Affordable housing developers had a robust 2016, but any momentum that may have been building looks to be significantly thwarted in the future.
An overwhelming 70% of the developers surveyed believe affordable housing finance conditions will be worse by the end of 2017, while only 14% expect conditions to be better and 16% expect conditions to remain the same.
That’s a stunning turnaround from a year ago, when more than half of the developers expected finance conditions to hold steady, and 34% expected them to improve.
The reason for the reversal in mood is the uncertainty that has fallen on the low-income housing tax credit (LIHTC) market with Donald Trump and Congress expected to push for tax reform. This black cloud has blanketed the market since the November election and has led to a drop in LIHTC prices this year.
“There will be more volatility in the market while everyone waits for the Trump administration to advance tax reform and to see how the Department of Housing and Urban Development will fare,” says Gary Buechler, president of The Michaels Development Co., part of The Michaels Organization, the nation’s largest affordable housing owner and one of the top developers.
Developers overwhelmingly (68%) said the election was the most significant event for the industry in 2016. That was far ahead of the next responses—availability of tax credit capital (9%) and rising development costs (9%)—in affordable housing finance’s survey.
Nearly 110 affordable housing developers and owners took part in the January survey, which determines the annual AHF 50 developers. The only list of its kind, the AHF 50 reveals how many units are being built by leading national and regional developers.
The ranking is based on the number of new affordable housing units that developers started construction on in 2016.
This year, 53 companies are on the list, as a result of three ties. Collectively, the firms started construction on 266 developments with 25,630 affordable housing units in 2016. That’s a hefty jump from the year before, when the 52 firms on last year’s list started construction on 226 projects with 17,653 units.
The NRP Group, which has consistently been one of the nation’s most active developers, tops the list after starting construction on nearly 1,800 affordable housing units in eight developments last year. The Cleveland-based firm also completed five developments that delivered 550 affordable homes in 2016.
“Affordable housing is far more than a housing program. It is economic development on a large scale. New housing creates jobs, and new residents pay taxes, shop at local stores. As we build neighborhoods, we build economic activity. It is a self-sustaining investment in neighborhoods.”
Despite new concerns, the AHF 50 developers remain optimistic about their production levels in 2017. They anticipate starting construction on more than 300 projects this year. A number of these deals likely closed on their financing before the end of last year.
Developers will also continue to make the case for affordable housing, and there’s much they would like people to know about their work.
“Affordable housing developers not only fulfill a genuine social need, they also stimulate the local economy and serve as catalysts for change,” says Matthew Rieger, president and CEO of Housing Trust Group in Miami. “Our developments generate high-paying jobs, bring stability to young families and children, and create beautiful, safe spaces, often in underserved neighborhoods. The positive impacts of our developments are long-lasting, felt across multiple generations.”