This year’s adversity means opportunity for affordable housing in 2021
This was a year like no other for every business, and the acquisition and preservation of affordable housing was no exception. Between keeping old deals alive, initiating new ones, and finding ways to help residents pay the rent, we at The NHP Foundation (NHPF) have leveraged the lessons learned during this tumultuous year to make some predictions for the industry in 2021.
Here’s what those in the acquisition, development, resident services and asset management trenches at NHPF suggest we should look for in 2021:
Development: Another suburban family morning? Although cobbling together development deals will remain challenging if government agencies impose more and more requirements, those challenges may push residential and commercial development out to the suburbs in 2021. The COVID-19 vaccine is great news, but the country likely won’t return to “normal” until well into 2021, meaning that many developers may take a cue from city dwellers and explore their options in the suburbs. Property values in the suburbs will increase temporarily and rents in urban areas will decrease. Zoning officials may see fit to make some changes to enable easier permitting in suburban areas. It may be temporary, but we are keeping our eye on this potential trend.
Acquisition: You gotta have faith. NHPF has fostered a strong affiliate program by partnering with faith-based organizations to produce affordable housing, but 2021 could prove to be a breakout year for such development. The pandemic affected many houses of worship, resulting in a decline in attendance and tithing as many parishioners were faced with unemployment and instability. It is easy to envision churches and other places of worship stepping up to help solve the housing crisis in an even more determined way by increasing supply for their communities. Houses of worship increasingly find themselves with excess property that beautifully converts to affordable housing. It should be noted that throughout the pandemic, many parochial schools managed to keep in-place learning ongoing, making them a desirable choice for many families. This desirability would increase with the addition of onsite affordable housing.
Design: “Our house is a very, very, very fine house.” If this year has taught us anything, it is the importance of a home that works hard for its inhabitants. This will manifest itself in design changes, including health-based additions such as an increased emphasis on fresh or outside ventilation, as well as a reduction in touchable surfaces. Considerations for work-from-home amenities may include more space for a home office or desk nook, and the comeback of phone lines in apartments. Child care centers could become a must-have component of affordable housing, as opposed to a nice-to-have amenity. COVID-19 has brought to light the technology gaps in low-income communities, including access to computers and high-speed internet. Look for state agencies to require quality internet access in affordable housing developments or to provide extra points in their qualified allocation plans for a technology component in future developments.
Tax credits: We are not throwing away our shot. Crazy competition will continue for 9 percent Low Income Housing Tax Credit (LIHTC) allocations, and volume cap for 4 percent tax credits will become increasingly scarce. The risk of awards and the high cost of pursuing them will become untenable for some less well-capitalized organizations. Tax credit pricing may remain stagnant through the economic recovery, because businesses claiming losses during 2020 will not pay high taxes in 2021. Once businesses are profitable again, pricing of tax credits will increase. We are thrilled to see a 4 percent minimum LIHTC rate included in the 2020 year-end legislation, which will make thousands more affordable housing developments possible beginning in 2021.
Resident services: A lesson lived is a lesson learned. Although 2020 was fraught with challenges and difficulties, those in resident services programs have learned valuable lessons to carry into 2021. We’ve implemented important policies regarding updating residents’ contact information and emergency contact information, as well as new messaging and communication platforms (i.e., blast text-messaging) that will transition into the new year and beyond. We also predict that 2021 will bring about widespread implementation of rent reporting services to assist residents in building credit, thereby increasing social mobility. Resident services providers also will work to decrease the digital divide by offering broadband internet service to residents in affordable housing.
As we prepare for the coming year and whatever it may bring, we recall what Benjamin Franklin once said: “Out of adversity comes opportunity.”
Richard F. Burns is president, CEO and trustee of the nonprofit affordable housing organization, The NHP Foundation, with offices in New York, Washington and Chicago. He has more than 40 years of experience as a real estate investment professional.
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