The affordable housing crisis in the U.S. continued to deepen in 2020 even though there has been tremendous efforts made to change that. Currently, there is a national shortage of more than 7 million affordable homes for the country’s more than 11 million extremely low-income families, according to the National Low-Income Housing Coalition.
Providing access to safe and affordable housing is essential to reducing economic inequalities, yet no state has adequate affordable housing supply for low-income renters, per the NLIHC report.
The simplest solution to America’s housing crisis is delivering more supply. However, beyond obstacles—such as rising land costs, labor shortages and burdensome regulations—that make affordable housing development difficult, there are other, more fundamental issues standing in the way of a more affordable housing market. A major issue is that most of the available homes are in places where there are no jobs that provide opportunities for growth and stability. Instead, workplaces are located in a few areas where housing has become highly unaffordable. Additionally, the available supply doesn’t fit the needs of today’s generation.
Another major challenge for developers is putting together the funding stack and finalizing the closing. The year-end bill submitted last month and passed by congress sets the Low-Income Housing Tax Credit floor at 4 percent, which is set to help developers assemble the funding stacks more easily. These changes would allow for up to 25 percent additional capital to the stacks and help fund budget gaps on current deals, which would allow for larger deals, effectively increasing unit counts, and ultimately increasing the amount of capital that can be allocated by municipalities to projects.
President Joe Biden’s campaign platform called for spending $640 billion on housing programs in the next few years, including establishing a $100 billion Affordable Housing Fund to construct and upgrade affordable housing, increasing funding for the Housing Trust Fund Program by $20 billion and expanding the Low-Income Housing Tax Credit Program by $10 billion. It is still too soon to tell if and how all these plans will materialize but the affordable housing market remain eyes opened.