To the uninitiated, affordable housing is a study in contradictions. It’s doing well in hyper-pricey markets. The most ambitious designs often are developed by nonprofits, who have access to private money that for-profit builders don’t. And the sector’s chief financing tool, the Low-Income Housing Tax Credit program (LIHTC), operates like a corporation that leverages private capital.
“Affordable actually does better during downturns—historically, construction prices, land prices and architect fees go down,” says architect David Baker, a leader in affordable housing whose Bay Area practice is a mix of market rate and custom, single-, and multifamily. Market-rate and affordable cycles, he says, tend to offset each other.
Even during the recent recession, communities funded by LIHTCs had a foreclosure rate of less than 1 percent—lower than any other type of real estate, be it commercial or residential. But the last meltdown affected affordable, too—tax credits lost value for a while. Even California, an affordable housing mecca, has taken a hit: In 2011, the state reduced urban development allotments for blighted areas, leaving cities to pick up the slack.
“Affordable housing is flourishing in markets like Silicon Valley, Seattle, the Bay Area, and Los Angeles—cities that have enough local power to augment other funding,” says Oakland, Calif.–based architect Mike Pyatok, who, along with Baker, is one of the nation’s affordable housing experts; he also does market-rate and student housing.
Funding an affordable project often involves an intricate choreography that differs from market-rate housing, says Richard Stacy, principal at Leddy Maytum Stacy Architects in San Francisco, the firm that worked on 474 Natoma. Often, buy-in on a municipal level comes first, then state support is sought, and finally federal tax credits are secured. “Sequencing is key,” he says.
On the nonprofit side, use it or lose it can be the catch, says John Perfitt, executive director of Restore Neighborhoods LA, the nonprofit that developed the South LA Prototypes on page 66. That project was financed with 2009 stimulus money, which had a limited shelf life.
While nonprofits appear to have the inside track, Pyatok says opportunity awaits by serving potential homeowners who earn too much to qualify for subsidies but not enough to buy a house. Those who earn 80 percent to 120 percent of an area’s median income (AMI) are “in the shadows,” he adds.
“Taking a stab at that niche, where folks are caught in the middle—that would be a great contribution.”