gets like, you know, feet and feet and feet of snowfall every year.

• 4:50Joe Weisenthal?

  No, totally. All right. Well, we do, in fact, have the perfect guests. We are at the Alaska Housing Finance Corporation. We are going to be speaking with Jimmy Ord. He is the Director of Research and Rural Development, as well as Daniel Delfino, Director of Planning and Program Development. So Jimmy and Daniel, thank you so much for coming on Odd Lots.

• 5:09Speaker 06

  Oh, thank you. This is Daniel. It's nice to be here. We appreciate the invitation to chat with your highly sophisticated group.

• 5:15Speaker 07

  This is Jimmy. Happy to be here.

• 5:18Joe Weisenthal?

  Well, thank you both for having us at your office. What do you just, for listeners, tell us, what do you do and what is the Alaska Housing Finance Corporation?

• 5:25Speaker 07

  Alaska Housing Finance Corporation, this is Jimmy. We are an organization that addresses safe, quality, affordable housing in Alaska. That's, that's our mission. In the early 90s, the state of Alaska, they took the different housing departments and the Housing Finance Agency, and they put them under one roof. So in many other states, you can have housing departments, maybe in the Department of Commerce, or under Revenue, or under some other function of the state, where we get to walk across the hall and talk to our counterparts in the Mortgage Department, or the Finance Department, Public Housing Division. So we're an organization

• 6:08Speaker 07

  that is all things housing in the spade of Alaska. And that's really helped with collaboration and getting programs and services out the door.

• 6:16Tracy Alloway?

  So Joe and I tried to do this in the intro a little bit, but why don't you contextualize for us, what are the actual housing issues in the state of Alaska? How would you describe some of the problems that you're trying to solve?

• 6:29Speaker 06

  So, there are a lot.

• 6:32Speaker 06

  You said earlier, go into the details. The housing issues used to be a lot simpler when I started in 2008. It's kind of like the algebra problems that evolve, the more math you take. You solve for C and you're only dealing with one unknown variable. And you're able to triangulate that and solve it pretty simply. And then it's like, okay, now you have two unknown variables and you use the substitution rule. And now you get up to three or four unknown variables. And now all of a sudden you have to start using linear equations. And it's just gets to this level of complexity where you need a computer. And that's kind of what we're dealing with in terms of the, the issues as they, they've kind of emerged over the state. We have some places that are dealing with population drain.

• 7:16Speaker 06

  We have some places that are dealing with an aging contracting base where the people are retiring and there's no new people coming up behind them. We have other communities that are struggling with the cost of housing development. I mean, you mentioned the cost of housing in the intro. It's, um, there are a lot of things that drive housing costs and housing challenges. I'm guessing we'll get into here. But then you have the housing stock itself. When I started, it used to be you had apartments, you had houses and you had hotels. Now the three things are effectively linked. Thanks to the emergence of vacation rentals in a lot of our communities, where the hospitality industry is now inextricably linked to the, the housing industry. Because you have inventory that is taking a multipurpose nature throughout the year. So there are a lot of things moving all at once.

• 7:58Speaker 06

  And the old days of being able to focus on one or two issues and try and understand how it's affecting the housing market at large, those are largely gone. And we're, we're left in this layer of complexity that's very difficult to conceptualize and even harder to communicate to other people that don't live and breathe this stuff.

• 8:13Speaker 07

  And adding to that, Daniel, I just want to make sure folks understand the vastness of the state of Alaska. Like you talked about there in the introduction. Imagine a state where you can get on a plane and fly three hours west and still be in Alaska. Okay. So. There's so much in this state that is gonna be varied because of the location and the community. And you have communities in rural Alaska that have several dozen people in them, and they still need housing and services. And the cost to make sure that they have safe, quality, affordable housing is gonna be extreme. So they have to ensure

• 8:58Speaker 07

  that the housing that they're building is appropriate for that space and climate. Now, if you were gonna start in southeast Alaska, and you wanted to travel to the North Slope, you're gonna leave a wet rainforest, marine climate, and you're gonna head to the North Slope, which is up in Uktyavik area, and you're gonna see extreme temperature changes from fifty, sixty below zero to, you know, to fifty, sixty degrees Fahrenheit above freezing, you know. So it's, it's quite a state. And when you're thinking of housing in that space, it's not a magic silver bullet.

• 9:40Speaker 06

  One of the things that you'll find as you go on this journey from southeast Alaska up to Uktyavik, is if you flip a coin, probably about half of the merchants that you find online that you may take for granted on Amazon won't ship to you in Alaska. So when you talk about some of the housing challenges, people don't all do business in Alaska, and those that do tend to charge us gouging prices to get things up here. Jimmy mentioned flying three hours to western Alaska to get to one of the communities. We did that last year for a board meeting. And when you get to that place, when you go down the runway, you see a plane off to the side of the runway. And it's a plane that broke down, that just stayed there. There are things in that harbor that have rusted out because they don't, they don't come out and pick them up. I mean, there are certain things that people take

• 10:22Speaker 06

  for granted, like shipping services, that you're gonna be able to get new parts in, you're gonna be able to take things away that are dilapidated in your community, that... Aren't a reality for a lot of the people that we work with in the state. A lot of our neighbors, especially in the places off the road system, which is the majority of our communities, don't have a lot of the things that most people take for granted.

• 10:42Joe Weisenthal?

