- Housing developers have said it’s too expensive to put up quality, low-income apartments.
- They cite rising costs for land, materials and labor, a well as increasingly restrictive zoning regulations. So-called NIMBYism (an acronym for “not in my backyard”), is also on the rise.
- Jonathan Rose, founder and CEO of the Jonathan Rose Companies, said there’s support for affordable housing and relief may be on the way.
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The shortage of affordable housing, whether in the rental or for-sale market, is only becoming worse. Particularly in the apartment sector, where developers have stated that it is simply too costly to provide high-quality, affordable housing, there is just not enough supply.
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They point to growing labor, material, and land prices as well as more stringent zoning laws. In communities where property values have skyrocketed over the last five years, locals are battling for affordable housing, a phenomenon known as “NIMBYism” (an acronym for “not in my backyard”).
“I believe that this is a difficult moment. Higher interest rates, rising construction costs, building department regulations, and other obstacles are all making real estate challenging, according to Jonathan Rose, founder and CEO of the Jonathan Rose Companies, a company that specializes in real estate planning, development, and investment.
“But there’s also a lot of support, and our job is to weave the pathway in between the complexities, the challenges and the opportunities and find the pathway through,” he stated.
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The recently passed tax and spending plan just gave developers like Rose even more help. It increased the number of possible credits and reduced the financing criteria for the Low-Income Housing Tax Credit. The law specifically permanently raised the 9% credit allotment to states by 12%. To help fund their projects, developers offer these credits to investors.
“It significantly advances the development of more reasonably priced dwellings. In actuality, there is a roughly 10 million unit shortfall in the US. “This will be a big help, but it won’t solve the whole 10 million unit problem,” Rose said, adding that he sees a rising opportunity for investors in the field.
The LIHTC is still the most successful mechanism in the country for creating and maintaining affordable rental housing, according to advocates for affordable housing, who praised the bill’s passing.
According to a press release from the National Housing Conference, “This legislation delivers a significant expansion of the credit by incorporating key elements of the Affordable Housing Credit Improvement Act, aimed at boosting the supply of rental homes across urban, rural, and tribal communities,” President and CEO David Dworkin said.
Dworkin mentioned the credit’s growth as well as modifications to another developer tax credit that would facilitate eligibility for the benefit.
“Together, these changes are expected to produce or preserve more than 1 million additional affordable rental homes between 2026 and 2035,” Dworkin stated.
The cheap market does seem to have a high level of investor demand, both for new construction and remodeling. “Dedicated to acquiring, preserving, and enhancing affordable and mixed-income multifamily housing in high-demand urban markets across the United States,” a press release states that the Jonathan Rose Company recently closed a $660 million impact fund.
Family offices and foundations are showing more interest in housing-related investments, according to Rose.
However, a new wrench is being developed. A $27 billion decrease to government rental assistance programs for low-income tenants has been proposed by the Trump administration. Some lenders are apparently already pulling back as a result of that.
Rose points out that the House has always had bipartisan support for providing affordable housing, and that Congress would need to approve the cut.
In light of this, the Senate Banking, Housing, and Urban Affairs Committee declared on Friday that it is advancing new bipartisan legislation to increase the supply of housing and address affordability. Funds for localities developing more housing that can be utilized for water and sewer infrastructure are also included in the package, along with the removal of regulatory hurdles to housing construction. However, the legislation is less about assisting in the construction of more low-income rental housing and more about lowering the cost of for-sale homes.
Furthermore, NIMBYism, which seems to be increasing in tandem with home values, will not be helped by the new tax incentives for rentals. Neighbors who are worried that any such housing will lower the value of existing and future homes are opposing even mixed-use structures, which contain a modest percentage of units designated as affordable.
The LIHTC offered developers incentives to create more mixed-income buildings even before it was expanded, with some units set aside for affordable housing and others at higher price ranges. According to Rose, owners eventually gain from these kinds of better-designed, higher-quality, greener developments since they reduce operational and capital expenses.
“One of the reasons why communities oppose affordable housing is because a lot of affordable housing it was built in the ’60s, ’70s and early ’80s was cheap and ugly, and I wouldn’t want it in my neighborhood either,” Rose said. “We’re deeply committed to creating beautiful buildings.”
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