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Affordable housing crisis can get worse, both in the sales and rental markets. There is simply not enough supply, especially in the apartment market, which developers say is too expensive to build high-quality low-income housing.
They cite rising costs of land, materials and labor, as well as increasingly stringent zoning regulations. The so-called Nimbyism (the acronym for “not in my backyard”) is also on the rise, with residents fighting affordable housing in their neighborhoods, and home values have soared over the past five years.
“I think it's a tough time. All real estate is challenged by higher interest rates and higher construction costs, by the way, the requirements of the construction sector and all the friction that makes real estate difficult.”
“But there is also a lot of support, and our work is to weave the path between complexity, challenges and opportunities and find the path that passes through,” he said.
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Developers like Ross have just received more support from the recently passed Tax and Expenditure Act. It expands the low-income housing tax credit by increasing available credit and reducing financing requirements. Specifically, the legislation permanently increased the credit allocation of 9% by 12%. Developers sell these points to investors to help fund their projects.
“This is a big driving force for building more affordable housing. In fact, the United States has a shortage of about 10 million units. That won't solve the entire 10 million unit problem, but it will be a big help,” Ross said.
Affordable housing advocates appreciate the passage of the bill, saying LIHTC remains the most effective tool in the United States to build and preserve affordable rental housing.
“This legislation has passed the key elements of the Affordable Housing Credit Improvement Act to increase the availability of rental housing in urban, rural and tribal communities,” said David Dworkin, president and CEO of the National Housing Conference.
Dworkin pointed to the expansion of credit, and also pointed to another tax credit for developers, which would qualify for benefits.
“Between 2026 and 2035, these changes are expected to co-produce or retain more than one million additional affordable rental homes,” Dworkin said.
Jonathan Rose Company hybrid revenue development project at Harlem, Sendero Verde. Developed with L+M and Acacia Network.
Courtesy: Dreaming in the air
There does seem to be strong investor demand in affordable spaces when it comes to new developments and renovations. Jonathan Rose Company recently concluded a $660 million impact fund “dedicated to acquiring, preserving and enhancing affordable and mixed income multifamily housing in high-demand urban markets in the U.S..”
Ross said he saw increased interest in housing-related investments in home offices and foundations.
However, there is a new wrench in this work. The Trump administration has proposed to cut $27 billion in federal rental assistance programs for low-income tenants. This has reportedly caused some lenders to back off.
The cuts need to be approved by Congress, and Ross noted that the house has long had bipartisan support for affordable housing.
The Senate Banking, Housing and Urban Affairs Committee announced Friday that it is advancing new bipartisan legislation to expand housing supply and address affordability. The package includes removing regulatory barriers to housing development and providing funding for communities that are building more housing for water and sewer infrastructure. However, the legislation aims more to make selling homes more affordable and less help build more low-income rental housing.
Even so, new rental tax incentives cannot help agility, which seems to rise along with home values. Even a mixed-use building designated as a small portion of an affordable unit sees neighbors worrying that any such housing will harm current and future home values.
Even before the expansion, LIHTC incentivized developers for more mixed income buildings, with some units designated for affordable housing, while others at higher prices. This type of higher quality, better design, greener development benefits owners in the long run by reducing operational and capital costs, Ross said.
“One of the reasons the community is against affordable housing is because a lot of affordable housing – built in the 60s, 70s and early 80s – was cheap and ugly, and I didn't want it to be near me either,” Ross said. “We're very committed to building beautiful buildings.”