  So, never having been there, I can only imagine the sort of weirdness and difficulties of trying to, you know, commerce and housing, et cetera, in some of these extreme, far-flung locations. Let's just start, though, with like the relatively major urban centers. You know, we're in Anchorage right now, the biggest city in the state. Like, what's happened on the affordability front here? And what's happened on the construction front here over the last several years?

• 11:08Speaker 06

  Sure, so I'll take a shot at this one. On affordability, I've seen a bifurcation in the market. The interest rates a couple of years ago were down in the twos for people that wanted to refinance, and the homeowner market was going gangbusters. And the prices, when interest rates were low, reflected that. There was a huge price acceleration in the cost of homes. Fast forward to now, instead of a 2% interest rate, I think our rate that we publish for first-time homebuyers on our website, I checked it this morning, at 6.2%. So, a couple of years ago, things were much cheaper. Same thing for renters, cheaper for renters. It's just the growth rates, and I'm talking about the lines going up at different angles. Homeownership in Anchorage, the cost has gone up by over 60% in the last couple of

• 11:53Speaker 06

  years versus close to 30% for renters. So, both have it bad, it's just one, one has a much steeper curve. So, what we're seeing is a lot of folks could not afford to buy their own home again at today's interest rates, and that's affecting their willingness to sell them because they can't afford to buy something new in another community, or even within the same community at the interest rates that they charge. So, you have folks that are maybe stuck or less mobile in homes that are really expensive now. You have renters that don't have people freeing up a homeownership sock, so it's getting a little bit more congested there. And a lot of things are moving. In terms of the development, the inflation chaos that we were seeing in the construction industry where no one would do guaranteed

• 12:37Speaker 06

  maximum price contract anymore and it was all time and materials, some of that craziness in terms of the escalations that we're seeing year over year like 20, 30%, that seems to have died down. It's still expensive, don't get me wrong, but that's moderated a little bit. What hasn't changed is the availability of land. I mean, you look around and you see, wow, you're huge. We brag all the time, we're twice as big as Texas, why can't you build housing everywhere? Well, the land here isn't the easiest to build on. Like, you can look at a hill and it will be considered a federal wetland because there will be a specific type of plant that's on the side of the hill, or the hill is owned by the federal government or some other entity. So what you see versus what's available to develop, there can be a disconnect in some communities. And Anchorage is one of

• 13:20Speaker 06

  our older communities, so it's been built out with a lot of the easy and the good land taken first. There are other places to build outside of Anchorage, and we do see that sprawling a little bit more outside of the main community. But for the communities that have been developing for 20 or 30 years, they're starting to reach the more mature stage where they're running into the harder things to develop, given what's left.

• 13:40Speaker 07

  Yeah. So what I hear you saying, Daniel, is that in many ways Anchorage is somewhat similar to other larger communities throughout the country where they're facing cost of construction, labor shortages.

• 13:53Tracy Alloway?

  The lock-in effect.

• 13:54Speaker 07

  Yeah.

• 13:55Speaker 06

  But I'd still prefer to live here.

• 14:13Speaker 00

  What's next for virtual assets? I'm Jacob Grease, host of Economy Scale, a series exploring growth in key global sectors. And in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

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• 15:58Speaker 01

  but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

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• 17:30Tracy Alloway?

  Okay, one thing that I know is unusual about Alaska and Anchorage specifically is that you have a large turnover of the population, right? You have a lot of people who are leaving every year and you have a lot of people who are coming in. And on the whole, you have seen, I think, a slight, maybe not for Anchorage per se, you'll have to correct me, but there's been an overall population decline in the state, for sure. How does that turnover in the population and the idea that, you know, for the most part, you have seen a decline in total numbers, how does that feed into the housing situation?

• 18:05Speaker 06

  Not the way that you might think.

• 18:06Tracy Alloway?

  Okay.

• 18:07Speaker 06

  So in 2010, shortly after I started, we were talking about a housing plan here in Anchorage. And there were projections that Anchorage was going to grow as far as the eye could see. We were going to have all these people coming in. Six years later, the population peaked and then it started falling. So it's like, okay, we peaked in 2016 and then we started going down to a base around 2020, 2021, and then we started coming back up. So we have about 2,000 more people now in the last recorded population year than we did in 2016. Well, the vacancies have gone up.

• 18:45Speaker 06

  And it's when we see that people leave, you would expect, okay, the vacancy rate should go up, right? Yeah. That's not happening. So it's like, some of the things when I talked earlier about, you used to have one or variable or two variables explaining things, and now we have a sort of multipurpose inventory. Why is that? Yeah, this is to me a huge question. Are people changing their living arrangements? Do we have housing stock? Because I mean, if you go from the supply and demand, if you reduce the supply, you can, you can get back to a tighter vacancy rate by doing that, even if the demand is falling. I don't know if that's happening. We're trying to track the vacation rental data as best we can. We go through a company, I don't want to name a company in case it gets me into some commercial issue here, but we get proprietary reports where we track the growth in vacation rental listings across the state.

• 19:30Speaker 06

  And we see that those have gone up, they've almost doubled since, I want to say 2017, 2018, when we started tracking them. Is that just the data set being completed? Or is that legitimate growth? I mean, these are questions that we're asking because these are new issues. If it's legitimate growth and the vacation rental stock did actually double, and now we're looking at 7,000 units that have come online across the state in the last couple of years, that's a big number. If that's just counting what the data set wasn't recording in the earlier years, then I don't know. So we're seeing a lot of these things that offer explanations, but there's still such new issues in the data and in housing in general, that we're really reluctant to come out forward and say deterministically, yes, it's this, yes, it's that.

