The dire need for affordable housing for low and moderate-income households is a national issue from coast to coast and includes rural, suburban, and urban locations. While moderately priced housing was in short supply for buyers and renters prior to 2020, the pandemic created deeper economic hardship and drove demand higher, especially for rental housing. A new migration trend also increased the need for affordable rentals in locations with rising populations and limited housing options, particularly in Sunbelt cities.
“Preserving and developing affordable housing requires a complex network of partnerships between experienced and talented individuals and organizations including nonprofit, for-profit, and public agencies,” says Will Eckstein, senior vice president of business development for Greystone’s Affordable Development Group. “Strategically, Greystone’s Affordable Development team has had success both preserving and developing housing, especially in rural areas. We’re now adapting to address the need for creating and preserving more affordable housing in urban and suburban areas as well.”
Over the past 15 years, Greystone has preserved and developed approximately 15,000 affordable housing units across 12 states. In 2021, Greystone Affordable Development was once again named the top 20 affordable housing developer in rural rental housing by the Council for Affordable and Rural Housing.
Building on more than a decade of experience
Greystone Affordable Development launched approximately 15 years ago with a single portfolio of assets to preserve in rural areas in North Carolina, South Carolina, and Georgia.
“Preservation in a rural location is vital due to limited new construction in those areas,” says Eckstein. “Access to quality housing is essential to the economic viability of the community.”
Greystone replicated their process of preserving and building affordable housing multiple times, often relying on tax-exempt bond financing and both 4% and 9% Low-Income Housing Tax Credits.
“The volume of affordable housing we developed is unique, especially in the rural space,” says Eckstein.
While Greystone Affordable Development will continue to lead affordable housing development efforts in rural areas, it has begun to use its expertise to address the issue in urban markets.
Expanding to meet needs in Greystone’s backyard
Years of low vacancy rates have increased rents at a faster rate than incomes, according to the “America’s Rental Housing 2020” report by the Joint Center for Housing Studies of Harvard University. The report revealed that nearly half (47.5%) of all renters – almost 21 million people - are paying more than 30% of their income on their housing. Approximately 25% of renters – 10.9 million – spent more than half of their income on housing in 2018.
“Every organization addressing affordable housing, whether they’re a nonprofit, a for-profit, or a government agency, is capacity constrained,” says Eckstein. “We are using our prior experiences and development successes to build a comprehensive platform for new construction opportunities in urban infill locations to help address this housing shortage.”
For the past two years, Greystone has taken a regional approach to expanding into more urban development in the Carolinas, Tennessee, and Virginia.
“We’ve focused, at least initially, on these markets, because we have the staff, and existing relationships with key local and regional stakeholders,” says Eckstein. “We’re working on building new communities in Charlotte, Durham, and Raleigh using funding from the North Carolina Housing Finance Agency and soft financing from city and county partners. One of our senior projects in Charlotte will reserve a portion of units for veterans, and we are getting project-based vouchers to support those units.”
In Greenville, South Carolina, Greystone is working with the Greenville Housing Fund to develop new affordable communities.
“The cost of land and other materials is the same for us as it is for conventional developers,” says Eckstein. “Therefore, to succeed, we have to secure additional funding sources to fill the funding gap because we charge less in rent to meet the affordability challenge.”
While Greystone leverages housing credits for some projects, it also develops some without credits, including naturally occurring affordable housing (NOAH).
“In a situation without available housing credits it can be a disadvantage in finding other sources to add to the capital stack,” says Eckstein. “But the advantage is that unrestricted projects are less bureaucratic, and the closing timeline can be shorter.”
“Making the transition from rural to urban locations has been relatively simple for Greystone because of the team’s familiarity with the financing elements and experience in developing public-private partnerships,” says Eckstein. The principles apply to most regions – Greystone Affordable Development has also completed transactions in more urban areas in the Northeast, such as in Newark, NJ.
“We just need to overlay zoning, land, and entitlement issues and go vertical in our developments,” he says.
An advantage to new construction versus the rehabilitation of existing buildings is the ability to maintain greater control over the development process.
“There are no existing residents in place to relocate to alternative or temporary housing, or construction issues related to upgrading and transitioning an older building to meet the needs of residents today which can be difficult and sometimes cost-prohibitive,” Eckstein says.
Managing complex financing for mutual benefit
Over the past decade, there’s been renewed interest in the affordable housing asset class, says Eckstein. Greystone faces competition from developers interested in acquiring and rehabilitating affordable rental communities and from developers who hope to acquire the buildings to convert them to market-rate housing.
“We’re also challenged by construction costs and supply chain constraints, so deals and timelines are stretched,” says Eckstein. “We pursue and secure different sources of capital to manage this. Each region, city, and municipality has different resources, so every development needs to be done on a case-by-case basis.”
“Greystone finds creative ways to orchestrate the financial structure needed for successful development of affordable housing in every location. One aspect that helps is the current political will to solve housing issues, particularly for workforce housing for low- and moderate-income working families. We’ve been doing development work for nonprofit organizations, for-profit companies, and housing authorities. As we expand, we will develop for our own book of business, but we will continue to provide turnkey development services for other partners and organizations,” Eckstein adds.
Greystone Affordable Development’s experience with innovative affordable housing preservation in rural areas provides the ballast to support the group’s expansion into the competitive arena of urban low-income, moderate-income and mixed-income housing development.