A record-breaking 2,000 affordable housing stakeholders gathered for the annual AHF Live: The Affordable Housing Developers Summit, Nov. 18 to 20, in Chicago. While the industry still faces an uncertain environment and cost headwinds, leaders are cautiously optimistic heading into 2025.
Here are some of the key takeaways from the conference.
1. Seize the Moment
Throughout the conference, speakers noted the growing spotlight on the affordable housing crisis across the country. The increased attention provides an opportunity to build new support and alliances.
“We’re seeing a lot of interest from employers who really understand the desperate need for affordability for their employees,” said Ismael Guerrero, president and CEO of Mercy Housing. “It’s a whole other constituency, and they’re coming to the table with land, with dollars, with investment. It’s a new partner in communities all around the country to boost affordable production.”
Leaders also stressed the role housing plays beyond providing shelter.
“You have an administration and both houses of Congress that are focused on economic growth in a post-COVID environment,” said Sharon Wilson Géno, president of the National Multifamily Housing Council. “We have an opportunity to tie the dots between housing production and economic growth of chips factory, manufacturing, and other things that many people on both sides of the aisle ran on and are bipartisan issues. Housing is critical to economic growth.”
2. Keep Deals Moving
As deals get more complicated and tougher to do, developers should challenge their own assumptions, said Sam Adams, managing director of KeyBanc Capital Markets.
“Stress-test the things you assume are true,” he said during the “Expand Your Finance Toolkit” session.
Moderator R.J. Pasquesi, president of KCG Cos., asked panelists to share a piece of advice to developers in the audience.
It’s important that developers keep in close contact with finance partners, both debt and equity, as they work on their projects, said Alexis Dunfee, senior vice president of development at Wallick Communities.
In addition, developers should consider asking their lenders and equity providers what other strategies they are seeing being deployed because they will be seeing different transactions, added Jeanne Marie Coronado, vice president of debt and structured finance at CBRE.
“Make your finance partners work for you,” she said.
Also, in many cases, the best deal is the one you walk away from, said Shannon Nazworth, president and CEO of Ability Housing.
“The deal you shouldn’t do is going to be the most expensive,” she added.
3. Navigate Uncertainty
Finance conditions have been challenging for developers, but there are positive signs heading into 2025.
“Timing lately seems to be something that’s keeping me up at night, with perm loans so important to our deals,” said Maria Barry, managing director and Community Development Banking national executive at Bank of America. “And so far they are all getting over the finish line. But I know it’s been challenging for many [developers], and we’re doing our best to help make that happen.”
She added that on the positive wide, whenever Bank of America is seeing challenges, they are getting solved.
“Perm loans are coming through; deals are getting fixed. Our pipeline is very strong for next year, so that leads me to be very optimistic that you all are doing your job and helping find ways to make deals work, getting the right subsidies, and positioning them to get over the finish line,” she noted.
Mahesh Aiyer, managing director of Citi Community Capital, said Citi is seeing more deals than last year and the year before. However, that doesn’t mean they are all penciling and are stellar projects. The volatility of rates has also been hampering deals; you may be able to rate-lock one week, while waiting longer the next week because of some movement in rates.
“By and large, we also are not seeing developers yank their projects like they might have done in 2022 and early 2023 because they are more cognizant of the way that they have structured their deals, and that this isn’t going away,” he said. “We are seeing a healthier pipeline. I’m cautiously optimistic for next year that, despite some of the uncertainty, we will continue to have pretty healthy pipelines with deals that come through.”
Barry added that some of the projects that aren’t closing aren’t ready to go; however, the public-private partnerships continue to work and are key to getting deals to balance this year.
She added she’s also encouraged with Bank of America’s pipeline being strong for next year.
“A well-structured deal is more important than ever now because we don’t know what’s coming. Every quarter something pops up or lingers. We are really focused on let’s make sure the deal has enough cushion in it and that the reserves are in place because if something happens three months or six months from now, we want the deal to be successful and for everything to move forward as planned,” she noted.
4. Understand the Equity Market
Following the recent election and changes coming to Washington, D.C., low-income housing tax credit (LIHTC) investors will likely take a cautious approach to start the new year, according to several industry leaders.
While they do not expect major changes in the tax rate that could disrupt the LIHTC market, they say there’s still a level of uncertainty that’s causing investors to be conservative.
“Even though the actual effect and the end game may not change much, the uncertainty until figuring that out will have an effect—not as bad as the last time when we came to a kind of standstill for a little while,” said Dudley Benoit, senior managing director of affordable equity-investor relations at Walker & Dunlop. “I don’t think that’s going to happen. I think we’re still going to get deals done. I just think folks will be a little more measured in pricing. Unfortunately, it’s probably going to be a little bit worse because of that.”
Several LIHTC leaders agreed that the next several months will be a wait-and-see period for many, which means a slow first quarter for the industry.
If developers have a deal that works now, they should close it, according to several LIHTC syndicators.
“Take the shot you’ve got,” said Amy Dickerson, chief operating officer at Hunt Capital Partners.
5. Continue to Be Creative
Ingenuity has been critical when it comes to affordable housing over the years.
“We are a really creative industry. There have been a lot of challenges over the years. Every AHF Live, it seems we are facing a new challenge for the next year,” said April Housing CEO Alice Carr. “There have been so many creative solutions, and this industry continues to not just survive but thrive. I think that creativity will continue. Keep thinking outside the box.”
Jeff Kittle, president and CEO of Kittle Property Group, echoed the sentiment.
“I would advocate that you look at your deal and how you can be creative within the industry to keep producing housing,” he said.
Tom Tomaszewski, president of The Annex Group, added that creativity also is important when it comes to underwriting and rising costs.
“You have to get creative and be innovative and work with all project partners, state agencies, and investors to come to the table to figure things out,” he said during the “Developers’ Roundtable” discussion.
“It’s never been more challenging than before, but we have to really get good at operating our own properties and making sure everything is running as efficiently as possible,” he added.
6. Share Your Story
There are many reasons to tout the affordable housing industry’s story.
Barry noted the importance of sharing the work that is being done and the great impact that it has on residents and communities as well as how the developments can decrease taxpayer dollars on multiple levels, such as health care. “It’s a great opportunity for us to continue to share the story.”
Kittle added that continuing to trumpet the industry’s successes can bring in new and different capital to help with production.
Patricia Belden, executive vice president of real estate development at The Community Builders, also said with today’s higher operating costs, such as insurance, security measures, and wages, it’s important to get the message out in a proactive way and spell out what’s driving these expenses to avoid negative reactions.
“Instead of just hoping they go down, we have to be out there as mission-oriented developers and owners with a message because they are probably not going down. Wage rates, we pay a living wage to our property management staff, benefits, and all of those pieces—I think we need to be better at telling that story,” she said. “We want to control operating costs, but we also need to embrace that reality and start sharing the message.”
7. Go Big
Bob Moss, principal at MG Housing Strategies, urged the audience to aim high when it comes to the future of affordable housing production.
“I think we have to go big. I think for years now, with the AHCIA [Affordable Housing Credit Improvement Act], we’re asking for what we think we can get done. But why not go big? Whether it’s this administration or the next administration, let’s all start working to make five years from now or two years from now tremendous,” he said. “Let’s go big on credits, let’s use the programs that all of you have demonstrated mechanically that you know how to do. Let’s not come up with some new housing programs from someone who isn’t on one of the housing committees. Let’s get housing done with people who know how to do housing. Let’s get housing built, let’s give everyone a home.”
