Chicago had a widening affordable housing gap prior to the pandemic, and the economic fallout of the crisis means that even more families are in danger of losing their homes. So what can be done about it?
That was the question recently put to 10 commercial real estate professionals. They participated in REjournals’ Chicago Affordable Housing Real Estate Summit, hosted virtually on October 27th.
Stacie Young, director at The Preservation Compact moderated the first half of the event. Joining her were Applegate & Thorne-Thomsen attorney, Nicholas Brunick; Allison Clements the executive director of the Illinois Housing Council; Tony Hernandez, managing director, CIBC and Kyle Shoemaker, managing director, Affordable Housing Investment Brokerage, Inc.
“I would argue that prior to the pandemic, we were underproducing housing at all levels, and certainly for working families,” Brunick said. “Since the pandemic, housing has only worsened.”
Brunick suggested that creating and supporting mortgage assistance programs at the state (but more importantly, federal) level will not only keep people in their homes but also help to keep dollars flowing through the economy. Not only is there a moral imperative to help those hurt most by pandemic, but these efforts can stave off further threats to the health of the economy.
Citing a report by the National Council of State Housing Agencies, Clements said that Americans will owe $34 billion in back rent by January 2021, and the pandemic won’t be over by then. Her organization has been pushing a federal bill that would expand The Low-Income Housing Tax Credit (LIHTC). If passed, the act would increase production of affordable homes.
On the financing side, Hernandez reported that he is seeing just as many deals coming through as before, both on the lending and equity sides. While the pandemic didn’t slow down development as much as many feared early on, the lending atmosphere has indeed changed.
“The industry has shifted from trying to keep up with developers to being risk mitigators,” Hernandez said. “When we look at a deal, yes we are underwriting more carefully, but we aren’t retrenching to operating guarantees or liquidity requirements.”
Overall, transaction volume among affordable housing properties is very high, according to Shoemaker, with investor interest as high as it has ever been. In fact, he said that his office is fielding calls from CRE professionals who weren’t previously in this space, which is likely an effect of economic crisis.
“Anyone who was already in this world has only doubled down on it,” said Shoemaker. “To meet the need of demand, a lot of long-term owners are probably accelerating their short- to mid-term selling plans due to uncertainty.”
The second panel, moderated by Bickerdike Redevelopment Corporation chief executive officer, Joy Aruguete, featured Kirk Albinson, project manager, The Community Builders; Edgar Flagg, regional director of real estate, Mercy Housing; Robert Natke, partner, UrbanWorks and Peter Raphael, senior vice president and managing director, D.A. Davidson Companies.
While the creation and preservation of affordable housing has obvious benefits for low-income families, it also can help to revitalize neighborhoods. Albinson explained how he has seen this paly out in downtown Aurora, Illinois.
“We came in and used affordable housing as carrot to create new economic development in downtown,” Albinson said. “The downtown rents have started to go up and after our development went in a year ago, another 100 units of market rate has gone in.”
Affordable housing often comes with a stigma of bringing with it “undesirable” residents and depressing housing values of the surrounding community, leading to very vocal grass roots campaigns against some developments. One way to skirt this issue is to focus more on mixed-income housing.
“We are seeing more and more creation of affordable housing in areas where, in the past, the larger developers would come in and evacuate the lower income type housing,” said Raphael. “Governmental entities are finally realizing that this isn’t the right way to attack low income housing. I’m happy to see municipalities incorporating low income with market rate.”
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