The U.S. faces a huge shortage of affordable housing, which has been an issue for many years. Most recently, the New York Times reported that experts anticipate a “production cliff” to hit in about a year – meaning fewer affordable homes coming on the market at a time when there is already scarcity of this product. To discuss this issue further, Aaron Pechota with affordable housing developer NRP Group was recently interviewed and his insights are shared below in two parts; part one being published here and part two appearing in the June 24 Weekender edition.
When asked why there is continued decline in availability of rental housing options at an accessible price point, Aaron Pechota stated that it didn’t happen overnight but rather began during The Great Recession where production was put on hold for five or six years resulting in significant cutbacks to supply while demand simultaneously increased significantly without reaching equilibrium yet; particularly on the more affordable side due to lack of government subsidies both federally and locally needed for development projects like Low Income Housing Tax Credit (LIHTC).
Investors have also been cautious about becoming involved with such projects as capping revenue from rent tends not be worth as much from their perspective however returns are stable despite being lower than usual investments plus default rates nationally remain well below 1%. Despite recent turmoil within finance industry impacting market-rate developments adversely banks continue showing commitment towards regional level investment opportunities while local banks step up support too along with super-regional/national ones thus far no negative impact has been seen regarding affordability initiatives either way so far thankfully!
