Upward of 300 federal, state and local programs are layered within the capital stack of 27,000 fully affordable multifamily properties, according to a new Yardi Matrix study. In exchange for such funds, owners are legally bound to limit rents, as well as cater to certain demographics, including but not limited to low-income households, the elderly and the disabled.
Federal stipends are the most widely spread, with 11,221 communities benefitting from such subsidies, followed by state incentives (2,170 communities) and local contributions (583 communities). These allotments can take on many forms, including tax credits and deferrals, low-cost financing, grants, density bonuses and direct renter subsidies.
At a federal level, tax-exempt private activity bonds fund the largest number of properties, amounting to 3,288 communities. This type of financing is often packaged with 4 percent LIHTC, most commonly used in the preservation and rehabilitation of affordable housing assets.
Other notable federal programs aim to assist public housing authorities through annual HUD grants. Some 1,850 properties leveraged such funding. HUD also issues Section 8 vouchers, which are subsequently distributed to qualified PHA residents, covering part of their rents.
Going by state, California leads the way with 22 programs layered in the capital stack of 974 properties. Some of the incentives aim to boost affordable development, such as the Density Bonus incentive, which allows companies to bypass local zoning limits, as well as the Multifamily Housing Program, which provides construction debt for eligible borrowers.
Florida ranks second, comprising five programs used in 239 properties. Strides are likewise being made in the construction—but also the rehabilitation—of affordable housing with the State Apartment Incentive Loan initiative. Through SAIL, companies may access low-interest debt covering up to 25 percent of development costs.
Though operating on a smaller scale, county and local programs nonetheless find themselves in the capital stack of affordable properties. In Los Angeles, companies can receive loans and tax incentives through Proposition HHH Permanent Supportive Housing, while Seattle’s Housing Division issues funds for the construction, acquisition or renovation of affordable communities.
The future of affordable housing subsidies
With a new tax and budget bill making its way through the chambers of Congress, certain policy shifts are expected at the federal level. While the bill aims to increase affordable housing funds through extra 9 percent LIHTC allocations and ease the requirements for tax-exempt bonds, it also proposes substantial cuts to direct renter subsidies and slashes to other debt programs.
As negotiations are ongoing, the effects and outcome of the bill are yet to be clear. However, regardless of the result, affordable housing developers continue facing issues attributed to the extensive paperwork required for multiple compliance regulations, which extend timelines and add costs to projects that may already be difficult to pencil out.
Read the full Yardi Matrix affordable housing report.
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