The affordable housing sector is navigating a complex and ever-shifting political and economic landscape. While there has been a slight downward trend in long-term interest rates, they remain high and the entire financing ecosystem—from investors, banks, state agencies to the GSEs —is operating above capacity.
“M&T Bank is no exception,” says Lopa Kolluri, Head of Affordable Housing Lending, M&T Bank. “We are in high gear and not taking our foot off the pedal.”
But, this summer, Kolluri notes, the passage of the One Big Beautiful Bill Act (OBBBA) (P.L 11-21 federal tax and spending bill brought some good news for the sector.
On the bright side, the bill lowered the tax-exempt bond requirement from 50% to 25%, which helps expand the number of deals states can support. OBBBA also permanently increases the 9% low-income housing tax credit (LIHTC) allocation by 12% starting in 2026, projecting to add $1 billion in equity each year. But even with these changes, pent up demand in the sector could easily absorb whatever new funds are flowing into the sector. And with the ever-rising cost to produce affordable housing, it could be a wash.
Other challenges remain, says Sean Cullen, managing director and affordable housing platform manager at M&T Bank’s subsidiary M&T Realty Capital Corporation. Staffing shortages plague the state agencies that administer the bonds, and geographic constraints persist as well. Even with more capital available, attracting LIHTC investors to projects outside of major metro areas remains a challenge.
Amid all these changes and challenges, affordable housing finance partners must find ways to remain agile, resilient and innovative, Cullen says. M&T Bank has positioned itself to do just that with an integrated strategy that emphasizes flexibility, partnerships, and creative problem-solving.
The bank also brings deep expertise and a proven track record. It’s earned the top Community Reinvestment Act of 1977 (CRA) rating of “Outstanding” and is ranked among the top 25 affordable housing lenders across the country.
“We’re always thinking about the next thing we should be doing to help developers build or acquire affordable housing,” Cullen says.
Integration as strategy
M&T’s approach is three-pronged, consisting of M&T Bank, the permanent lending group; M&T Bank’s LIHTC team; and M&T Realty Capital Corporation, which manages off-balance sheet lending. All three function as a single vertical unit, reviewing opportunities together.
This integration is essential because every affordable housing deal is unique, Cullen says. Differing market conditions and regulations means what might work in one state won’t work in another.
All three groups vet every project, though not every deal requires all three services, he says. M&T’s strategic approach sometimes means deploying only one or two services on certain transactions to position both the developer and the bank for other opportunities in the same CRA cycle, Cullen says. That balance between CRA requirements and client goals means M&T can craft more creative, mutually beneficial solutions.
“As a team, we are rolling up our sleeves and diving into the deals,” says Kolluri. “We also work closely with the state and local government agencies on a deal-by-deal basis staying in regular communication with them to ensure we are fulfilling regulatory requirements, meeting funding timelines.”
Creative financing required
And, as the market evolves, Cullen expects a growing need for creative financing solutions. The reduction of the 50% test to 25%, for example, is driving more deals that require a mix of tax-exempt and taxable bonds, which raises borrowing costs and introduces additional complexity to an already complex financing, Cullen says. “It just adds a level of complexity to the transactions that is frankly, in a lot of high bond issuance states, a new norm.”
Another growth area for the sector is bridge lending, which can allow affordable housing projects to continue without disruption as they secure permanent financing, Cullen says. “The key there is underwriting towards an exit, and the exits are typically Freddie, Fannie or FHA.”
The bridge market offers some unique repositioning opportunities, particularly for converting conventional properties into affordable communities, Cullen says. The conversions could allow owners to qualify for property tax exemptions as they expand the affordable housing stock. That trend has accelerated as more states, such as Washington, implement exemptions, he says.
And with challenges facing traditional LIHTC and bond deals, bridge loans to update buildings that already exist potentially offer a more stable route to help address the affordable housing gap, Cullen says. “We expect to see more of those types of transactions in the future.”
Building long-term relationships
Whatever comes next, M&T’s comprehensive suite of services positions it to meet all these evolving needs. “We’re not the gigantic bank,” Cullen says. “We’re more nimble. … There are fewer touchpoints internally. Not all banks have dedicated resources across the board to affordable.”
That specialization extends beyond lending. As a member of the Federal Home Loan Bank of New York, M&T sponsors about 25% to 35% of all Affordable Housing Program grants awarded each year, providing an important financing option as costs rise. It also provides treasury management and other community bank services. And, within its team, it brings dedicated affordable housing expertise across every function.
“We’re all about building long-term relationships with people to help resolve the affordable housing crisis,” Cullen says. “That’s the goal,” Cullen says. “We’re always thinking about the next thing we should be doing to help developers build and preserve affordable housing.”