Leadership Perspective

The housing industry is about to learn a hard lesson about mixed signals.

I’ve been spending some time digesting the 900-page bill that’s been making headlines (oft-referred to by an alliterative title), and I noticed something that should have every real estate professional paying attention. The housing provisions are sending contradictory messages that will reshape how we work.

The bill keeps the Low Income Housing Tax Credit (LITHC) infrastructure in place, which provides incentives for new affordable apartment development. However, it removes $27 billion in federal rental assistance subsidies that actually help people to afford to live in these projects once they’re built.

Something doesn’t add up.

My fear is that we’re creating a system that encourages the building of affordable housing, while simultaneously removing the support that makes it accessible. It’s like building a bridge, then removing the on-ramps, or a treehouse, then removing the ladder.

I think what you’ll find is that those of us in the real estate investment space will be less inclined to work with nonprofit developers who depend on these vanishing revenue streams.

When someone approaches us with a proposition for a large apartment complex knowing their customers will lose critical subsidies, the math simply doesn’t work anymore.

This isn’t necessarily good or bad policy. There is legitimate debate about misuse of subsidies. But it’s definitely a change from how we’ve operated in the past, and it’s also the kind of shift that could be changed again, depending on what the next administration looks like.

So, how do you build affordable housing without the tools that make it affordable? I’m not sure if you can…but the next few years will be very telling.