What's At Stake For Affordable Housing In The November Elections
Most Americans' political energy may be focused on the presidential race in November, but for the affordable housing industry, the stakes go far beyond the White House.
Affordable housing advocates, developers and lenders have their eyes on a handful of key legislative changes aimed at boosting the production of affordable housing. They argue that no matter which party holds the presidency and Congress in 2021, the coronavirus has ushered in a desperate new era of the housing crisis — one that requires immediate legislative action.
"Prior to the pandemic, the country was short almost 10 million units of housing, and the pandemic has only exacerbated the crisis," said Robert Likes, who leads the national affordable housing platform at KeyBank. "Regardless of who wins the presidency, it's imperative to move now to preserve and create more affordable housing."
At the top of the list of policies, affordable housing developers want an expansion of the Low-Income Housing Tax Credit, or LIHTC, program. The program provides the largest component of the capital stack for most low-income housing developments in the country.
But the current program only creates or preserves around 100,000 housing units per year, which Likes said is nowhere near enough for the lowest-income renters, let alone the millions of renters who make between 60% and 80% of their area median income. Along with an expansion of the program itself, advocates want to ensure that critical affordable housing developments maintain financial feasibility.
While LIHTC provides 9% of equity on the lowest-income housing, for workforce housing projects, the amount of LIHTC equity floats between 3% and 4%. Establishing a 4% minimum for all LIHTC projects, Likes said, would mean lower debt service payments for much-needed workforce housing, providing for more affordable housing preservation and creation.
The Moving Forward Act, the infrastructure bill passed by the House of Representatives in early July, would enshrine an expansion of the low-income housing tax credit program, and the 4% minimum, as well as numerous other housing credit priorities.
The LIHTC program has strong bipartisan support; 40% of the Senate from both sides of the aisle and more than 100 representatives in the House recently signed on to a bipartisan letter urging the inclusion of certain housing credits in coronavirus relief efforts.
Other affordable housing policies are often more contentious in Washington: While the Moving Forward Act may be unlikely to pass because of partisan divides, Likes noted that opportunities still exist for the Housing Credit and especially for the 4% minimum rate. Whoever wins control of Congress and the presidency will have the task of leading the nation out of an economic recession and Likes said he believes housing must be a priority.
"You can't underestimate how important housing is," Likes said. "Housing stabilizes lives. It's only when you have adequate housing where everyone can live affordably, paying less than 30% of their income to housing, that you can start making real change on education, transportation and economic recovery."
The recession has dealt the affordable housing industry a double blow, not only making it harder than ever to develop low-income and workforce housing properties, but also drastically increasing the number of Americans who need them. While debt financing is very affordable at the moment, the largest impact has been on the LIHTC equity side, according to Likes.
"The majority of LIHTC investors are banks, many of whom are being much more cautious about investing in tax credit investments due to the fluid and unknown nature of the coronavirus recovery," he said.
In addition, the pandemic has negatively affected state and city budgets. As state and municipal funding slows or stops, gap funding becomes scarcer, directly impacting financial feasibility. These additional barriers slow down the pipeline of existing affordable housing developments and discourage new proposals, Likes said, just as tens of millions of Americans are out of work.
"Demand for housing is at an all-time high and will only continue to go up, as more people are going to need affordable housing," Likes said. "The gap between supply and demand is only going to increase."
Another part of the problem, Likes said, is a concern among investors that because low-income earners are those hit hardest by the coronavirus, affordable housing developments will have trouble collecting rent. Likes disputed this belief and said that affordable housing advocates have made an immense effort to work with low-income tenants impacted by the pandemic to find work, file for unemployment benefits and help them stay current on payments.
"The people in this industry care so much about their communities and their tenants, and they would do anything they can to help them," Likes said. "Affordable housing is a very high priority for KeyBank. We are committed to being part of the solution and our platform allows us to get deals done, continuing to provide debt and equity to affordable housing developments. I feel so lucky to be involved in a business that is driven by a mission to help people and have a positive impact."
This feature was produced in collaboration between the Bisnow Branded Content Studio and KeyBank. Bisnow news staff was not involved in the production of this content.