Why Affordable Housing is Facing a Perfect Storm

The affordable housing crisis doesn’t seem to be getting better. At the moment, there is a perfect storm driving housing prices and rents up. The storm includes low supply, increased demand, poor wage growth and a lack of proper financing tools, all of which are helping to drive rents up.

“We’ve been seeing a huge influx of local and state resources for affordable housing in California, bringing a much larger pipeline of transactions,” Cecile Chalifour, west division manager for Community Development Banking at Chase, tells GlobeSt.com. “However, we’re facing an ongoing and perfect storm: low production of affordable housing over the last 10 years with low supply, increased demand leading to higher rent expectations from landlords and investors, and a growing disconnect between rent increases and income growth. As a result, the affordable housing crisis is growing. Although we have more resources today, high development costs for land and construction are making it harder to build financially viable affordable housing projects.”

It isn’t only a severe supply demand imbalance, but also a shortage of funding tools and solutions to bring more affordable housing product to the market. “The complexity of the tools to finance affordable housing can also present challenges,” says Chalifour. “Developers and financial partners spend a tremendous amount of time, capacity and financial resources to secure funds and structure transactions. Despite some challenges, this is an industry of creative players, so there has been a lot of innovation and improvements resulting from those challenges.”