Despite the reputation of financial institutions of being inflexible, several see an opportunity for innovation in lending that will result in a much needed increase in development. And, not only will development increase, it will be focused on healthier, more sustainable product, capturing innovation in design and engineering.
Housing in the U.S. continues to become less affordable for a growing number of Americans. In 2016, nearly half of renters were considered cost-burdened, spending more than 30% of their income on rent. The country needs 4.6 million new apartments by 2030 across both market-rate and affordable properties to meet demand, Curbed reports.
The increased need for affordable housing development has led to both new financing products and new investors in the asset class, Capital One Senior Vice President Evan Williams said. Williams is based in Capital One’s New York office, where he focuses on affordable housing and the origination through Fannie Mae Delegated Underwriting and Servicing, Freddie Mac Targeted Affordable Housing and Federal Housing Authority loans nationally.
Momentum around affordable housing development and preservation continues to grow, fueled by the growing availability of financing products from Fannie Mae and Freddie Mac, Williams said. Consequently, investors who have traditionally worked with market-rate apartments have also brought their experience raising capital to the burgeoning market. From new loan products that expand the scope of affordable housing financing to encouraging healthier design, innovation has been at the center of new affordable housing trends and products.
As more Americans struggle to find and afford quality housing, lenders and agencies like Fannie Mae and Freddie Mac are finding creative ways to encourage investors and developers to fill that need while still meeting their requirements for return on investment.
“We are at the point where affordable housing is large enough as an industry that it has become an investment class, and so there are more traditional market-rate apartment investors coming into the space,” Williams said. “Traditional affordable housing developers are also innovating how they finance their properties, like creating investment funds and other financing vehicles that were not a part of the landscape five or 10 years ago.”
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