If there is one word to sum up what affordable housing developers/sponsors need in today’s environment, it might be adaptability.
As in the adaptability to confidently add more preservation and workforce housing properties to a portfolio of tax credit projects.
As managing director and head of agency lending at National Equity Fund (NEF), Tom Booher understands the need for this big-picture approach that can shape the future of affordable housing. “As subsidized construction faces extreme economic headwinds, many affordable housing operators and owners are adding preservation of Class B and C housing to their portfolios,” Booher explains “These leaders recognize that it’s just as important to preserve existing housing stock.”
Booher’s colleague, Daryl Shore, NEF’s senior vice president of structured finance, agrees. “Interest rates and construction costs can adversely impact new projects. Plus, there’s a renewed focus on moderate-income housing. The challenge is to preserve existing housing without LIHTC (low income housing tax credit) subsidies.”
Create and Preserve
Agency lenders understand the challenge. Freddie Mac’s Workforce Housing Preservation product is a way to gain favorable financing terms in exchange for declaring at least 20% of the units to residents at 80% of the AMI (area median income). Some local jurisdictions offer other preservation incentives, such as tax abatements.
A big concern is Year 15 properties. Those assets may be vulnerable to market-rate conversion if investors don’t have a fair way to reinstate affordability. Some developers have responded by modifying their business model to include preservation through property acquisition.
The good news is that dual “create and preserve” strategies can be surprisingly straightforward. NEF, for example, represents a full-service, all-in-one financing partner that supports both subsidized and unsubsidized development.
Total Solution
“We bring the entire capital stack to the table,” Booher affirms. “Yes, we vigorously support LIHTC deals. The permanent loan piece means we also support workforce and preservation housing deals, with both short- and long-term financing available.”
No need for multiple lenders. Just a familiar, mission-focused partner with the preservation financing capability to:
- Acquire affordable housing properties;
- Pay off an existing first mortgage;
- Buy out existing limited partners; and
- Invest in minor capital improvements.
“Developers and sponsors need more tools to expand their business through acquisition. Eliminating the need for another party at the financing table simplifies and smooths the process. Having all the capital pieces available as needed serves everyone’s best interests,” suggests Booher.
Mission-Focused Expertise
There’s something else, too. Securing permanent loan financing through a mission-focused partner comes with certain technical advantages. Namely, the experience and relationships gained over decades in the business. In the case of NEF, that’s a 37-year, $24.5 billion legacy.
Booher and Shore remain optimistic about 2025. “Affordable housing is one of the few things in Washington that’s supported by both sides of the aisle,” notes Shore. With permanent loan access to workforce housing projects, the way is clear to respond with even more adaptability, resolve, and urgency.
Learn more about how NEF’s single-source financing solutions can help advance your next project.
