Investors Slowly Returning to LIHTC Market
Although affordable rental housing is feeling the pressure of a slowly recovering economy, “affordable housing, which is primarily driven by the low-income housing tax credit (LIHTC) program, is rebounding,” says Robert Greer, president of Marlton, N.J.-based Michaels Development Company. “Investors are slowly coming back into the market, and deals are getting done, which is good news. But the bad news is that given the depth of the current recession, more people than ever need affordable housing, and the demand far outstrips the supply,” he adds.
Looking at all multifamily rentals, including fair market, new job creation amid a slowly recovering economy is creating increased demand by new renters seeking to move into apartment. However, the lack of credit needed to finance the development of apartments is already causing rents to increase and is likely to lead to a shortage of available apartments in the next few years, predicts David Crowe, chief economist, National Association of Home Builders (NAHB).
“Although we are forecasting construction of 133,000 new multifamily residences in 2011,” says Crowe, “that is far short of the 250,000 to 300,000 units that would be required to keep supply and demand in balance. In addition, we have yet to make up for the insufficient number of new apartments that should have been built over the last two years. The capital needed to finance that construction is just not available to apartment developers.”
Private development firms bore the brunt of the constrained supply of capital. Jay Jacobson, national partner for acquisition and investment, at Boca Raton, Fla.-based Wood Partners, says: “The market is telling firms to build and acquire, but capital is still extremely difficult to find.”