Lenders Are Slowing Down Their Affordable Housing Financing In Another Hurdle For Sector
A lack of financing in the public and private sectors is already causing delays in affordable housing projects.
With decreased public financing and private financing harder to secure, delays on affordable housing projects have already begun, affordable housing lenders said on a Bisnow webinar Tuesday.
“The budget cuts in New York City, specifically, are really slowing things down and kind of creating a big question mark around how some of those projects are going to get funded and gonna get done and when,” Citi Community Capital’s Eastern Region Director Tricia Yarger said on the webinar.
In July, the city council approved a 40% cut to affordable housing funding for Fiscal Year 2021. The cuts are expected to affect 20,000 affordable units. Meanwhile, private funders are being more selective and credit committees are being increasingly fastidious, Yarger said.
"We’ve actually added another layer of approval in our process, so that slows things down a bit," she said. "New clients can be somewhat of a challenge, there is more due diligence being done."
The lack of public and private funding is beginning to affect affordable development projects, said Managing Director of Goldman Sachs’ Urban Investment Group Dan Alger, who also spoke on Tuesday's webinar.
“We’re already seeing projects get pushed back and delayed because of [a] lack of available subsidy,” he said. “Folks ... are going to have to be creative and figure out how to do more with less.”
With the dearth in widespread financing, the bigger affordable endeavors will be prioritized, Alger said.
“I do think we’re going to continue to see high-profile, important projects continue to get pushed forward, but they’re going to have hair on them, they’re going to have challenges,” he said.
Former New York City housing czar Alicia Glen, who launched an affordable housing development firm, MSquared, in June, also spoke on the webinar. Glen reiterated her earlier critiques of her former boss's decision to cut the city's capital budget but said that the private sector cannot let up on funding these projects.
“They need to push themselves and not use the climate and the budget as an excuse to pull back,” Glen said.
She called on institutions like City Community Capital and Goldman Sachs to continue funding affordable housing in the city. Without help from the private and public sectors, the city will walk back the strides it has made, she said.
“We’ve spent about 15 years building this extraordinary machine, and it’s incredibly important that it keeps cranking,” Glen said. “It’s very difficult to lose ground, particularly when we’re going into a transition to the next mayor.”
New York City Department of Housing and Preservation Commissioner Louise Carroll defended the city’s cuts on a Bisnow webinar about policy and affordable housing last week.
Yarger said while it will be trickier to secure funding, developers will have to be even more creative than usual in cobbling together different sources of funding.
“I think it is going to be really important ... [to] come up with alternative financing structures,” Yarger said. “So, for example for New York City or New York state, thinking about a private placement versus traditional resolution issuances ... Getting creative, opening up the dialogue: I think those are important ways to focus on to get more of these transactions through the pipeline.