The conversation around affordable housing has never been as crucial as it is today. According to the National Low Income Housing Coalition, 6.8 million more affordable housing units are needed for extremely low-income families with more than 580,000 families experiencing homelessness on any given night. In fact, 70% of all extremely low-income families pay more than half of its income in rent. This issue is at its tipping point and will continue to strain the economy and those who are negatively affected by it for years to come.
The Problem
The biggest problem we face in this country as it relates to affordable housing is the lack of inventory — even those who qualify for government assistance suffer from a lack of adequate housing, creating a ripple effect through the industry. This leaves people in unforeseen circumstances, like over-densification, where many people are living in one space or in unstable living conditions, like substandard housing or even cars, motorhomes or tents, just to get through the night.
The Response
Recent federal legislation, including the last two COVID-19 Economic Relief plans, earmarked funds for affordable housing in the form of federal tax credits, but it’s ultimately up to the state to determine how to allocate the finite tax credits issued. New affordable housing additions are by and large supported by a tax credit program that hasn’t kept up with demand. Similarly, new tax credits fund much of the activity around acquisition and rehabilitation of existing housing in need of significant refurbishment. How tax credits are divided between new and existing housing is a matter left up to individual states to determine. For example, in California, the state is currently prioritizing new construction rather than preservation. This decision has effects across the industry as developers and owners respond to the availability of tax credits.
A Solution
To begin meeting the demand for affordable housing, solutions are needed for both new construction and renovation of existing apartments. While the tax credit program has proven to work well for new construction, existing affordable apartments are often neglected. Through the preservation of existing affordable housing, we can help stem the housing crisis facing our nation.
WNC, a real estate service and investment firm with more than 50 years of experience as a proven leader in the space, has acquired more than 1,650 properties, representing $13.7 billion in affordable housing nationwide. WNC is at the forefront of serving institutional capital, looking to invest in the affordable housing space, whether through tax credit or preservation equity strategies.
The Difference
Affordable housing comes in many different forms and can mean different things to different people. At WNC, the focus is on serving those people whose income falls in the range of 30% to 60% of the area median income. This includes a wide range of individuals, families, immigrants, seniors and those who’ve fallen on hard times and are looking to take a step forward in pursuit of their American Dreams. By focusing our efforts on this segment of the affordable housing universe, we believe we can deliver meaningful results for our partners and a positive impact to our residents.
The Future
An affordable housing investment attracts those who want to both do good and do well. While affordable housing is not as well understood as other housing sectors in the economy, with further education and exposure, we believe investors will come to appreciate the compelling dynamics of the market and the opportunity it presents to meet both financial and impact objectives. Further, when increased investment in preserving existing affordable housing assets is combined with a healthy tax credit program supporting the construction of new affordable housing, our nation will begin to make up ground in the effort to provide sufficient affordable housing.
Rich Bennion
WNC
Irvine, CA
rbennion@wncinc.com
(714) 662-5565
