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Despite considerable headwinds working against them, this year’s AHF 50 developers started construction on 386 new affordable housing communities in 2022. That’s a notable jump—about 15% more than the 335 projects started by last year’s group—at a time when the industry saw significant spikes in construction costs.

When completed, the recent developments will provide 45,241 affordable housing units, roughly 5% more than the 43,077 units started by the prior year’s AHF 50 group.

“It’s our belief that most developers focused on closing as many projects as they could before conditions became worse,” says Caleb Roope, president and CEO of The Pacific Cos. “In a period of rising interest rates and uncertain construction costs, taking those variables off the table as quickly as possible is often the best strategy.”

His Idaho-based firm leads this year’s AHF 50 after beginning construction on 31 projects with 3,091 affordable units last year.

“We spent a lot of time focusing on sites in areas of opportunity which matched the priorities of the state funding allocators,” Roope says. “It was great to see so many new homes being built where low-income parents and their children will have better access to the resources they need to improve their lives.”

He is quick to credit the team at The Pacific Cos. along with its many finance, government, joint-venture, and other partners for the company’s big numbers in 2022. “Additionally, many of our projects closed early in the year, thereby avoiding the full impact of the disruptions, and modular construction helped us continue to successfully address supply chain disruptions,” he says.

Looking at the year ahead, Roope expects inflation to keep the pressure on interest rates, especially for short-term financing.

“We do see construction costs stabilizing and even declining in some markets out West, where we do most of our work,” he adds. “We also see an ongoing struggle to maintain project feasibility due to lower borrowing power, generally high development costs, and relatively limited gap financing. The need for structural change to the tax credit and/or sourcing of public-private gap financing is critical for sustaining production of affordable housing.”

The AHF 50 developers list is based on the number of new affordable units that the firms started construction on in 2022. The information is collected through surveys submitted by the companies.

Overall, 115 firms participated in the survey, with 35.2% of the respondents saying finance conditions for affordable housing will be better by the end of the year and 29.5% expecting conditions to be worse. That’s a change from a year ago when 41% expected the outlook to be worse by the end of 2022.

Rising development costs continue to be the top concern of developers, 29.4%, followed by the availability and cost of debt financing, 25.3%. Rising operating costs, 14.1%, moves into the top three concerns this year.

The survey reveals the average development cost per unit for new construction project was about $331,000 last year, up approximately 8% from the $307,387 average of a year earlier. When asked how much construction costs increased on their 2022 developments, just over 25% of the respondents said between 16% and 20%. Nearly 22% reported increases between 21% and 25%.

Affordable Housing Finance also unveils its AHF 50 owners list along with the top 10 firms completing acquisitions and completing substantial rehabilitations last year.

The Michaels Organization continues to be the industry’s largest owner with 49,403 affordable units owned at the start of 2023.