If you’re thinking this is “Go Time” for affordable housing, you’re not alone. Many developers and owners have also decided it’s time to roll.

Aaron Hargrove, a 30-year affordable housing veteran who serves as the managing director of Walker & Dunlop’s affordable investment sales team, confirms the long industry pause is rapidly waning. As part of the larger W&D affordable platform, which includes affordable capital advisory, low-income housing tax credit (LIHTC) equity, debt, and preservation services, Hargrove has a broad perspective on the industry. He shares his insights into current market behavior and its potential implications.

“Last June we started to receive the green light on deals,” Hargrove recounts. “We currently have over 30 deals active in the market. This makes it one of the most dynamic times for our affordable housing investment sales team.”

Surge Factors

What accounts for the surge in investment sales? Hargrove has some theories. “Expectations were high late last year and early this year for a Fed rate drop,” he says. “That expectation froze the market. There was rate instability, and our internal data suggest that rate instability is negatively correlated with transaction volume.”

By June, there was more comfort with the rate situation. In addition, a crop of maturing LIHTC deals were approaching a decision point. “It was time to get in front of a looming year 15 LIHTC event,” Hargrove says, referring to the inescapable 15-year maturity date associated with all LIHTC assets. “Unlike market-rate assets, LIHTC deals are encumbered by internal calendars and must transact at fixed intervals. The market’s sense of ‘if we’re going to transact at all this year, now’s the time’ has reached a tipping point,” Hargrove observes.

He says that, in a rapidly changing market, owners are also looking for other intangible indicators of reliability. Though the number of trusted and actionable broker opinions of value (BOVs) have increased, quality of deliverables has to be maintained. “We work hard to deliver options that owners can execute with confidence,” Hargrove adds. “You must stand by your BOV. Investors expect you to deliver. Walker & Dunlop started as a lender, and our valuations are crafted in concert with expert debt guidance.”

He says his team prioritizes “The Three A’s”:

  • Authenticity is the attitude of honest and forthright communication with owners about what’s working at their property and what has to change for the property to be marketable.
  • Accuracy is the determination to provide answers that are real and actionable: “We work hard to serve all parties with valuations that are fair, reasonable, and based on both verifiable data and deep market insight,” Hargrove says.
  • Accountability is the willingness to stand by the analysis without reservations or excuses. “It’s a small world. Valuation accountability is the only way to do business,” Hargrove explains.

One recent transaction illustrates this point perfectly. When a highly sought-after portfolio recently was being considered for disposition, the affordable investment sales group found itself in competition with two other groups for the opportunity. The W&D team counseled the ownership group to operate with full transparency, advising them to inform all staff connected to the properties of the sale intent. “It’s always best to be open, especially in an industry that so often over promises and under delivers. Even though our BOV wasn’t the highest price of the three submitted, they went with us,” he says.

Right Place, Right Time

In the current transaction environment, Hargrove says he believes affordable housing is the smart place to be: “Affordable housing keeps chugging along, producing 110,000 units each year. The demand for clean, safe affordable housing isn’t going away. If anything, its increasing at a steady clip.

“It’s humbling how our team of over 200 affordable housing professionals, working with the industry’s leading data platform, is now able to help lead a dealmaking resurgence, signaling more and better housing for the nation’s most deserving.”

Learn more how Walker & Dunlop can help accelerate the execution of your next affordable housing project.