• 20:12Speaker 06

  But we do see things that don't make sense, because usually, housing is a function of people. If you have less people, you should probably need less housing. And that's not what we're seeing in the data.

• 20:21Tracy Alloway?

  And so, Joe, it's unironically our fault, as some of the visitors coming to Inquisition.

• 20:26Speaker 06

  We stayed in a hotel, though.

• 20:27Tracy Alloway?

  Yeah, okay, but we might go to an Airbnb later this weekend.

• 20:31Speaker 06

  That's true. I'm sorry, 739 for the state, a couple of years ago, and now we're at 741. Yeah. So 2,000 more people.

• 20:40Speaker 07

  I came to Alaska in the late 90s, and I feel that that was the number back then. It just, it just hasn't really changed that much. And so, to your point, Tracy, where you have people moving to the state, they work for a period of time, and then, and then they move out, you know? They've, they've kind of come, they've experienced the wildness of Alaska, and then they're moving on to do a different things.

• 21:02Speaker 06

  Yeah, and we used to be a countercyclical state in that people would come up here when there was a downturn in the lower 48, as we refer to the rest of the country.

• 21:10Joe Weisenthal?

  We've probably heard the term lower 48 more in the last three or four days than I had.

• 21:14Speaker 06

  It's not a pejorative, it's just a geographical distinction.

• 21:16Joe Weisenthal?

  I just forget that that's where we are.

• 21:18Tracy Alloway?

  No one calls Alaska the like upper one, though.

• 21:21Joe Weisenthal?

  The upper one, the 49th state.

• 21:22Speaker 06

  That would kind of sound elitist.

• 21:25Tracy Alloway?

  Okay, so my other question in terms of housing stock in a place like Anchorage was just, how much is lost through like sheer attrition, I guess, and like?

• 21:36Joe Weisenthal?

  Depreciation.

• 21:36Tracy Alloway?

  Depreciation, and I could kind of, I could see arguing this both ways. So on the one hand, because construction costs are so high here, if you have a house, even if it's aging and falling apart, you probably want to hold on to it, try to fix it up and keep it. But on the other hand, just looking at the environment here, just looking at the weather, you must have rapidly, rapidly depreciating housing stock.

• 21:57Speaker 07

  That's one of the biggest challenges that Anchorage housing faces is its resilience. Most of the housing in Anchorage was built during the 70s and 80s when Alaska, you may have heard of this thing called the Alaska Pipeline, right?

• 22:11Joe Weisenthal?

  Heard of it.

• 22:11Speaker 07

  Yeah, and a lot of the housing was thrown up with two by four construction based on construction techniques and practices that were appropriate for somewhere down south. How's that for not saying lower 48? And, and what that means is...

• 22:27Joe Weisenthal?

  I think we're in this other part of the United States here.

• 22:29Tracy Alloway?

  I know.

• 22:30Joe Weisenthal?

  When we go back to New York.

• 22:31Speaker 07

  The housing's really not built appropriately for this climate.

• 22:34Joe Weisenthal?

  Oh.

• 22:34Speaker 07

  I mean, it was built where you don't have a consideration for the long-term sustainability and resilience of that housing. So we find ourselves in a situation where when people come in and they're a homeowner to a new house, they have to spend a lot of their resources improving that existing house. Because like Daniel said, we don't have that much land to build in new places in the Anchorage area. So a lot of what we have to do is fix the current housing stock that we do have. So an investment in energy efficiency...

• 23:10Speaker 07

  Insulation, making sure you have an appropriate heating system, making sure that the windows and doors are in the right place is what we focus our time and effort on to make sure that our housing is appropriate.

• 23:21Joe Weisenthal?

  Can we talk a little bit more about this essentially supply side? Like, how many like active developers are there in terms of like companies that do housing development? And then the specific like supply chain constraints that the inherent nature of Alaska poses to construction and repair?

• 23:40Speaker 06

  Sure, so I'll take a shot at this. The development community, it's a very dangerous thing for a person like me that works in us or a quasi-government agency to try and speculate about the true population of developers because there are all kinds of people that I don't talk to that do very important things in the state. We operate about 10 different housing programs that build or buy things that people will live in that's consistent with our mission across the state. We have roughly 70 partners that we work with across the state that are various nonprofits. We'll have maybe 30 or 40 different developments going on at any given time across the state. So, I mean, is it 10? Is it 20? It depends on the year. And what are we talking about? Are we talking about people that work with government money like the Long Come Housing Tax Credit Program or grants?

• 24:23Speaker 06

  Or are we talking about individual home builders? Is it a person who's building a multiplex downtown that's going to be an eight-figure development or more? Or is it a person who's building a duplex? So, who's a developer? It's sort of a loaded question, sort of like when people ask us, how much does it cost to develop per door? When we're reporting what we're doing on the public side with building housing units, we're looking at a complete budget. So, when we say it costs $350,000 a door to deliver new housing to a community in the state, we're talking about the cost of acquisition, the cost of construction, paying an architect, paying a developer fee, all of these other things. If you're talking to a contractor who might also consider themselves a developer,

• 25:05Speaker 06

  they might just be reporting the vertical construction costs and they're keeping things off. So the language when we define these terms really affects the answer. So the developers that we work with, I'd say about 10 to 20, work with our agency to develop multifamily housing through our grant programs. There are a ton of people that build housing all across the state that I think would equally be called developers by other people, including their banks and their community partners. So it really depends on who you talk to.

