The White House announced their Housing Supply Action Plan to address the rising housing costs by increasing the supply of housing in communities across the country over the next five years. The plan aims to create more housing of all asset types through new construction and preservation and singles out the importance of affordable housing particularly in a time of high interest rates and inflation.
The Covid-19 pandemic, and now current economic environment, has uniquely impacted renters. It has caused renter demand and rental rates to increase at the fastest pace recorded in decades – underscoring the importance and urgency of increasing the stock of affordable rental housing. The Housing Supply Action Plan does just that.
The plan seeks to finance more than 800,000 affordable rental units by expanding and strengthening the Low-Income Housing Tax Credit, similar language was included in the Build Back Better Plan which included a variety of actions aimed to rebuild the lower and middle class with investments in housing, infrastructure and labor markets. This important piece of proposed legislation would significantly increase resources that will ultimately expand the number of affordable units available.
The Housing Supply Action Plan includes the following proposals related to the Housing Credit:
- Lowering the bond-financing threshold from 50 percent to 25 percent for five years, from 2022 to 2026
- Increasing the annual Housing Credit allocation at a rate of 10 percent per year plus inflation from 2022 to 2024, which amounts to a roughly 41 percent increase over current levels in 2024, followed by inflation adjustments after 2025
- Providing a permanent 50 percent basis boost for properties serving extremely low-income (ELI) households, along with an 8 percent set-aside for properties taking advantage of the ELI basis boost, as well as a limitation on the amount of allocation and volume cap that can be used for properties receiving the ELI boost
- Providing a permanent 30 percent basis boost for properties in Indian areas.
There’s immense opportunity with the proposed Housing Supply Action Plan and with it comes several challenges that we, as an industry, will work together to navigate. With additional credits entering the market we need to properly manage and place them in a way that balances investor returns with investment dollars to developers. With the increased investment it’s imperative that the market pricing and returns remain steady.
Safe, quality, affordable housing helps reduce poverty and increase economic mobility. The growing demand of affordable rental units and inadequate supply is garnering more interest and investment in the affordable housing sector. Not only because of the fundamental importance of it, but also because it lines up with investors’ ESG (environmental, social, governance) goals.
I’ve been working in affordable housing for 30 years and I can honestly say that there has never been a more exciting or more important time to invest in affordable housing. The massive demand nationwide requires new opportunities for innovative financing and new ways to fulfill affordable housing needs. I am thrilled about the steps we are making toward bridging the gap in affordable rental housing supply and demand, but am well aware of the additional work that we need to do to ensure that everyone has access to quality housing.