New Developments, Year in Review, Year Ahead
By Thom Amdur
5 min read
2017 has been a year to remember for community development and affordable housing professionals. Sadly, our affordable housing crisis continues unabated and, due to a number of external factors, may likely become more acute in the years to come. The supply of new affordable housing for low- and moderate-income renters has not kept up with demand and I fear the crisis will only be exacerbated by the spate of natural disasters that have devastated large swathes of California, Florida, Puerto Rico, Texas and the Virgin Islands.
Harvard University’s Joint Center for Housing Studies’ recently-released “America’s Rental Housing 2017” report observes a particularly sobering dynamic. “Part of the new normal emerging in the rental market is that nearly half of renter households are cost burdened. Addressing this affordability challenge thus requires not only the expansion of subsidies for the nation’s lowest-income households, but also the fostering of private development of moderately priced housing.”
However, awareness of our nation’s long simmering affordable housing crisis has finally broken through into the mainstream, where articles, op-eds and stories routinely appear in the media. Legislation aiming to expand the LIHTC has received remarkable and evergrowing bipartisan political support in the Congress. In this age of polarized politics, it is no small feat that HR 1661 could draw both Progressive Caucus leaders, like Keith Ellison (D-MN), and Tea-Party leader Mark Meadows (R-NC) as co-sponsors.
As we close out 2017 with Congress poised to pass a once-in-a-generation tax reform legislation, Herculean advocacy efforts by the affordable housing, historic preservation and community development industries successfully preserved the LIHTC, PABs, NMTC and the Historic Tax Credit in the Senate and conference packages, averting the worst-case scenario initial legislation passed by the House of Representatives. This is a notable victory and worth celebrating. However, when the dust eventually settles, I suspect we will feel this victory is somewhat Pyrrhic. Lower corporate tax rates, as well as alternations to the Historic Tax Credit in particular, will diminish the economic value of the LIHTC and Historic Credits at a time when more resources are needed for community development activities. Still, we live to fight another day and I hold out some hope that additional efforts can lead to legislative enhancements to the LIHTC, which may mitigate these effects as part of year-end tax extender legislation or a technical corrections package in the New Year.
What is clear to me is that we have a lot of work to do in 2018 and we cannot rest on our legislative victory. There will be many gaps to fill in project finances in the coming year and, as of now, fewer resources to fill them. The Federal Reserve, as predicted, once again raised its benchmark interest rates at its December meeting and, unless something dramatic happens in the economy, I assume we’ll be in a rising interest rate environment for the foreseeable future. Likewise, given the demand created by disaster recovery and the direction in which our trade policy is progressing, we can expect labor and material costs for things, like lumber, at multifamily properties to continue to rise. Furthermore, given the impact tax reform will have on growing the federal deficit, it is not too big a leap to predict increased downward pressure on federal discretionary appropriations for critical gap filling resources, such as HOME, CDBG and the National Affordable Housing Trust Fund.
At the federal level, we will need to be vigilant and step up our efforts in the coming year to defend federal appropriations for housing, as well as pursue enhancements to the LIHTC to bring it back to its current parity and hopefully expand it. Efforts to educate and create more champions for affordable housing must continue, especially if an expected wave of congressional retirements continues.
Likewise, more local leadership will be necessary in most jurisdictions. This should include efforts to expand local housing trust funds and state credits, as well as more ambitious efforts to address structural barriers to affordable housing, like as-of-right zoning.
I anticipate that 2018 may be a watershed year for innovative new approaches to building technology and financial innovation, which may mitigate some of these dynamics. At a recent presentation by faculty at MIT’s Real Estate Innovation Lab, I was encouraged to learn of more than 50 start-ups, particularly in the modular construction space, that are attempting to rethink and disrupt the traditional methods of design and construction across the residential real estate sector. I am also aware of several efforts underway to create new financial products to assist in the preservation and construction of workforce housing which we expect to see in action in 2018.
To succeed in the long-term, we must make sure that in 2018 we build on our successes and continue to mobilize so that #affordablehousing has the same political and social impact that #fakenews, #charlottesville or #metoo had in 2017.