• 25:31Tracy Alloway?

  So just on this note, I take the point about permitting and where you're building in a place like Anchorage, but talk a little bit more about what the constraints actually are on new construction. So there's the high cost of materials. I imagine there's probably labor and in many respects, you know, if you're building residential in a place like Anchorage, you might be competing for contractors with, I don't know, an oil and gas company that's probably paying more money for them to build something else. So what exactly are the exact constraints, you know, whether it's materials, construction, labor, permitting, land availability, finance? How would you describe those?

• 26:09Speaker 06

  Sure. So there's a, you said to get technical.

• 26:12Tracy Alloway?

  Please.

• 26:13Speaker 06

  Cobb Douglas, you remember the production function in economics class where like what you can do is a function of labor and capital, right? There's also something that involves technology that transforms that curve. So there are labor inputs, there are capital inputs in terms of money, but it's also what you do with technology and the system behind it. So your question about development constraints, it is part labor, it is part capital, it is part logistics, because these are huge issues. But with the aging sort of group of people that we have that are starting to retire and the people that are spread out all across the different far-flung reaches of Alaska, the capacity is as much of a constraint for a lot of these folks. And this is something I think Jimmy's team works with our partners a lot on as well.

• 26:58Speaker 06

  The capacity is as much of an issue to some of them as funding or construction materials because we can put money out there. There can be resources to build housing. But if no one knows how to do anything with it, that can stop a community from actually developing housing. So that's one of the things that we've been doing with some of our development initiatives. Is not just coming forward with some of the needed things like money or some of the other like federal resources. But saying, hey, we know some of the things that maybe your community doesn't because in addition to being spread out community wise, our skill base as a state is also spread out. We have people all over the state who understand things. There are people who are great at procurement that are located off the road system that don't have running water. There are people that understand finance. You'll find Stanford grads in some of these communities.

• 27:43Speaker 06

  But you need to put together a team of people that understand a lot of things to make housing happen. So when we see that they have three of the five things that they need to make a housing development move forward, there may be the missing two things that we have that we need to bring into the community. That's as much a part of the development equation as capital is.

• 28:02Speaker 07

  Yeah, Daniel, I think that speaks to Alaska Housing Finance Corporation's partnerships with a lot of entities in the state. You know, I think of the Alaska Association of the Housing Authorities. That's a 14 member organization of different regional housing authorities in the state and you know, how we're able to communicate with them and bring additional resources to bear so that we can be in this together, right? Because like I said earlier, it's there's no magic bolt. There's no one size fits all and you know, to be effective, you have to provide that assistance as a team member.

• 28:37Joe Weisenthal?

  I think that's just like a really interesting idea that like, you know, in a place like New York City, like of course, any new housing development is going to take lots of people with lots of different skills, whether it's the person who knows how to put in plumbing, the electrical. Knows how to deal with permitting and you know, I'm sure many of the big developers in New York City are like one stop shops or maybe it's a two stop shop or whatever. And the idea that in Alaska, like all that knowledge is there, but it's just so spread out. So you don't have that sort of like knowledge density or those network effects, which we don't really think of, I think, a lot when it comes to housing, but it's very intuitive when you talk about it in this context.

• 29:13Speaker 07

  And, and think about right back to the population of the state. We still have to do all the same things.

• 29:19Joe Weisenthal?

  Yeah.

• 29:19Speaker 07

  There's still all the same jobs. There's just over 700,000 people, right? But if you're in a place like New York, there's millions of people to do the jobs.

• 29:29Joe Weisenthal?

  Yeah.

• 29:29Speaker 07

  So, so there's much greater opportunity here in the state for individuals to step into a role and learn new things. But there's, there's not as many of us to do the things that need to get done.

• 29:40Speaker 06

  That's, I think, one of our strengths because there are a lot of things that are challenging about building housing in Alaska, but I'm trying not to make it sound like it's all doom and gloom. We have a lot of things that do go for us as well. I was just in a fairly small community. It's a hub off the road system. And the mayor was on a job site with us and one of the carpenters referred her affectionately in a way that probably HR wouldn't like, but they're very jovial. And this, this elected leader runs a gift shop in town and she's on a first name basis with contractors. She punched the utilities director in the arm when he got out of the truck. I mean, they know each other. When we go in with this sort of connection, where they're neighbors and these are people that live right next to each other, they're willing to help each other in a way that I don't

• 30:24Speaker 06

  know if Mayor Adams has that relationship with carpenters in New York City. I'm sure he would say he did.

• 30:29Joe Weisenthal?

  He has some relationship with carpenters. What the nature of it is, we don't exactly know.

• 30:34Speaker 06

  But.

• 30:34Joe Weisenthal?

  Oh, you've heard of our mayor?

• 30:35Speaker 06

  But, but they care and they're, they're a lot more predisposed to work with each other because they live in a way that's probably difficult for people in major cities with hundreds of thousands of people to understand the relationships between the elected leaders that we may work with and the people on the ground that are actually going to be able to do the work. And that's what's made some of the initiatives that we've been doing recently actually work because these are people that actually know their neighbors and they, they have a really vested, a joint vested interest as a community in making something happen. So that is one of the things that we have a lot of challenges, but that's one of our, I think, greatest strengths when we go into the communities is being able to leverage those relationships.

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• 34:39Tracy Alloway?

  Just to hone in on this point, can you give us an example of, you know, a project that you did in, I don't know, like a Sitka or something like that? That, you know, where you were trying to bring in the requisite skills or the requisite construction workers and expertise in order to get something off the ground? And like, in excruciating detail, walk us through what that process actually looks like.

