Some of the nation’s largest affordable housing developers are predicting a significant drop in the country’s affordable housing supply starting in 2025. Rising interest rates and higher costs related to inflation have created financing gaps that make completing affordable housing projects on time difficult, which has resulted in lengthy delays. In addition, new loan volume has dropped sharply, according to HUD. Between January and May of this year, HUD received applications totaling $12 billion for FHA loans for multifamily projects. The figure is about half the volume of the same time period in 2022 and less than one-third of the volume during the same period in 2021. Firms like the development group NRP Group foresee an affordable housing shortage in 2025 or 2026 that could turn out to be as bad as the market in 2021, when pandemic shifts led to skyrocketing rental prices.
The possibility of a housing shortage comes on the heels of a record year for multifamily deliveries in 2022. Around 530,000 apartment units were started last year in the U.S., the highest number in 36 years, according to Census Bureau data, though it’s unclear how many of those units are designated as affordable. Still, there is a dire need for more affordable housing supply. Across the country, there is a shortage of 7.3 million rental homes that are affordable and available to rental households with extremely low incomes, according to the National Low-Income Housing Coalition. Making matters worse, a recent analysis from Moody’s Analytics found that the U.S. lost 8 percent of the total stock of affordable housing units for extremely low-income renters during the pandemic. There’s no easy solution to the lack of affordable housing, and though there have been recent moves from President Biden’s administration to address the problem, it will likely take a concerted effort by lawmakers and the industry to start moving the needle.
Courtesy of Holly Dutton, Propmodo