The biggest threat to affordable housing right now? Climbing interest rates.

Rising construction costs also pose problem

Aug.August 14, 2018 09:33 AM

(Credit: Raphaël Biscaldi via Unsplash and iStock)

Rising interest rates are putting a damper on efforts to build affordable housing across the U.S.
According to developers, rates offered by national lenders have steadily increased in the past two years. Bridge Housing, one of the largest affordable housing developers on the west coast, told the Wall Street Journal that rates for both short- and long-term debt have been on the incline.

“It makes the difference between feasibility and infeasibility,” Cynthia Parker, president and chief executive of Bridge Housing, told the Journal. “Developers have to pull things out of units, and it may take a bit longer because you have to assemble other funding sources. By the time you get those, you might have to rebid out the project and it might be more expensive.”

The number of multifamily housing bonds, which are commonly used to fund affordable housing projects, has also declined 29 percent year-over-year, according to data compiled by Thomas Reuters. The number of affordable housing units built in 2018 is expected to reach 97,000, according to Novogradac. That’s up from last year’s 91,434 units, but is a down from levels seen in 2015 and 2016. Over the next 10 years, the number of affordable housing units built is expected to drop by 230,000, due to the devaluation of low-income housing tax credits — a product of the new tax law.

Labor shortages and subsequent higher construction costs, along with tariffs on building materials, are also making affordable housing development more difficult. [WSJ] — Kathryn Brenzel

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