Deliveries of fully affordable housing is forecast to reach 69,600 units this year and then hit a multiyear peak of 70,500 units in 2025 before a looming slowdown in the following years, according to a new Yardi Matrix report.
The affordable housing market benefited in recent years from “the availability and cost of construction financing a few years ago, which jump-started a lot of multifamily development of all types,” says Paul Fiorilla, director of research for Yardi Matrix.
There’s also been an increase in jurisdictions that are taking action to increase the housing stock that’s affordable to low- and medium-income households. Some states have implemented tax incentive or loan programs specifically to increase affordable stock, he adds.
A temporary 12.5% increase in low-income housing tax credits that expired in 2021 may also be contributing to the high number of deliveries in 2024 and 2025.
However, after next year, the number of completions is forecast to decline to an estimated 46,757 units in 2026 and then lower in the following years. “Starts have declined sharply in 2024 due to a variety of factors, including the cost of capital, land, and construction materials,” according to the Yardi Matrix’s research bulletin.
Despite the strong demand for low-cost units, the availability and competitiveness of fully affordable housing—defined as properties in which at least 90% of units have income restrictions—varies by market across the United States, further reveals Yardi Matrix’s analysis.
The firm recently expanded its multifamily coverage with a dedicated affordable housing database that encompasses more than 3.3 million units in 21,000-plus properties.
The new study compares the average maximum allowable rent of fully affordable units owned by private entities with the average advertised rent of market-rate units, broken into four levels of apartment quality.
“The primary challenge facing governments and renters alike is that market-rate housing is not competitive with affordable housing in many of the country’s major metros, including markets such as Chicago, San Francisco, Los Angeles, Boston, Miami, and northern New Jersey,” according to Yardi Matrix.
For example, in San Francisco (where the market-rate average is $3,028 and fully affordable average is $1,982) or Boston (where the market-rate average is $2,801 and fully affordable average is $1,819), there is a big gap between market-rate and fully affordable rents.
Conversely, at least 90% of market-rate stock is competitive with affordable properties in seven small markets, including South Dakota; Wichita, Kansas; Huntsville, Alabama; Amarillo, Texas; Des Moines, Iowa; Fayetteville, Arkansas; and Omaha, Nebraska.
Researchers note that every market is unique, and the relative competitiveness between market-rate and affordable in each market is more nuanced.
“We believe that this analysis represents a valuable first step to compare the differences between market-rate and affordable rents and to understand why some markets are more successful at producing housing that meets the demands of households with limited incomes. Far from being the last word on the topic, we view this as a beginning of what we hope is an ongoing effort to study numbers that are now available through the new Matrix database,” says Fiorilla.
