Amid today’s tough economic and development climate, there’s a growing recognition of the need for affordable housing.
“You know the saying ‘never let a crisis go to waste,’” said Shaun Donovan, president and CEO of Enterprise Community Partners. “I think what we’re seeing is the country waking up to this challenge of housing affordability, and you’re starting to see it on all sides of the spectrum with more and more focus on this issue.”
As an example, the House of Representatives passed a tax bill that includes a significant increase to the low-income housing tax credit (LIHTC) by vote of 357 to 70.
Local communities are also passing bond measures and updating zoning laws to speed up the creation of affordable housing, said Donovan, who served as secretary of the Department of Housing and Urban Development (HUD) under President Barack Obama.
At the same time, there are issues raising alarms, including high development and operating costs, including a recent surge in insurance premiums.
Donovan said he’s most concerned about the health of smaller affordable housing owners and managers that are struggling. “We’re seeing some of them fail right now in a way that’s a serious threat,” he said.
His comments came during a media roundtable hosted by Bank of America and moderated by Maria Barry, national executive for Community Development Banking at the bank.
Gilbert Winn, CEO of WinnCompanies, one of the nation’s largest multifamily owners and developers, said his firm and other companies have been able to keep building affordable housing through the recent challenges, including the COVID pandemic, mainly through strong partnerships.
He noted that WinnCompanies’ pipeline includes about 4,000 units across seven states with Bank of America. These projects also rely on a variety of other subsidies, such as LIHTCs, historic tax credits, and state and local programs.
Through these partnerships, developers can cobble together enough resources to move affordable housing deals forward unlike many market-rate projects that rely on low interest rates for their conventional loans and the rents they are able to charge, Winn said.
As for a bright spot, he pointed to the recent Inflation Reduction Act, which is providing new resources for climate resilience and efficiency programs, including grants and loans for HUD-assisted multifamily housing. Another is in Massachusetts, where a $4 billion bond for housing has been proposed, he said.
The ‘Missing Middle’
Barry brought up the challenges faced by residents who earn too much to be eligible for affordable housing but not enough to live near where they work.
This group, often referred to as the “missing middle,” is growing as it gets priced out of apartments that used to be naturally affordable but are now charging higher rents, said Donovan.
One avenue is to look at downpayment assistance and other resources to try to accelerate homeownership for these families. In addition, Enterprise and Bank of America have teamed on a $150 million fund to preserve 3,000 middle-income homes.
While communities may say they don’t have resources for low-income families or they don’t want gentrification, you almost never hear a community board say they don’t want more middle-income earners, added Winn.
Looking ahead, the developer said he’s hopeful the bipartisan tax bill with key LIHTC provisions will pass this year. “There are large pipelines of housing across the country that can’t get started until that happens,” he said.
Declining interest rates would also go a long way to closing budget gaps on affordable housing projects, according to Winn.
Donovan added that businesses that need to attract employees and others are recognizing the importance of affordable housing. He said he thinks 2024 will be when big-tent coalitions start to coalesce around housing issues at the federal level but especially at the state and local levels.
