With the uncertainty of tax reform in the rearview mirror, affordable housing developers charged forward in 2018.
This year’s group of AHF 50 Developers started construction on 257 developments with 32,069 affordable housing units, easily outpacing last year’s group, which started 231 developments with 22,540 units.
The AHF 50 is led by Eagle, Idaho–based The Pacific Cos., which has consistently been among the top affordable housing developers in the nation. It takes the top spot after breaking ground on 15 projects with 2,501 units in 2018.
The Pacific Cos. was one of many firms to significantly boost its production levels. One likely reason for the higher numbers is that many 2017 deals were slowed by the disruption in the low-income housing tax credit (LIHTC) market caused by the uncertainty of tax reform for most of that year. Those projects got back on track in 2018 once a tax plan was approved and the industry began to adjust to the market changes.
A look at the top 10 reveals that three companies started construction on more than 2,000 units each, and seven firms started more than 1,000 units in 2018. In comparison, just four firms from the prior AHF 50 Developers list started more than 1,000 units, and no firms broke ground on more than 2,000 units in 2017.
Miami-based Housing Trust Group (HTG) is among the companies that saw a surge in production, breaking ground on seven communities with 673 affordable homes for seniors and families in 2018—almost three times its unit total from 2017. HTG, No. 19 on this year’s developers list, also delivered 454 new affordable units last year, compared with 279 the year before.
Several factors contributed to the firm’s strong activity, says Matthew Rieger, president and CEO of HTG.
“First, LIHTC pricing stayed relatively stable in 2018, despite initial projections,” he says. “Second, we were forced to get more resourceful with financing. We turned to local and state funding sources to fill gaps and, in some cases, took on significant hard debt. We also ramped up internally—investing more in people and technology—to allow us to submit more applications for LIHTCs than in previous years.”
This year, 109 firms took part in the January survey, which determines the annual AHF 50 Developers. Fifty-two companies are on the list because of two ties. Fifty-two companies also made up last year’s group.
The only list of its kind in the affordable housing industry, the AHF 50 Developers is based on the number of new-construction units started in 2018.
This year’s group is dominated by for-profit companies—42 total—compared with 10 nonprofit organizations.
Rising development costs were the industry’s biggest issue in 2018 and remain the top concern this year, as well. The average development cost per unit for a new-construction project was $302,862, according to the survey. That’s a nearly 9% jump from the $278,142 average from 2017.
Approximately 42% of all survey respondents said development costs were the most significant issue last year, followed by tax reform (19%) and the new income-averaging option in the LIHTC program (13%).
Developers were also asked about their biggest concerns for this year, and, again, 42% cited rising development costs. That was followed by the availability and cost of debt financing (17%) and preserving and maintaining aging properties (10%).