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This year’s AHF 50 developers started construction on 364 developments with 41,535 affordable housing units in 2023.

That’s about an 8% drop in units compared with the total started by the prior year’s AHF 50 group, a sign of the challenges encountered last year.

Hefty increases in development and operating costs were among the major trends reported in Affordable Housing Finance’s annual survey that determines the AHF 50 rankings and collects other industry data. This year, 111 firms took part in the survey.

Let’s dive into some of the numbers. AHF found that the average development cost per unit for new-construction projects was about $402,115 last year based on all the responses submitted, a big 21.5% jump from the $331,080 average in 2022.

Operating costs also saw a significant spike, averaging $7,232 per unit per year last year. That’s about a 12.2% increase from 2022.

While it’s good news that 364 developments started construction last year, others did not get to the closing table. Rising development costs delayed 75 projects, which were pushed into this year or later, reported the AHF 50 developers.

These figures underscore the financial strains faced by the industry in 2023 and continue to trouble it this year.

Affordable housing executives cited insurance costs and availability as their top concerns heading into 2024, followed by rising operating costs and the elimination or reduction of local and state resources.

This is a change from a year ago when the top issues were rising development costs, availability and cost of debt financing, and rising operating costs.

Belveron-Conifer Realty saw construction costs increase between 6% and 10% last year, but the firm still managed to break ground on eight developments with 749 affordable units. It also completed two developments with 197 affordable units.

“We spent 2023 catching up on physical-needs assessments, getting back out to our sites, and understanding what investments need to be made, as well as focusing on the financial health of our portfolio,” says Sam Leone, Conifer Realty president. “During 2023, we initiated a separate, stand-alone team to focus solely on this initiative so that our operations team could ensure that we were prepared for 2024.”

The company, No. 25 on the developers list and No. 6 on the owners list, also pivoted toward more meaningful opportunities, according to Leone.

“Historically, Conifer was a 9% low-income housing tax credit developer in four states, but that space got smaller,” he says. “Instead of seeing opportunities involving 80 to 100 units, it was more like 40 to 50 units. At our scale, that was no longer a good fit, so we turned to larger, 4% credit transactions.”

This year, he explains, will be a year of focus, making the right choices and moving forward on projects that make sense. “That’s how we’ll adapt and thrive in a dynamic real estate landscape.”

Lincoln Avenue Communities also had a big year, starting construction on 1,944 affordable units and acquiring 1,676 more in 2023. The fast-growing company, No. 2 on this year’s developers list, expanded into four states despite the economic challenges. It also rose to No. 8 on the owners list with 23,700 affordable units.

To help cope with high development costs, the firm established standardized unit plans and interior finish selections to increase efficiencies. “As we continue to grow in our primary markets, we have developed stronger relationships with national suppliers. This has allowed us to create economies of scale throughout our projects,” says Jeremy Bronfman, CEO and founder.

The AHF 50 developers list is based on the number of new affordable housing units that a firm started construction on in 2023.

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

The Michaels Organization retains its top spot as the industry’s largest owner with nearly 51,000 affordable housing units owned as of Jan. 1.