• 35:00Speaker 06

  Okay, so there are a lot of places in Alaska where housing is such a challenge that local employers have resorted to actually building housing for their employees. State workers don't really have that option. The state doesn't have deep pockets like some of the big health clinics do to do all these other things or like banks. So what we started seeing was our executive director, Brian Butcher, was reaching out to some of the other commissioners in the state. And they had positions that had been vacant for a long time. And they were in danger of losing the positions because they had been vacant for so long because there was nowhere for these people to live. Wow. And so if you go out to any of these communities, the person who takes care of the runaway in the winter, which is your main source of transport for logistics, might not be able to find housing.

• 35:44Speaker 06

  Like this is a really, this is a life and death issue for some of these communities. So we're like, well, why aren't we, we have programs, why aren't these communities utilizing our programs to develop housing? Well, we decided to get a little bit more direct. We're like, well, we're their local governments. We're a quasi-state agency. We can work with them on a government-to-government basis and say, what is it going to take to get housing developed in your community? Because this is like a critical issue for a community, and we need to come together and figure out a way to solve it. So we developed something that we came up with. We called it the Last Return to Your Housing Initiative, after our state's motto. And we approached local governments with about $5 million each, just a couple of them, and said, we want X number of housing units to go up in your communities. Some professional workers, some affordable housing.

• 36:29Speaker 06

  We tried to make it big enough so that it would be a big enough dollar amount that would be attractive for the community and have, generate some interest. But that's what we did. We didn't come and say, it has to be a two-bedroom, it has to be this, X, Y, or Z. We allowed the ask to the community to come from a place where we could be responsive to what they wanted to do. Because some of them wanted to help out municipal people. We didn't know what kind of land they'd have, what kind of a capacity they'd have. And all the conversations with the five partners that we approached were extremely different. One community was down 20 people, and this is a small community, so down 20 people for municipal staff is big. They didn't even have a city attorney. They're like, we basically need you to do almost everything for us. We'll be on a review committee for you, but that's about all we can do.

• 37:14Speaker 06

  Another community, they had land, and they're like, uh, yeah, we have a procurement department, it's great. We have land, we don't know how any of this stuff works with your program. So we flew down there and we did training with them and all this other stuff. Another community, they didn't understand a lot of it. We had to go up there, and it was like an episode of Shark Tank, sitting there for a couple of hours while everyone from the community started asking questions about the resource. Because a lot of these people are sold a bill of goods from folks that fly in and offer probably well-intentioned help, saying, oh, Alaska, we'll show you the way. Let us lead you out of the wilderness.

• 37:48Speaker 07

  And to jump in there. That is what Alaskans do not want to hear. Is somebody from the lower 48 coming here telling us what we need or how to do something.

• 37:56Tracy Alloway?

  We're from New York, and we're here to help.

• 37:58Speaker 06

  Yeah, because that conversation does not go over well. I mean, we're flying into a community of maybe a thousand people and a bunch of the community elders are at the table. We're the guests in the community. So it's like, here's our resource. We want to help you. And that's it's pretty much just letting the conversation play out. So the approaches were very different based on what the community wanted from us. But the thing that underpinned all of it was we were coming to them with a resource. And a promise of support that we would stand behind. And everything else beyond that was the community's decision as to what they wanted to do. Did they want to take a more active role? Did they not want to? Like, some of them. We're dealing with city managers who are dealing with sewer lines, things like this, any number of issues. They don't know how to negotiate with the contractor. They have no idea.

• 38:43Speaker 06

  If a contractor asking for this payment request is reasonable based on the facts and circumstances. So for some of them, we were just a lifeline saying. We have lots of developments and we, at any given point in time, we have hundreds of millions of dollars in developments that are going on across the state. So this is second nature for us and we can provide that technical expertise. From a place that they trust because they've worked with us for a number of years. This isn't the first conversation that we've had with a lot of the communities. They know that the. Agency that we represent doesn't have a history of burning them. So when they call and say, is this reasonable? And we say, well, have you thought about this? Have you thought about this? Have you thought about this? They're having a conversation that anyone else could have with them, but they trust us to provide them the truthful answer. And we were able to do a lot with that one.

• 39:26Joe Weisenthal?

  Since you mentioned the hundreds of millions in development, let's actually talk about the finance. Part of finance and we're very interested in various financing models for housing and other way, give especially given where interest rates are, et cetera, and who bears the burden. Well, do you talk to us about like how you finance yourself, whether you use the municipal bond market? And our, you know, creative ways of financing the construction of housing in Alaska that are not that maybe. Those of us in the lower 48 don't appreciate.

• 39:56Speaker 06

  So I'm not the CFO and our CFO hockey player that he is, I would probably come down here very aggressively if I tried to explain what he did.

• 40:04Speaker 06

  We're a self-supporting corporation. So we have a mortgage department that provides mortgage financing. Our finance department is active in the bond market, making sure that our programs have capital. A lot of the programs that Jimmy and I operate are funded from HFC's earnings. We're under the Executive Budget Act, so our budget goes to Juno every year and it's allocated. And usually there's a recommendation of what to do with the earnings from the corporation for some of our programs. So like our department and the planning department, we manage roughly 20 programs. And it's a combination of state, federal, and foundation grants and tax credits from treasury. And then Jimmy has other funding sources from a bunch of different places.

