The country faces the biggest housing crisis in decades. Median apartment rentals for newly leased units were up a third from December 2017 to September 2022, according to the Center on Budget and Policy Priorities, with almost all the increase in the last 18 months. And there’s further pressure from would-be buyers opting to stay in their rental as a result of historically high home prices and rising interest rates.

Developers, investors, and lenders can still do their part, but bear in mind: it won’t be one-size-fits-all. Affordable housing looks different everywhere, and supporting traditionally underrepresented communities in CRE can come with a unique set of considerations. Here are four tips to keep in mind as 2023 approaches.

Understanding affordability and availability

Affordable housing is highly dependent on the median income of a particular area. For example, the Department of Housing and Urban Development puts the median family income in the New York metro at $94,500 dollars. By contrast, Mobile, AL’s median income is $68,000. A solution for one isn’t a solution for the other.

“Housing is a very local issue, but nationwide, the NLIHC estimates a shortage of 7 million units for households that are considered extremely low income,” says Desiree Francis, managing VP and head of Community Finance at Capital One. “With a greater demand for affordable housing than what is available, we have to continue investing in housing or the gap will continue to widen.”

The affordable housing market expands

The multifamily financing “usual suspects” are expanding. “We are seeing more large companies become involved in addressing affordable housing, Amazon for example has invested $2 billion in an affordable housing fund specifically for workforce and affordable housing. In addition, Google and Microsoft have also made significant investments in affordable housing solutions.” says Mark Dellonte, SVP and head of FHA Production at Capital One.

New capital providers from the health industry, technology firms, and private equity investors are investing in affordable housing. While some are motivated by risk adjusted return opportunities in a resilient asset class, the most sophisticated are motivated to help preserve and expand affordable housing where it is needed most.

Leverage the LIHTC program

One of the biggest sources of tax credits is the Low-Income Housing Tax Credit (LIHTC) program created in 1986. There is the equivalent of $8 billion dollars available to state and local agencies for issuance to organizations that develop affordable housing to serve formerly homeless veterans, intergenerational families, single individuals, and families.

“We’re really excited about the trends we see in LIHTC development.” said Evan Williams, SVP of Agency Finance at Capital One. “In addition to building high quality housing, we’re seeing a lot of operators providing resident services, enabling digital access, and creating energy efficient and sustainable housing.”

Support BIPOC developers

Capital One has played an important role in funding affordable housing, but it hasn’t stopped there. The company has made a point of supporting a diverse range of programs that provide technical assistance, training and network opportunities that are sponsored by their partners.

“Representation within the affordable housing space is incredibly important, both from the perspective of who is developing the properties, and who is financing the properties,” Francis says.