How M&T Bank’s Lopa Kolluri Tackles Affordable Housing Lending

During the Obama administration, Kolluri served as the deputy chief of staff of the U.S. Department of Housing and Urban Development. During the Biden administration, she served as the deputy assistant secretary of the Federal Housing Administration. As if that weren’t enough, she’s also the former chief development officer of the Philadelphia Housing Authority. 

Commercial Observer sat down with Kolluri to discuss the state of affordable housing in America, the biggest misconceptions surrounding the sector, and how her career has given her a uniquely holistic view of how to solve complex problems. 

This article has been edited for length and clarity.

Commercial Observer: It seems you’ve been able to experience affordable housing from many different sides. Could you walk us through your career?  

Lopa Kolluri: During the course of my career, I’ve had the opportunity to work with fairly large administrations. Before coming to M&T, I ran the Federal Housing Administration, which is one of the largest insurers of first-time home mortgages and multi-
family mortgages in the country. I’ve also worked at the state level in New Jersey, overseeing housing production and policy, and as the chief operating officer of the Philadelphia Housing Authority, giving me local experience. 

So that’s just on the government side. I also worked for a small boutique developer, Community Investment Strategies, in New Jersey, and after a couple of stints in government, I went to work for Pennrose, a national affordable housing developer based in Philadelphia. That’s given me the full picture of American affordable housing, 

Why did you come to M&T Bank?

Based on my lending exposure at FHA, I realized that I wanted to join a bank, and not just any bank, but a bank deeply rooted in communities. For me, M&T fit the bill. I was actually brought on to work on commercial real estate strategies at M&T — the bank was going through a transition, and I became part of a team to transform and diversify the commercial real estate portfolio. So I thought I’d be spending more time in the commercial real estate space, moving away from affordable housing, but one area it became clear we were focused on for diversification was affordable housing. 

M&T has been financing affordable housing for years, as a market leader, along with M&T Realty Capital Corporation, our full subsidiary off-balance-sheet outfit. And I think what makes us unique is that our leadership has decided affordable housing is a potential growth area that requires its own vertical and platform. The bank has made a commitment to invest in building out that platform and has tasked me with building that up. 

What type of projects is M&T financing, and how closely do you work with state and city agencies that manage affordable housing?

Affordable housing lending, particularly bank lending on the debt side, is only one component of the overall capital stack. Most of the balance is coming from various government sources — it may be from local, state or federal government funds. Those sources of funding are softer sources that come as grants or low interest rate loans. 

When it comes to affordable housing, we know that rents must be kept affordable, and the project can only pay off so much in terms of debt, so it has to be subsidized with layers of funding from a city like New York and an agency like the New York City Housing Authority (NYCHA). So it’s important to remember that bank debt is only one component of a broader set of financing sources that makes up each affordable housing project. 

What geographies do you play in?

As a regional bank, M&T has a footprint that goes from Maine into Virginia. We see growth potential in this current market, but, like many banks, we are motivated by the Community Reinvestment Act (CRA), and so we do have CRA needs throughout our national footprint and some are heavier than others. 

So the three leading states in terms of our CRA involvement are New York, Maryland and Connecticut. But what we’ve observed is that there is a need for affordable housing financing across our footprint, and we believe there’s potential in all those states we operate in. This requires working with state and local governments in each area to make those projects come to fruition. But a major challenge right now is the cost of housing. We used to think about the cost of housing being very high in cities like New York and other high-cost areas, but we’re seeing it exist from Maine down to Virginia. So it’s important for us to work with our industry partners, whether it’s the government or banks, to address this crisis. 

Let’s talk about the federal government. Biden’s Build Back Better bill allocated $166 billion toward housing, including $65 billion toward public housing repairs. What is the true need of American affordable housing from a federal government perspective? 

So the Build Back Better bill was in response to a significant backlog in public housing rehabilitation that needed to happen. When I was with the Obama administration, we talked about the need, the public housing backlog, as $40 billion. That has increased steadily. So, by the time we got to the Biden administration, it probably doubled. 

Build Back Better was a robust bill that would’ve specifically addressed the needs and would have rebuilt our public housing across the country. But one of the things that has happened generally, across the board, is we have experienced a steady reduction of federal resources that have come in. Build Back Better would’ve given us that slug of funding that we need to start to catch up to that backlog of housing rehabilitation needs. [The housing portions of Build Back Better] didn’t pass, but the problem is still there and has gotten worse. 

But now we’re facing an affordable housing supply crisis in our country that, for the first time, has gotten national attention. There’s a number of factors at play: a lack of availability of land, high interest rates, increased construction cost, increased insurance costs, and the steady reduction of federal resources. If Build Back Better [as originally envisioned] had passed, it would’ve given us a head start in beginning to be able to address those issues. So we’re having to play catchup, and we have all these other factors that are coming into play that have exacerbated the lack of housing supply. 

FHA is a part of HUD, and you worked at both agencies. What were the best lessons you took from your time in the federal government?

The first time I was at HUD, it was during the Global Financial Crisis. It was a time when Obama had passed the Helping Families Save Their Homes Act (HFSA) and the Bush administration passed the Housing and Economic Recovery Act (HERA). At that point the focus was on addressing the massive wave of foreclosures happening across the country due to the subprime mortgage crisis. 

