The nation’s affordable housing crisis persists, but there’s some good news. The federal tax and spending bill, passed in July, is expected to fuel construction as it permanently boosts states’ annual low-income housing tax credit (LIHTC) allocation authority by 12% and cuts the tax-exempt bond-financing threshold from 50% to 25%, beginning in 2026.
But to close the affordable housing gap, it will take more than favorable financing, says Aaron Krasnow, managing director of the affordable equity team at Walker & Dunlop, one of the country’s largest commercial real estate finance and advisory firms. Strong partnerships are essential.
“There’s no way of doing this without partnerships,” says Krasnow, a 25-year affordable housing veteran whose responsibilities include sourcing and structuring LIHTC equity investment opportunities and acquisitions. “They’re both a necessity and a bit of an art.”
That’s because today’s affordable housing projects are shaped by complex layers of financing, evolving public policy and requirements to meet specialized needs, such as providing housing for the elderly or including a grocery store to serve a food desert.
Affordable housing partnerships come in many forms — through LIHTC public-private arrangements to collaborations with developers, investors, nonprofits, and local, state and federal agencies. As these various groups work to address the housing crisis, Krasnow shares three ways they can be better partners for each other.
Choose the right partners
On their own, affordable housing stakeholders generally don’t have the expertise to address every challenge that crops up, Krasnow says. Successful initiatives are powered by partners with complementary strengths, creating the backbone that propels projects forward.
Local governments set clear policy directives. Nonprofits represent the populations they serve. Developers build efficient, marketable projects. And organizations like Walker & Dunlop bring together investors and developers to fund affordable housing projects that carry out public policy objectives.
On the capital side, in particular, the sector currently faces an imbalance of more LIHTCs than demand from traditional investors, Krasnow says. For long-term success, the affordable housing sector must be ready to welcome new partners, including major developers with a track record of annually delivering thousands of units and non-traditional investors.
“We need to bring in non-traditional, economically motivated investors to our partnerships to make the program more sustainable,” he says.
Nurture the relationships
Partnerships thrive on trust and transparency, Krasnow says. And, in affordable housing, where projects can span years and involve numerous stakeholders, clarity and shared understanding are crucial.
“Maintaining that collegiality is very important—meeting your partners where they are,” he says. “To be a good partner, I can’t assume what the objectives of my partner are. I have to really understand where they’re coming from, be transparent about my own objectives, and communicate openly.”
This principle extends beyond the leadership team, Krasnow says. Effective partnerships ensure that information flows throughout all levels of each organization, from decision-makers to those implementing agreements on the ground.
“That understanding, of the evolution of a property, is really important in being able to respond to hiccups and hurdles, which are always going to happen in the affordable housing space. Partners need to be able to respond quickly, effectively, and not go back on promises,” Krasnow says.
Maximize each other's strengths
Amid shifting policy objectives and emerging community needs, successful affordable housing partnerships make the most of each partner’s expertise, Krasnow says. “The differentiation of specialization really promotes efficiency in the delivery of affordable housing because one party doesn’t have to figure it all out,” he says. “It’s also a scalable approach."
The strongest partnerships, however, take time to build, Krasnow says. The best develop naturally as each partner recognizes and values what the others bring, while staying united around the common goal of creating housing that serves the community — even if they are driven by different motivations.
Nonprofits and for-profits, for example, can work well together, despite those differences, Krasnow says. If everyone stays focused on the bigger picture, they can achieve both social impact and financial return.
“It’s OK to do well by doing good,” Krasnow says. “And the best examples of those situations are those that have organically grown up around partnerships where people are on the same track even if they are driven by varying objectives.”