Housing Developers Fear Funding Is Drying Up For Affordable Projects

While states like Massachusetts are pushing for more affordable housing development, developers say a drying up of critical federal funding sources could make it hard to move projects forward. 

Earlier this month, the federal government paused at least $60M in funding intended for affordable housing development across the country. Last week, The Associated Press reported that the Trump administration plans to eliminate the Department of Housing and Urban Development's $1B Green and Resilient Retrofit Program that has been critical to preserving affordable housing.

The administration also reportedly plans to slash 50% of HUD's workforce, which experts worry will lead to reduced production of low-income housing.

Several developers said Thursday at Bisnow's Boston Affordable Housing Conference that the federal cuts will make it harder to advance affordable housing projects in Massachusetts, despite Gov. Maura Healey's efforts. 

"The barrier to entry in this market is crazy, and this is a time when we have to figure out how to open our arms, because the federal government isn't coming to help and the state is helping all it can," MassHousing CEO Chrystal Kornegay said at the event, held at the Revere Hotel Boston Common. 

Developers said they worried that the Low-Income Housing Tax Credit program, which has funded more than 3.5 million units since its creation in 1986, will no longer be a reliable funding source. 

"LIHTC really should not be considered as a viable option for any type of transaction you're looking to do in the next three to four years," said Nick Boehm, vice president at Related Beal's affordable housing arm. "It's so uncertain about what deals will be funded, even if you have an award."

MassHousing's Kornegay, whose organization is leading a fund to help advance stalled developments as part of Massachusetts' $5.2B Affordable Homes Act, said that without federal funding, it will be almost impossible to get units built. She said that the state has seen some deals where affordable units cost between $800K and $900K to build.

And she said the federal government now doesn't see low-income housing as its priority. 

"No matter what we think, the people who are making decisions about money think of them as 'those people,'" Kornegay said of low-income tenants. "You've got to figure out together how we make this less expensive, because we can't afford it, and so there are going to be less deals."

Massachusetts Housing Investment Corp. CEO Moddie Turay said the administration is targeting any programs that reference diversity, and that puts affordable housing at risk. 

"It almost feels to me like it's not business as usual," Turay said. "I feel like there has to be a modern-day Underground Railroad for capital to projects to sustain us." 

In Boston alone, there have been thousands of units proposed and approved, but many of them haven't been able to move forward — even before the federal cuts — due to high costs and other macroeconomic constraints.

Boston Communities principal Phil Cohen said the affordable housing industry is seeing a backlog of approved projects that can't get the necessary funding. 

"We have been in an affordable housing traffic jam," Cohen said. "We don't have a ton of more subsidies, and half of us don't want to sit on the sidelines for the next decade in order to get things moving again."

Related Affordable secured a zero-interest $10M loan from the city of Boston to acquire the Fairlawn Estates in Mattapan. As part of the deal, Related plans to convert all 347 units from market-rate housing to permanently affordable units.

Boehm said the deal was made in part by local enthusiasm from housing, but other deals have been hard to refinance and receive equity on.

He said it has gotten to the point where developers are considering selling off existing properties to raise money to produce new housing. 

"I think that's something we're going to continue to see," he said. 

For other developers, moving projects forward in this uncertain environment is a risk they aren't willing to take. 

"What we are going to do is we're not going to advance our pipeline," said Dan Cruz Jr., vice president at Cruz Development Corp. "We've got a deal scheduled to close this year, and I can tell you, we won't replace that deal until we know more."

Developers working under Boston's and Cambridge's ambitious sustainability requirements worry the HUD cuts will create a funding gap for retrofits and renovations on older projects. 

"I think there can be real issues in the coming years with the preservation of existing affordable housing," Beacon Communities Development President Josh Cohen said.

"A lot of the aspirations we have to decarbonize the existing building stock are going to be very difficult to achieve in the coming years, and there are going to be existing affordable housing developments that need the renovations right away."