Affordable housing is not an issue only for large coastal metros such as San Francisco or New York City. The need for low-income units is widespread. Second-tier markets are struggling with affordability issues, while affordable housing projects in rural areas are almost absent.
“The politics of development have become more complicated. At the same time there’s an affordability crisis, people fear overbuilding, they fear overcrowding, there’s this stress on transportation, on schools. All of these things are linked together and need to be thought of as one package,“ Community Preservation Corp. President & CEO Rafael Cestero told Multi-Housing News.
GOVERNMENT CONTRIBUTION NEEDED
Apart from a long list of regulatory challenges that developers frequently face, such as land use approval or building codes, the most important barrier they need to overcome is funding. Private capital is not enough to sustain the affordable housing sector.
“We have a federal government that has for many years been absent, largely, from the affordable housing business. It’s a math problem because if you’re building rental housing and you want to keep your rents low, and you have rising land and rising building costs, you need government intervention in the form of subsidy in order to help underwrite those projects,” Cestero said.
Large metros such as New York City pump billions of dollars from tax revenue into affordable housing initiatives, but few—if any—cities can afford to do that. Insufficient funding deepens the supply-demand gap. “There are statistics out there that suggest that there are as many as 11 million renters in this country who are paying more than 50 percent of their income in rent,” Cestero added.
In February, CPC launched a subsidiary that focuses on the lending business. CPC Mortgage Co. was first introduced at CREF in San Diego.
The newly created firm provides a suite of Freddie Mac, Fannie Mae and Federal Housing Administration products for the acquisition, refinancing, rehabilitation and construction of small multifamily properties. Experts now working for CPC Mortgage Co. used to be CPC employees.
One of the deals that CPC was involved in this year was the acquisition of a 515-unit portfolio in South Bronx for $100 million, in partnership with NCV Capital Partners, Mount Hope Housing Co. and Lemor Development Group.
CPC and Amalgamated Bank provided financing for the project, which is part of Mayor Bill de Blasio’s New York housing plan—Housing New York 2.0—to produce 300,000 affordable units by 2026.