• 40:46Speaker 06

  So it's a self-supporting corporation. Sometimes there are foundations that come in and match other things like that. There are financial tools that we use in housing. Some of them are more relevant than others. When you're looking at development that costs, say, I don't know, $500,000 to develop a unit off the road system, going from a 6% interest rate down to a 5 and 3/8s doesn't really make that $500,000 a door something less prohibitive. So what we tend to see in terms of the things that are driving housing in the mission spaces that Jimmy and I think work in a lot, it's not usually these things like people throw out terms like mezzanine financing or these other weird types of debt products.

• 41:28Speaker 06

  Those don't usually move the market for the multifamily stuff in the space that I see at the corporation. But there's an entire world of homeownership and lending and the relationships with the banks that we don't really touch, that I don't want to speak to because that's probably really out of our area of expertise. Yeah, I would say that's true.

• 41:47Tracy Alloway?

  Okay, well, sort of a related question, but I imagine no matter what's going on with your finances, you are, you know, limited in some way in what you can do. And you have housing needs in relatively large urban centers within Alaska. So whether it's Fairbanks or Anchorage or whatever, and then you have lots of housing needs in lots of different rural communities. How do you decide where you need to intervene and how you actually prioritize a project?

• 42:17Speaker 07

  As Daniel mentioned, Lask Housing Finance Corporation is a quasi-state governmental entity. So we take our direction from the legislature and the governor's office, essentially. So there's a lot of the initiatives that we work on are coming with that direction and that intent. For example, one of the areas that I work on and we work on on our team is improving the housing stock in rural communities through weatherization and making sure that individuals in those communities, again, have housing that is appropriate for their climate. Because, you know, they, you know, the people that have lived in Alaska for long durations

• 43:00Speaker 07

  and over the generations, you know, they've always had this can-do attitude. And I'm going to put some sweat equity into something that really shines through in their lifestyle and their community. But oftentimes, they, you know, they don't necessarily have the resources to do that. And Daniel was talking about the Last Frontier Housing Initiative program. And I think that's a wonderful way to help the community is providing those resources. So when we go into a community with our weatherization program, we're not just going in to do one house. We're going to go in and we're going to do the community because we need to take advantage of economies of scale. We need to make sure that if we're going to put materials, insulation, windows and doors,

• 43:45Speaker 07

  things of this nature on a barge to then ship them up to the Norton Sound and maybe up a river to get to the community so that we can do an overall weatherization project in that whole community and impact 70, 80% of the housing units there. You know, so I think having the ability to take advantage of economies of scale and then work with the community to make that housing more resilient is very appropriate.

• 44:13Speaker 06

  Yeah, so on the subject of prioritizing, we're a stay-awayed agency. So it's kind of like asking a parent to choose their favorite child. We try and make sure that our resources are allocated in a way that responds to the entire state in a way that's relevant. So one of the things that we do, so we operate a lot of programs, over 20 in our department alone. We get a lot of information from the operations of these programs of how much homeless housing interventions cost, how much developments cost, operating cost trends, things like this. And then we also commission primary data on the rental market and then we do a quarterly survey of lenders to try and understand what is the market doing on its own that we don't need to do because it's already taken care of it. So we try and make sure that we're

• 44:55Speaker 06

  not being redundant to what's already happening and we're actually serving an unmet need in our state with the housing resources. So that's a big part of it. But then the other thing, and one of the things that makes the Last Run to Your Housing Initiative work and some of our COVID responses, we talk to our partners. We have 70 different partners all across the state and we engage with them on a fairly regular basis. And we just ask questions like, what's going on in your community? I mean, technology has been able to do a lot about expanding access to programs and things like that. But the old school way of actually connecting and engaging with partners face to face, going out to their communities, like what we've been doing over the summer, that is really where we learn a lot of what we need to do to reposition our programs. Because especially

• 45:37Speaker 06

  with our state programs, these are on Word documents that we can change upstairs if Brian gives us the go ahead or tells us that we need to change direction. A lot of our homeless response initiatives from COVID were developed based on feedback that we'd heard from our homeless and supportive housing partners over the last decade. The Last Run to Your Housing Initiative, the same thing. When we're going through revisions to some of our rating programs, we actually call people and say, well, how do you make a decision on when it's time to renovate your project? Or when you're looking at a development, what do you actually, like, walk us through the process? We try and understand things from them. So it's not so much us making a decision from our little four-story building here in Anchorage for the entire state. We really do try and inform that based

• 46:19Speaker 06

  on the data that we get from our programs and the conversations from our community partners.

• 46:24Tracy Alloway?

  Let me ask a related question. How do you judge the success of one of your programs? Because again, I imagine in a rural area like in Anchorage, maybe you could measure it in sort of, you know, traditional ways. So we built a bunch of housing and then we saw a bunch of people move in and we saw economic growth increase by whatever basis point or percent or whatever. But if you're talking about a remote community where, you know, maybe a large chunk of the population is basically subsistence living, how do you actually measure the difference that your housing initiatives have made for that particular community?

• 46:58Speaker 06

  Quantitatively, it's very difficult to come up with a benchmark that doesn't basically redline communities. Because if you look at it on a quantitative standpoint and say it has to be this growth rate or this unit thing, you're going to disadvantage one community or not. I'd say over the 17, so years that I've been here, what I've come to view success from in terms of our initiatives is we do a lot of benchmarking when we design these things. And whether or not the outcome delivered more than I thought, that's usually what I see as success. Was there something that we didn't account for that we captured in the process that drove the outcome further than we thought it would? The last Runtier Housing Initiative, we thought we were going to get 53 units. We got over 60.

