What will the new year bring for the affordable housing industry? Affordable Housing Finance Editorial Advisory Board members have weighed in with their predictions, trends, and a challenge for 2016.

Federal Outlook

The presidential election will dominate the national stage this year, and Eileen Fitzgerald, president of Stewards of Affordable for the Future, optimistically predicts that candidates will be discussing affordable housing. “The presidential debates will include questions and a conversation about the rental housing crisis facing millions of Americans,” she says.

Prior to the November election, Bob Moss, principal and national director of governmental affairs at CohnReznick, says he expects the industry to see the first comprehensive overhaul (draft) of the tax code by Ways and Means Chairman Kevin Brady (R-Texas) as a marker for action in 2017.

“This gives us the time we need starting Jan. 1 to renew the grand opening campaign with Congress that proved so successful in the past. We have work to do with Senate Finance Republicans,” Moss adds.

Also on the legislative front, Sean Thomas, Ohio Housing Finance Agency chief of staff, predicts that Congress will pass a bill that allows states to exchange volume cap for 9% low-income housing tax credits (LIHTCs). “My reasoning is that this proposal is gaining some momentum, and budget-wise it is not costly. States could use more 9% credits,” says Thomas. “The big question is will Congress pass anything substantial in the election year.”

Labor Costs

J. David Heller, co-founder and principal of The NRP Group, predicts that oil prices will drop below $30 a barrel in 2016. “This will cause a fracking crisis, which will in return free up labor to return to the housing market, thus driving down labor costs in multifamily,” he says.

LIHTC Market Conditions

Editorial Advisory Board members also looked into their crystal balls to see what’s in store for the LIHTC market in 2016.

“LIHTC pricing will remain high, interest rates will remain low, 9% applications will continue to run three or four for every one award, and the demand for affordable housing will be as strong as ever,” says R. Lee Harris, president and CEO of Cohen-Esrey Real Estate Partners. “What I’m less sure of is whether our industry will be able to make progress in working in a collaborative fashion with housing finance agencies to develop better qualified allocation plans.”

Pat Sheridan, executive vice president of housing at nonprofit Volunteers of America, agrees that credit prices will remain stable but says he expects debt costs to start to rise and interest rates increase.  

“The continued demand for multifamily assets by investors will make affordable housing increasingly scarce as affordable projects are taken out of the available pool of projects and made market rate,” he says, “and the lack of new production programs and scarce soft programs will continue the crisis in rental housing affordability and availability.”

Richard Gerwitz, managing director at Citi Community Capital, says a rise in interest rates will have little impact on the pace of activity. “Neither debt nor LIHTC proceeds will drop much as competition in the industry for quality projects remains robust,” he adds.

Tax-Exempt Bonds

Tax-exempt bond deals, even in new construction, will again surge, according to Editorial Advisory Board members.

“We'll see an increase in the use of private-activity bonds and 4% credits in areas of the country where such demand has been slack, as market-rate rents continue to rise due to increased demand, wage growth is stagnant, and affordability continues to be an issue,” says Gerwitz. “The increased rent differential in these areas will give the financial markets greater comfort in terms of risk profile, and competition will drive up tax credit pricing as investors look for better yields.”

Rob Hoskins, managing principal of The NuRock Cos., adds that tax-exempt bonds also will allow for the continuation of much-needed new housing stock as well as the preservation of the current housing stock in place.


“In terms of trends, I expect that the market to recapitalize LIHTC projects reaching the end of their initial compliance period, either with new credits and debt or with market-rate financing, will be an increasingly significant factor in our industry,” says Citi Community Capital’s Gerwitz.

A Challenge

Instead of a prediction, Bart Mitchell, president and CEO of nonprofit The Community Builders, has issued a challenge to the development community.

“In 2016, I challenge the AHF 50 developers to join The Community Builders to further prioritize building housing in urban and suburban high-opportunity neighborhoods with good access to transit, schools, and jobs,” he says. “By the end of 2016, let's be on track to deliver 10,000 such housing units among us.”