At the same time, we knew that with a steady decline of resources we had to leverage the private sector more to address the backlog of affordable housing. So we rolled out the emergency Rental Assistance Demonstration program and that was a way to bring private capital into the financing of public housing in a way we hadn’t had before. It has strong bipartisan support and is still an active program — it’s the way we’re able to rehabilitate public housing, whether at the Philadelphia Housing Authority or at NYCHA. 

During the Biden administration, I came in during COVID, and we were working on 13 percent delinquencies in the single-
family housing portfolio, and figuring out how to give people some relief from foreclosures as a result of the pandemic. So we put in policies to allow for loan modification and to support people to maintain their homes. But our whole focus at that point was how do we address and protect individuals impacted by COVID. But we were coming off the George Floyd protests, and we were focusing on racial equity, and figuring out how to bring people of color into homeownership. 

And the third focus was on climate change, figuring out how we build more resilient housing on both the multifamily side and supporting green mortgages for first-time homeowners. 

What are the biggest misconceptions the average American has toward affordable housing, and what misconceptions does the private sector bring to the sector?

The biggest misconception is that affordable housing is for poor people or people who aren’t working — or that it brings about violence and crime. Those are the misconceptions. Affordable housing financing is a national issue and a national problem. It’s a middle-income issue, where you have our policemen, our firefighters, our teachers — the ones who support our services and work in our communities — those are the people that need affordable housing and who we need to build our affordable housing for. So one word defines the misconceptions: NIMBYism — Not In My Backyard.  

From the private sector perspective, a lot has changed. The private sector had always been looking at affordable housing as a niche issue — that thing developed by government people or specific developers that have a few different sources of funds and put it together. Now it’s gotten national attention, and banks have done affordable housing lending, largely motivated by CRA. But the banks now see this as an opportunity, and you have nonbank entities like debt funds and pension funds and other capital markets players who have woken up, and now see this as a profitable area of commercial real estate to invest in. 

What’s enticing the private sector to finally enter into it?

It’s the safety of the government involvement in the capital stack. It’s less risky. You might not see the returns like you see on other assets of commercial real estate, but you’ll see steady returns. It’s also a long-term asset. At a time right now when we have so much instability in the commercial real estate market, multifamily and affordable housing is a very attractive asset for entities to funnel their money into. 

What have you taken from your experiences working for private real estate firms, state and local government, and now a major regional bank?

Ever since I was 18 years old, I traveled extensively and lived in many places as a result of my parents, as they are originally from India. I moved around a lot, and was an introverted and shy person, so the moves were hard for me. Navigating the new communities and making new friends was hard. But the real constant for me was the concept of home I had along all my travels. Where we lived, whether it was in a subsidized apartment in London, a garden apartment in New Jersey, or the first home we owned in a working-class suburb outside of Cleveland — it was a place I felt safe and secure and anchored. As I look back on it, that experience was the early seeds of my career in housing. 

And so I started that career in the international sector, where I was focused on working with organizations that would connect the unbanked, low-income individuals to the formal financial system. I did that for 10 years and then decided to pivot, and thought that if my community is now the United States, in D.C., then I want to take that experience and apply it to the U.S. and the challenge of accessing affordable housing and affordable financial services. So I got my start at Fannie Mae, where I learned the full understanding of the policies and the landscape, the intricate levels of funding coming in from federal, state and local government, and how the Low Income Housing Tax Credit funds affordable housing. 

Then I had the opportunity to have state-level experience. But, after some time, I felt it was time to get practical private sector experience, so I worked for a developer in New Jersey and worked with municipalities to develop land and identify projects. After my time in New Jersey, in the private sector, I was tapped to come into the Obama administration and figure out the various policies we need at a federal level to address that affordable housing backlog. 

I got a policy education at a state and federal level, and, when I moved back into the private sector to work for Pennrose, we partnered with housing authorities to figure out how the private sector taps into the federal money and worked with authorities to redevelop the housing on the ground. And coming back into the Biden administration was an opportunity to run the FHA and figure out how we provide first-time homeownership and dealing with the crisis of COVID. 

So what I’ve been able to do is see affordable housing from all angles: the policy and practitioner angle, but even more so from a regulatory side, from a lender side, and from the developer side. Quite frankly, it’s really given me a holistic view on the affordable housing market, and, from each of those positions, I’ve taken a bit of knowledge and a bit of experience. 

How have you seen affordable housing financing evolve? 

The affordable housing projects have become bigger, much more complex. As a result, using New York as an example, we as a bank have to partner with NYCHA, the New York City Department of Housing Preservation and Development, and the New York City Housing Development Corporation to coordinate our funding. And then we’re partnering with other banks. We can’t do it all. Or maybe we partner with debt funds to manage the risks. 

So what’s been interesting is to take the knowledge that I have and bring it to bear with the bank. And, as the projects are becoming more complex, the clients’ needs are actually becoming quite involved. They don’t just need construction loans — they need predevelopment loans or lines of credit for their organization. 

Having said that, we’ll need to harmonize our internal credit framework to meet regulatory obligations, but most important is ensuring that the process and the execution are both smooth for our clients.