• 47:39Speaker 06

  So our leverage rates for the units were in excess of what I did or what we were modeling when we set that up. We were able to get broad-based support that led to other new programs. So we got more than we thought we were going to, and people seemed happy with it. That tends to breed success that has support for our programs going forward in the future. So I know it's a kind of a fuzzy thing in a quantitative world, but it's really more of a qualitative thing that drives whether or not what we did works, at least from my perspective.

• 48:06Speaker 07

  And I'm going to take a little different approach in thinking some of the space that my team and I operate in, and that's focusing on the existing housing stock. And I talked a little bit about the weatherization aspect. So what we've done at Alaska Housing since the early 90s is developed an energy modeling software, which is unique to the state of Alaska. We call it AK Warm. And what this tool allows you to do is assess the building's energy efficiency level from a performance standpoint. So if we're going to go into a community and weatherize it, like I talked about earlier, you know, we do an energy modeling of that home to determine and benchmark its performance.

• 48:49Speaker 07

  So if we're going to then do insulation and air sealing and some other aspects to improve its resilience, we can then measure that on the back end. Thinking back to 2008, 2009, the state of Alaska made a very large investment in weatherization. And we had two big programs. One was targeted more toward the low-income residents, and it was weatherization services provided by many of our partners throughout the state at no cost to the participant. And the other one was a rebate of up to $10,000 for homeowners making improvements to the house. And what this allowed us to do was create a database of more than 100,000 housing units throughout the state, right? And there's,

• 49:34Speaker 07

  what is it? Correct me if I'm wrong, Daniel, but in the neighborhood of like 260,000 occupied housing units, somewhere in that neighborhood?

• 49:42Speaker 06

  I try to never do math in public, but that sounds right.

• 49:45Speaker 07

  Yeah, and at least owner occupied. And, you know, so you think about having a database of over 100,000 of these buildings in one centralized location, and you have information on how much insulation's in there, the square footage, the location, the building performance. I mean, that's an incredible wealth of information that you then can use to make decisions.

• 50:07Joe Weisenthal?

  One of the things that we've heard is that Alaska has particularly high-quality public data in part due to the dividend that people get from the permanent income fund, and the people are willing to hand over some data in order to get that check. So it sounds like, it sounds like you guys have it pretty hand, better than many in terms of having sort of some visibility into your own state. I want to ask about, one of the things in New York City is that, you know, there's a fair amount of public housing, but there's a perception that it's not kept up well, that it's in disrepair, that elevators go unfix, et cetera. Public housing is under your purview here at the Housing Finance Corporation.

• 50:48Joe Weisenthal?

  Talk about your, how that works, and also maybe, maybe we could use some lessons or what you've learned about like, how to keep the housing stock there good.

• 50:57Speaker 06

  Yeah, so the public housing is a different department than what Jimmy and I manage. What I can say is that the units that we operate that HFC owns are, do tend to be kept up better than a lot of the other folks. So the stories that you may have heard or read about in other cities, I think our units tend to be kept up very well. It's one of the benefits of being the type of agency that we are. If there's an issue with one of the units, it's very easy to get through to someone at HFC to connect with it. And I don't know the relationship that other housing authorities have in other states. I'm guessing they have a different reporting structure than what we have here at HFC where Brian has a very close relationship with the folks in the elected

• 51:41Speaker 06

  government and all these other things. So it's, they tend to look nice relative to the other ones. This, we read the same stories that you do about other places, like that wouldn't happen here. But maintenance is an issue in Alaska.

• 51:55Speaker 11

  Sorry, did you want to say something?

• 51:56Joe Weisenthal?

  Yeah, so in the room here, we also have Stacy Barnes, Director of Government Relations and Public Affairs here at the Housing Finance Corporation. Come in, come into the conversation.

• 52:05Speaker 11

  Well, thank you. So you've had some really great dialogue and a couple of things that I was thinking about as you were talking about is, as it relates to public housing and the work that we do statewide, you know, we're one of 39 of the original Moving to Work agencies, which is a designation.

• 52:20Joe Weisenthal?

  Moving to work?

• 52:21Speaker 11

  Moving to work. It was a designation that was authorized by Congress for us when Senator Stevens was still in the US Senate. And that gave us great flexibility to accommodate many of the needs that we see across the state. So as a result of this designation, we've been able to provide a lot of flexibility and meet the needs of Alaskans where they're at. So we have public housing in 16 communities across the state. We own and manage more than 2,000 properties ourself. And we also work really closely with landlords across the state. And on the question of funding, of course, there's never enough HUD funding to meet all of the needs in New York or elsewhere. Our state augments the funding that comes in because of the success that our mortgage and

• 53:06Speaker 11

  our finance business have. And as a result, we pay a dividend to the state of Alaska. Jimmy mentioned being under the Executive Budget Act. That means that we get authority to spend some of the dividend toward our public housing maintenance. And that has been really successful in helping us to maintain the units.

• 53:24Tracy Alloway?

  All right. So as we're wrapping up this conversation, I guess one thing I would be really interested in hearing from you is what do you think is like the big takeaway from the Alaska experience that could pertain to the lower 48? What should people know about the housing market here and your housing initiatives that could possibly have some insights for, you know, housing bottlenecks elsewhere in America?

