Volatile construction and material costs since the start of the pandemic have upended real estate development. The affordable housing industry, in particular, has felt the pinch. With less equity than a market rate development and sundry funding sources in the project, fluctuations in the construction budget can make or break many affordable projects. The escalatory lumber market of 2021 may be the most prominent example of this; at the time, affordable housing industry leaders penned an op-ed articulating the devastating effect of this on the current and future development of affordable housing.
As a result, many affordable housing projects awarded low-income housing tax credits (LIHTC) between 2019 and 2021 have experienced significant delays as developers and owners sort out budgets. To help fill the gap and deliver more affordable housing units, many state housing finance agencies are stepping up. As part of the American Rescue Plan Act (ARPA) passed in March 2021, states were allocated over $195 billion dollars via the Coronavirus State and Local Fiscal Recovery Fund (SLFRF).
States are putting a portion of this money to use for much needed gap financing for affordable housing projects to ensure their construction and completion. The National Council of State Housing Agencies (NCSHA) released a survey shedding light on those states and the amount of money at play. NCSHA found that over 70% of the 44 states to respond to the survey will devote SLFRF funds to affordable housing. The survey also found that 55% of those dollars reserved for affordable housing will be used for housing credit gap financing.
States have already begun to allocate these funds. The Illinois Housing Development Authority (IHDA) recently awarded $75 million in federal funds to 19 LIHTC projects in development – that’s over 1,000 new units. The Michigan State Housing Development Authority (MSHDA) also announced a second round of additional funding for LIHTC projects; 16 already received gap financing earlier in the year.
HDJ is a leading national design firm providing architectural and engineering expertise to support the affordable housing industry throughout the United States. HDJ’s diverse portfolio includes successful outcomes with adaptive reuse renovation, acquisition rehab, new construction, historic preservation and RAD.
Author: Josh Hahn