Affordable Housing Remains a Top Priority Across the U.S.

By David Leopold, Senior Vice President and Head of Affordable Housing at Berkadia

The affordable housing crisis in the United States has been persistent for decades. The obstacles that owners, developers, lenders, investors, and most importantly residents are experiencing are complex and growing. 2023 saw a record high of 439,394 units delivered, the highest annual total on record, and 2024 is forecast to surpass that number with 672,285 new units scheduled to come online by year-end. While these new deliveries are essential to combat the housing crisis – not enough of them are built to cater to lower-income demographics. Therefore, this influx of supply does not necessarily improve affordability across the country. So, this begs the question – what is being done to combat the affordable housing crisis?

Barriers to Affordability

Construction costs rank high on the list of barriers to increasing the supply of affordable housing. Though the economy has begun to look more stable in the past month, fewer active lending sources, high interest rates, high labor costs, and high materials costs continue to prevent developers from pursuing ground-up affordable developments. Additionally, restrictive zoning laws and costly permitting fees act as barriers to entry for many investors.

Grappling with Challenges

Housing affordability is top-of-mind for all parties tied to the commercial real estate (CRE) industry. The demand for affordable and workforce housing from residents, real estate professionals, policymakers, and investors has risen – and will likely continue to rise. Therefore, the emphasis that agency partners, such as Fannie Mae, Freddie Mac, and HUD, have placed on affordability in 2024 only further illustrates the growing importance of meeting this demand.

Just last month, the House of Representatives passed the Tax Relief for American Families and Workers Act of 2024. If passed by Congress, the bill could expand the Low-Income Housing Tax Credit (LIHTC) program, the largest federal subsidy program for construction of affordable housing. If expanded, incentives for investors would increase for the development of affordable housing, thus increasing the available supply. 

Embedding Purpose in Organizations’ Mission

While new legislation would work to effectively fight against the growing affordable housing crisis, there are other methods available that can slowly chip away at the issue. With the rise of ESG initiatives across industries, more companies are becoming increasingly aware of the impact they have on the communities they serve. Organizations across CRE are creating goals, steps to meet those goals and methods to hold themselves accountable, to ensure the impact they are having is positive.

Berkadia has long been a key player in the affordable housing space and is committed to providing a myriad of affordable housing solutions to its clients. A core part of Berkadia’s mission is making a meaningful contribution to its communities, particularly those in the Low-Income and Very Low-Income households. Just last year, Berkadia was ranked #1 GSE and HUD Affordable Lender Nationwide. More specifically, Berkadia was the #1 Fannie Mae Multifamily Affordable Housing Lender, the #1 HUD Multifamily Affordable Lender, and the #3 Freddie Mac Targeted Affordable Housing Lender (#1 Low-Income Housing Lender and #1 Very Low-Income Housing Lender).

These rankings are in part attributed to Berkadia’s prioritization of building a team of experts who have deep expertise in the affordable housing space. They are also due to Berkadia’s uniquely integrated business lines – Mortgage Banking, Investment Sales, and Tax Credit Syndication – which allow clients access to investment and financing strategies that maximize products and subsidies.

Fighting the Good Fight

While there is no magical answer to solving the affordable housing crisis facing our country, there are steps being taken by key players across CRE to combat the issue and increase housing affordability. As the economy begins to stabilize, investors will become more active across the CRE industry, including the affordable sector. While we have a way to go, increased investment activity, new legislation, and embedding purpose and impact driven initiatives into company missions will help to combat the affordable housing crisis.