• 53:47Speaker 07

  I thought a little bit about this question as we've been talking over the last hour or so. And I take a lot of what Daniel talked about with regard to how we are working with our partners in specific communities and meeting the needs of those community members where they're at. You cannot have one big magic policy to fit every situation throughout the state. And I honestly think that other places throughout the country can take that to heart, that you have to recognize that giving the power to the people to make the decisions and giving them the resources to determine the path forward for their situations

• 54:31Speaker 07

  is a best approach and a best practice that we've taken here in Alaska. And I think that's something that others can take away from this conversation.

• 54:39Speaker 06

  Yeah, I guess from the lessons, I think I've learned from our implementation of some of the COVID initiatives and what we did with the last rent to your housing initiative, I'd say that there's a change in terms of how we do work as housing professionals that feels like it's, it's happening at different speeds all across the country. Through the pandemic, we were able to develop systems that really connected us to our partners. And we used a shared space. And through the last rent to your housing initiative, we're connecting partners to our institutional infrastructure here at Alaska Housing. And people are able to, in other communities, do things that used to take self-contained agencies with the staff and a finance department and all these other things because they're

• 55:23Speaker 06

  able to connect with our resources. So they're able to do more in a sort of cohesive community framework now than they could a couple of years ago. When you think about vacation rentals, we talked about that earlier. People have owned houses for a long time that they could have rented out. But now with platforms online, they can connect to some corporate infrastructure. And someone traveling here from Japan can find their house in the Kenai Peninsula and rent it for the weekend that they're in Alaska. So the people on the Kenai Peninsula that are doing that are able to leverage some corporate infrastructure that exists somewhere else to have market opportunities for them and their community. These sorts of connections can apply to some of the housing programs. And we're starting to see that happen where we're connecting communities that are off

• 56:07Speaker 06

  the road system with communities that are on the road system within our state. So Alaskans in Juneau are helping Alaskans in Nome operate some of our programs. And these barriers that have historically been there through technology for any number of reasons are starting to come down. And technology is really helping us expand access to some of our programs to people and communities that may not have had all of the necessary tools to utilize them in the way. And that's a really exciting thing. It's bringing a lot of people together and doing more for our state than we could have a decade ago.

• 56:37Speaker 11

  And I'd just probably close by saying that, you know, our bonds are rated AA+ and higher on Wall Street. We had more than $600 million in single-family mortgage activity last year, and the delinquency rate on our loans is less than 1/3 of 1%. We are doing exceptionally well there. So you heard Daniel and Jimmy talk a lot about partnership, but we heard Mary Daly talk a lot about resilience as well.

• 56:59Joe Weisenthal?

  Yeah.

• 57:00Speaker 11

  And the people of Alaska are very resilient and we're very optimistic as well as we work together in the smallest and most remote communities to attempt to tackle these many challenges.

• 57:10Joe Weisenthal?

  I think for me, listening to you, it's like one of these things is by necessity, you have to have a lot of collaboration, which is a word everyone uses all the time, but you're literally, you know, so many different sort of entities and vehicles under one roof, and that seems like a sort of necessity. But it also seems like the type of structure that, you know, in other states or like New York City, where a lot of authority is extremely Balkanized, or other fights about who is authority, like maybe merge some departments and actually put them under one roof could be a pretty useful takeaway. Anyway, Jimmy, Daniel, and Stacey, I'm glad, glad you also joined us. Thank you so much for coming on Albus. That was really fascinating and really educating.

• 57:52Speaker 11

  Thanks for allowing me to pop in.

• 57:53Speaker 06

  Yeah, happy to be here. Thanks so much.

• 58:09Joe Weisenthal?

  Tracy, I loved that conversation. I love the detail. I love, you know, in our conversation, we talked with Mary Daly and she talked about Alaska's economies and listening to housing is like very clear what that means, that this is just a very diverse state in terms of the challenges and the the nature of living arrangements.

• 58:25Tracy Alloway?

  You definitely get a sense of it from that conversation. The other thing I was thinking about was in terms of like the usefulness of this type of program, I can imagine having dealt with a bunch of contractors, that just being able to call someone up, a government agency or quasi-agency and ask like, I just got a quote for the following activity. Does this sound reasonable to you as someone who has, you know, been involved in many, many of these projects? That would be a huge helping point, just when you're getting started.

• 58:53Joe Weisenthal?

  I think another takeaway for me from this conversation and others is that like infrastructure bottlenecks or choke points in the lower 48, everyone started paying attention to them in the second half of 2020. And that they feel like endemic to the nature of living in Alaska. The idea that if the person who clears the runway can't find a house right then, that that is an open position. And then that is the threatens the lifeline of an entire community. That is not like a 2022 story. That's a story that's like endemic to how Alaska operates. And so it feels like all these things that we've just sort of like woken up to are like the core like challenges of, you know, operating the economy here.

• 59:35Tracy Alloway?

  Alaska is truly an Odd Lots themed state.

• 59:38Joe Weisenthal?

  Yeah, it really is.

• 59:39Tracy Alloway?

  All right. Shall we leave it there?

• 59:40Joe Weisenthal?

  Let's leave it there.

• 59:40Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 59:46Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stalwart. Check out the Alaska Housing Finance Corporation, maybe some lessons to be learned in your state. Follow our producers, Carmen Rodriguez at Carmen, Armin Dash, Joe Bennett at Dashbot, and Kale Brooks at Kale Brooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have the daily newsletter and all of our episodes. You can chat about these topics 24/7 in our Discord, discord.gg/oddlots.

• 1:00:11Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we travel to Alaska to learn more about its various economies, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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