Affordable Housing Crisis Gets Industry Attention
Apartment experts see a huge opportunity to create and preserve affordable housing. As the U.S. finishes its long fight against the coronavirus, lawmakers and policy influencers finally seem to understand the scale of the problem and are proposing bold new solutions.
“For the first time that I can recall in 30 years of public policy work… we have a consensus that there is a crisis,” says Shekar Narasimhan, managing partner for Beekman Advisors, based in McLean, Vir. He moderated a panel at MBA’s Affordable Rental Housing Summit, a recent virtual event held by the Mortgage Bankers Association (MBA).
“There is going to be a huge opportunity for those of us who care about [affordable housing],” says Narasimhan. “Get into this business. Dive in and you’ll figure it out.”
Lawmakers Wake up to the Housing Crisis
From Congress to local governments, many leaders and lawmakers now recognize the growing shortage of affordable housing as a crisis that has been made worse by the coronavirus pandemic.
“We had an affordable housing crisis before. It has only been exacerbated,” says Narasimhan. “Renters have had more challenges during the pandemic than during the Great Financial Crisis.”
Congress is now considering a proposal that could potentially transform housing markets across the U.S. In March, the Biden Administration proposed its $2.25 trillion American Jobs Plan, including $213 billion to build or rehab more than two million units of affordable housing.
“That’s roughly four times the HUD budget,” says Marion Mollegen McFadden, senior vice president for Enterprise Community Partners, Inc., based in Washington, D.C.
The scope of the Jobs Plan may change as negotiation continue in Congress – early versions of the plan included $40 billion for public housing and a plan to increase by 50 percent the amount of low-income housing tax credits (LIHTCs) distributed by the government, among other things.
“A lot of priorities that we have been advocating for years [could] finally make it across the finish line,” says Emily Cadik, executive director of the Affordable Housing Tax Credit Coalition, based in Washington, D.C.
Fannie Mae Creates a New Program for Workforce Housing
Apartment developers don’t need to wait for Congress to act to find new opportunities to create or recapitalize affordable housing properties. Conventional apartment developers can also invest in affordable housing and be rewarded with low-interest, permanent financing from Fannie Mae’s new Sponsor-Initiated Affordability program.
“The need [for affordable housing] has forced us to view affordable housing in a more expanded way,” says Fannie Mae’s Angela Kelcher, senior director of multifamily affordable housing for Fannie Mae, based in Washington, D.C.
Fannie Mae offers pricing incentives for apartments that include a share of units priced to be affordable to people earning lower incomes, says Kelcher.
Borrowers don’t need to join an affordable housing program overseen by a state or federal agency to get this interest rate discount. They simply sign an agreement with Fannie Mae to recognize their “naturally occurring affordable housing.”.
Most affordable housing programs, like the LIHTC program, help households earning up to 60 percent of AMI. But as the housing crisis has deepened, more households are burdened by housing costs that take up more than a third or even half of their income, says Narasimhan.
Services Help Residents, Creating Stronger Apartment Communities
Fannie Mae is also offering interest rates up to 30 basis points lower than usual to apartment communities that provide much-needed services to residents.
“Turnover can be lower when you are focused on the health of your residents -- when you have services that are tailored to them,” says Kelcher.
For example, the National Affordable Housing Trust, based in Columbus, Ohio, hires service coordinators to arrange resident services at its affordable housing properties. Often local organizations are willing to provide these services at little or no cost. The salary of a full-time services coordinator – usually about $50,000 a year – can quickly pay for itself.
“It is good business to provide services,” says Lori Little, NHT’s CEO. “Those projects have performed economically better.”