The affordable housing crisis and how banks can help

In January, the Harvard Joint Center for Housing Studies (JCHS) released “America’s Rental Housing 2020.” A shortage of affordable housing is one of the most pressing challenges we face today, but what are the causes? The JCHS report identifies the following factors:

• Apartment construction is at a 30-year high, with much of it concentrated in major metro areas.
• More households that traditionally owned homes — including higher income and older households — are choosing to rent today.
• Vacancies are at a 30-year low, with high-demand markets experiencing rates of 3-5% or less.
• Strong demand has driven a 27% cumulative increase in rents over the past seven years.
• In response, many older, traditionally affordable apartment communities have raised rents or been demolished to make way for newer properties.

In 2018, approximately 47% of renter households were considered “cost-burdened” (i.e., paying more than 30% of income for housing). Though low-income households remain disproportionately affected, the greatest increases occurred among middle- and high-income renters.

Community banks are in a wonderful position to help address this crisis by working with trusted partners through the federal Low Income Housing Tax Credit (LIHTC) program. Most affordable multifamily housing created today is financed via the LIHTC program, much of it through bank equity investments or debt financing. In return, banks receive attractive returns and CRA credit, along with the satisfaction of supporting a critical community need.

Centrant Community Capital is a time-tested, low-risk permanent mortgage lending consortium created in 1990 specifically to leverage the resources of the banking industry to finance the creation and preservation of quality affordable housing in a safe, profitable manner. Contact us today to learn more, and join nearly 100 member banks making a difference in affordable housing finance.

David Bennett
[email protected]
919-781-7979