The nation’s affordable housing developers continue to navigate higher interest rates, combined with rising construction costs, to get their deals to closing.
While headwinds persist, finance partners are stepping up to help advance these deals to create needed affordable housing.
“In soft economies, the demand for multifamily affordable housing only increases,” says Sarah Estilai, senior vice president at PNC Real Estate. “Regardless of the construction challenges and rising interest rates, affordable housing is a strong and stable investment. The industry will continue to respond, finding ways to get these deals done.”
Several of the nation’s top affordable housing lenders shared advice for borrowers during these uncertain economic times—from fostering strong communication and relationships to having patience.
“Talk to your lenders early and often. Bounce structuring ideas [off of them] and use your lenders as a resource to navigate the market,” says Lisa Gutierrez, senior vice president and director of business development, affordable housing, at U.S. Bank.
KeyBank Real Estate Capital’s Rob Likes, national manager of Community Development Lending & Investment, and Al Beaumariage, senior vice president and affordable housing program manager, add that communication with partners will be key for finding solutions.
“To try to close those gaps, affordable housing developers will need to collaborate and partner with city officials, banks, nonprofits, and other partners to help make their projects feasible,” they say. “They will also need to consider lifting their area median income percentages to adjust rent income. Reach out to your bank and partners early on in your acquisitions and developments so they can help put together creative solutions.”
Angela Kelcher, senior managing director of affordable housing at JLL Capital Markets, advises borrowers to make sure they have a lender that will work for them and their best interests.
“Lenders that focus on affordable housing and have significant levels of volume will have the best relationships with capital providers and a better pulse on the market,” she says. “It is important to know the latest programs and structures available to ensure the best financing options are obtained for each project.”
Other key pieces of advice:
- “We recommend that developers ensure there are adequate cushions in the budgets and timeliness to account for continued variability in market conditions.” —Maria Barry, national executive, community development banking, Bank of America
- “Rate-lock as soon as you can if your deal works and take interest rate risk off the table.” —Paul Weissman, senior managing director, Lument
- “Don’t try to predict where interest rates are going. Work with lenders that can close deals quickly and efficiently.” —Jeff Rodman, affordable housing program manager, M&T Bank.
- “Have patience, there are deals to be structured, but many will take time, creativity, and flexibility.” —Liz Diamond, managing director and head of affordable originations, Berkadia Affordable Housing