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Communities across the United States continue to the bear the brunt of the affordable housing crisis. Despite the sustained work and commitment of the affordable housing industry, the divide between the need for affordable housing and the resources available to address it is growing. Without increased innovation and action from the public sector, investors, lenders, and the development industry, this gap will persist in the decade ahead.

At Affordable Housing Finance (AHF) Live 2019, KeyBank Real Estate Capital executives joined colleagues from around the country to discuss the challenges and opportunities the affordable housing industry is facing today. The key takeaway from the “State of the Industry” panel was that bold answers are needed to provide homes for those most vulnerable in our communities.1

Key Learning Points:

  • Innovative solutions are necessary to make a significant dent in the affordable housing shortage.
  • The National Low Income Housing Coalition estimates the housing gap is more than 7 million affordable and available rental homes.
  • Political factors such as a deep partisan divide and the impact of the corporate tax rate cut on Low-Income Housing Tax Credits have impeded the affordable housing industry.
  • Rising construction labor and material costs have made affordable housing projects more difficult to finance.
  • Experts suggest public and private sector solutions, such as increasing modular construction use in development and encouraging privately subsidized workforce housing programs.
  • Policymakers must ease zoning and building code regulations to enable affordable housing development.

The Affordable Housing Industry Environment Today

The National Low Income Housing Coalition notes that the United States has a shortage of 7 million rental homes that are both affordable and available to extremely low-income renters. That is, only 37 affordable rental homes are available for every 100 extremely low-income renter households.2 While more than 100,000 affordable housing units have been added each year over the past decade, the supply is still not nearly meeting the demand. Both macroeconomic and industry-specific forces are driving the supply crunch.

The Political Landscape Surrounding Affordable Housing

On the national front, affordable housing providers have had to navigate a deep partisan divide over the past few years. While both sides of the political aisle acknowledge the need for more housing supply, reaching bipartisan consensus about how to achieve it is difficult.

Another policy issue affecting affordable housing was the impact of the Tax Cuts and Jobs Act (TCJA) on the use of Low-Income Housing Tax Credits (LIHTCs). In reducing the corporate tax rate to 21 percent, the TCJA de-incentivized corporations—the largest LIHTC investors—to make equity investments in tax credits. Federal interest rate decreases also have made it more challenging to secure private investment for affordable housing.

On the local front, homeowners historically have had an outsized political voice that also creates obstacles to providing affordable housing. Many affordable housing development proposals have been met with “not in my backyard,” or NIMBY, opposition from local homeowners. However, the recent push for rent control legislation in urban markets has brought renters’ rights to the forefront. Housing industry executives are discussing ways to address rents and other housing concerns before they become matters of legislation.

Another systemic issue impacting affordable housing is that of equity. According to the Joint Center for Housing Studies at Harvard University, U.S. households are becoming much more racially and ethnically diverse, and at the same time, cost-burden rates for minority households were significantly higher than for white households whether they own or rent their housing.3 Because decisionmakers in the housing industry don’t reflect these demographic shifts, panelists said that they must be better stewards of investment dollars to improve racial equity in housing.

Rising Construction Costs and Constrictive Regulations Stymie Affordable Housing

The skilled labor shortage and increased raw materials costs have driven up the overall cost of construction, making it even more difficult for affordable housing development proposals to pencil out.4 Energy efficiency financing programs from the federal agencies, along with local sustainability and fire safety initiatives, have also made renovations more costly. Panelists spoke of the need to bring down costs by not over-improving during renovations and looking for cost efficiencies at every level. Building larger developments can also bring down per unit cost, but they may be more challenging in terms of obtaining approvals from local zoning boards.

The complexity of affordable housing projects, including coordinating the many sources of funding that are layered for each deal, causes the process to drag. Delays can result in significant cost increases between the due diligence process and the actual commitment of funds, preventing developers from meeting their pro forma projections.

The Call for Solutions from Every Sector

Panelists agreed that, while continual incremental change is important, larger-scale innovations are needed to significantly address the critical housing need. A wide range of solutions should be considered on both the practical and policy levels, including:

  • Modular construction to bring down development costs
  • Zoning changes to allow more housing density
  • Public-private financing programs aimed at creating workforce housing to reduce the crunch on middle-income renters
  • Programs that focus on the intersection of healthcare and housing, such as affordable seniors or veteran housing that can draw from a wide range of funding sources

Despite the challenges to delivering more affordable housing, AHF Live participants saw bright spots. One is that policymakers are focusing more attention on the issue. All of the Democratic candidates for U.S. president have discussed housing during their campaigns and, in June, the bipartisan Affordable Housing Credit Improvement Act of 2019 was proposed in Congress to strengthen the LIHTC program and create 1.9 million additional affordable units over the next decade.5

In addition, increased capital from private sources—including corporations, pension funds, and insurance investors—is flowing into the affordable housing sector. For example, in 2019 Apple committed $2.5 billion to address the housing availability and affordability crisis in California.6

Investing in Our Communities

Affordable housing developers, government entities at every level, corporate investors, and financial institutions all need to step up to combat the housing affordability crisis. As one of the nation’s leading multifamily finance originators, KeyBank brings deep industry expertise and actionable ideas to our clients. KeyBank Community Development Lending & Investment provides investment for affordable housing and community development projects in urban and rural communities across all 50 states.

To learn more, contact:

Robert L. Likes, National Director, KeyBank Community Development Lending & Investment



Affordable Housing Finance, “Bold Solutions Needed to Address the Affordability Crisis.” November 2019.


National Low Income Housing Coalition: “The Gap: A Shortage of Affordable Rental Homes.”


Joint Center for Housing Studies Harvard University, “Renter Demographics.”


Construction Dive, “2020 could see construction growth throttled by costs, labor and bearish owners,” December 2019.


Curbed, “New affordable housing bill aims to add 1.9M units nationwide.” June 2019.


Apple, “Apple commits $2.5 billion to combat housing crisis in California.” November 2019.