“We as an association and we as an industry need to get in front of it,” warned Hugh Frater, chairman of Berkadia. “It’s also the right thing to do because of all the positive outcomes stable housing produces for communities and families. It’s good for all of us.”
It’s also a tremendous business opportunity said Daryl Carter, CEO of Avanath Capital Management. “It’s the biggest source of demand if we can figure out how to deliver it. Our affordable portfolio is 98 percent occupied at maximum rents and is delivering double-digit returns to our investors.
Larry Curtis, managing partner of WinnCompanies, noted that “even if land is handed out free and all the regulatory burdens were removed, the cost to build still couldn’t be supported by the rents. To create workforce housing requires some element of subsidy.”
Curtis’s firm leverages existing subsidy programs, from historic preservation to brownfield redevelopment, to create mixed-income developments.
Outside of subsidies, preservation is a critical strategy in meeting the nation’s affordable housing needs. Fully 50 percent of the units in this country are more than 30 years old.
Frater said there is a lot of room within existing programs to promote preservation and predicted that Fannie Mae and Freddie Mac will focus on doing more targeted affordable, more in smaller markets and more in preservation.
Another challenge is the fact that 70 percent of the units that are affordable are in properties with less than nine units.
“Even though it’s not our core business, we are going to have to find ways to address that in our policy discussion,” said Frater.
The good news, said Carter, is that HUD Secretary Julian Castro is very open to hearing the industry's ideas for fixes to existing programs that would make it easier for us to serve this market.