Managing Five Of The Top Risks For Affordable Housing Developers

Richard Burns, CEO of The NHP Foundation, not-for-profit provider of affordable housing.

Full article here

When developers are worried about affordable housing we should pay attention. The harder it is for developers to build the less likely they will invest in affordable housing - we all lose. Check out these top 5 risks for affordable housing developers:

1. Evictions could continue to be difficult as non-payment of rent persists. A recent survey from MyEListing.com found that 15% of renters in the U.S. were behind on their rent payments in the fall of 2022.

2. A divided Congress could make support of affordable housing legislation difficult. With a new session of Congress comes the reintroduction of key tax incentive legislation and the need for bipartisan support, yet this support recently came from Representatives Suzan DelBene (Washington) and Brad Wenstrup (Ohio) in regard to the Low-Income Housing Tax Credit.

3. The number of people experiencing homelessness and in need of permanent supportive housing (PSH) will grow. According to 2022 HUD data on homelessness, “While the overall number of people experiencing homelessness in 2022 increased slightly compared with 2020, it rose significantly for individuals, people with disabilities who experience long-term homelessness, and people in unsheltered settings.”

4. Inflation’s impact on operating expenses could be difficult to cover with rent increases. “The reality is that rents can only rise as incomes rise,” said Jay Parsons (paywall), chief economist at the real estate data firm RealPage He continued, “If people can’t afford it, you can’t lease it.”

5. Rising costs could create larger gaps and the need for greater amounts of soft debt. Creation and preservation of quality affordable housing is not unlike producing a major motion picture—with many entities providing funding to get to the finish line—and no strategy should be overlooked to obtain what’s necessary to cover the costs.