Bank of America: Affordable housing funding will grow tight in 2018

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Affordable housing remains a major concern going into 2018 as home prices rise and housing inventory decreases.

In order to assess the current state of affordable housing, and its direction next year, HousingWire brought in Bank of America Merrill Lynch Community Development Executive Maria Barry.

In the QA below, Barry explains the current state of affordable housing, what direction it could take next year, and some of its greatest barriers.

HousingWire: What is the current state of affordable housing? Why?

Barry: According to projections from Enterprise and the Joint Center for Housing Studies, more than one in four families who rent their homes – 11.4 million renter households in total – are “housing insecure,” meaning they pay more than half of their monthly income on housing. The number of housing insecure renters in the U.S. has increased by 30% over the past decade. Even if rent growth matches income growth, the number of housing insecure renters is expected to increase by about 1.3 million households over the next decade – an increase of over 10%.

In the past few years, lower interest rates and access to capital also contributed to a growth in affordable housing.

HW: Will affordable housing improve in 2018? If so, how? If not, why not?

Barry: There is a real concern that funding will become more difficult in the next year. The low-income housing tax credit will continue to help finance affordable housing, however, tax reform may reduce tax credit values.

In addition, other potential cuts in the U.S. Department of Housing and Urban Development budget could have an impact on housing production and services. We are monitoring the potential impact tax reform may have on the industry and will know more in the coming days and weeks.

HW: What will be the greatest barrier to affordable housing moving into next year?

Barry: Tax reform may negatively impact tax credit values, and there is continued uncertainty around how these gaps will be filled.

The industry will have to find new solutions to reduce costs, such as more efficient construction, while relying on limited state and local funding sources to subsidize costs and make projects feasible.

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