Q&A: LS Black Development takes off, despite pandemic

The COVID 19 crisis was just heating up in April when LS Black Development was officially launched.

Bad timing? Not necessarily, say founders Michael Hudson and William Boulay. LS Black Development, the development arm of St. Paul-based LS Black Constructors, has a strong focus on affordable housing — and the need for those homes isn’t going away.

“Once [LS Black Constructors] had kind of that confidence that their specific business lines weren’t going to be interrupted, they were ready to go,” Hudson said. “And to be honest, we think everything that’s going on now is probably going to make the need for affordable housing even greater.”

In the following interview, Hudson and Boulay talk about how they got into the affordable housing business, what’s on their plate these days, and what policymakers can do to grease the skids for more affordable shelter.

The interview has been edited for length and clarity.

Q: How did LS Black Development get started? What’s the backstory?

Hudson: William and I both started the same day at Dominium, a large, affordable housing developer out of Plymouth, and worked together there for quite a bit of time. I actually left in 2018 to work for Life Time Fitness and help them start up their residential development program.

We always stayed in touch and kind of wanted to start our own thing, so we were networking with a lot of different people trying to kick around how we could start our own company, and specifically start a company doing affordable housing development. We ended up getting connected with Sterling Black, who is the CEO and owner of LS Black Constructors. And we got connected with him because he was kind of kicking around the idea of getting into the development world to help out the construction company. But also, he saw a void in the affordable housing industry and was interested in that.

We’ve talked to him about the programs that we use. He had some really great intelligent questions. He really got it and had an interest in it. So we ended up partnering with him and made it official in April of this year, right in the middle of COVID.

Q: There are many different levels to the affordable housing challenge. Where do you see your company fitting in?

Hudson: We fit more on that workforce housing need. A lot of our projects are 60% of the area median income. But like you said, there’s not enough product for really anyone on that spectrum. It’s all desperately needed.

Boulay: We’re definitely advocates for more supply overall in the market to lessen the upward pressure on rents as well as the other affordable housing world. So we hope to do what we can in our space and provide options from, like Mike said, 40% to 80% AMI, averaging at 60. And then being advocates for the other desperately needed slots.

Q: What can you tell me about your current affordable housing project in northeast Minneapolis?

Boulay: This would be our first project that we have been working on moving forward. It’s 164 units of one-, two- and three-bedroom apartment homes, all of which would be affordable, between 40% and 80% AMI.

The building is in the Bottineau Neighborhood in a zone that the new comprehensive plan plans for production and mixed-use, which means they want to kind of allude to the light industrial history of the area and the site. It was grain silos and an elevator for many, many years and they were recently demolished in 2018.

There will be about 13,400 square feet on the ground floor of that production space. We’re currently programming that now. But we hope it will become artist-focused production space that supports jobs, but also adds to the creativity and the viability of the neighborhood.

Q: What else do you have in the works?

Boulay: We’re looking at some other sites here locally, nothing that we can really share at this point. And we’re also targeting projects in Texas right now. They have a growing population and a desperate need for affordable housing, and they have some resources readily available to build.

Q: How did you become interested in affordable housing?

Hudson: For me, my parents had a small, eight-unit apartment complex in Annapolis, Maryland — I’m actually from out east — which was actually really naturally occurring, affordable housing. So I grew up around that and loved real estate in general.

I went to school at Marquette University in Milwaukee, and was in the real estate program there and ended up taking a class in, I believe it was called decent and affordable housing, which kind of enlightened me to the housing problem in the United States.

I took a semester in D.C. and interned for the National Housing and Rehabilitation Association, which is a trade association for specifically affordable housing developers. When I was there, I learned about Dominium, one of the largest affordable housing owners and producers in the nation. And when I went back to school, I pretty much immediately applied for an internship there. I spent a semester up in Minnesota, working for them, and that was the first time that I had ever come to Minnesota. After graduation, I decided to come back and work for Dominium, which is really just a great place to learn.

Boulay: I went to Northwestern University in Illinois and studied environmental engineering there and I was really interested in renewable energy and different things. But also where the light bulb went off for me, I was in graduate school at the University of Minnesota doing public policy work. There’s some land use and some real estate adjacent folks that have come out of Humphrey School. I found myself reading every article about Target Field when it was built and the North Loop’s changes and took a class in real estate development from an adjunct professor in grad school.

I networked throughout the industry and tried to meet every different type of person from developers to lenders and brokers and everyone that touches it and found my home in development. I didn’t know much about affordable housing at all until I happened to meet someone from Dominium, who said they were hiring. The interview went well and I took the leap, not really knowing what I was getting into. But I’m glad that I did because it was an absolute fit for me and I found it very motivating and fulfilling.

Q: What financing strategies would you like to see to move more of these projects forward?

Boulay: We know that the most subsidies and the most resources are needed at those lower levels and homeless units and service-wrapped units. So [we’re] definitely advocates for, at the state level, the housing infrastructure bonds and other tools that can help support those projects.

I think for us, we’re relying on things like TIF and local cities to help move it forward. I think the things that might be most impactful for the workforce housing space are federal changes. So increasing the availability of bonds is one and then fixing the 4% tax credit. Not to get too deep in the weeds here, but that makes the federal low income housing tax credit more powerful and would make a lot more projects feasible.

Q: What about NIMBY opposition? How do you go about overcoming some of those barriers?

Hudson: It is all about that education. So for our projects, we don’t think that you drive by our project and you can identify it as an affordable housing project. It competes with market-rate products.

And it should be equal. These aren’t second-class citizens. They’re equal to everyone else that can afford the market-rate project. So they need to be the same and they need to be able to compete with one another. So partnering with groups like ESG [Architecture & Design], that’s prolific on the market-rate side and has great, great design, that’s one way that we try to level the playing field.

I think the more that you can show people what types of jobs qualify for affordable housing in this space and what that means, they understand who it’s serving and hopefully come around on supporting a nice-looking project that can provide a long-term stable option for folks.