Affordable housing’s major headwinds

The affordable housing delivery system in America is facing a perfect storm. In the wake of the post-pandemic challenges, housing providers are grappling with unprecedented conditions that threaten the stability of their organizations as well as their ability to deliver the affordable rental homes that families and individuals with low means need. While their jobs have never been easy, these housing providers are now facing fierce headwinds that are fundamentally shifting the outlook for the sector.

The future of affordable housing hangs in the balance, and with it, the well-being of the families and communities that depend on it. As a veteran of the nonprofit housing sector, I've seen the transformative power of a stable, affordable home. But I've also seen how quickly that stability can be upended. If we don't act to support and uphold the organizations on the frontlines of this crisis, the consequences will be dire. It's time to confront the reality of the affordable housing crunch, and to mobilize the solutions that our most vulnerable neighbors deserve.

At Housing Partnership Network (HPN), our members are seeing the effects first-hand. They have lost rental income, as the end of rent relief and eviction bans coupled with several years of rising expenses have made it difficult for residents to address rent arrears. In fact, estimates place lost rental income for the country at $9.9 billion—with 13 percent of all renters behind in payments, most of them people without the income needed to catch up.

Housing providers are trying to absorb those hits—which for some top 20 percent of a property’s cash flow—while also incurring massive increases in operating costs, with insurance being among the most egregious. In a recent survey of HPN members, nearly all the respondents said insurance premiums are stressing their portfolios and their organizations. When combined with increases in delayed developer fees, it is becoming more difficult for owners to advance resources from their own treasuries to fund maintenance, pay the mortgage on their properties and pay their staffs, much less support important wrap-around services that help lift families out of poverty or pursue new development opportunities.

Over the last few years, these organizations have tapped their reserves to protect the financial well-being of residents and properties, essentially stepping in where public policies have fallen short. But it has become increasingly clear that the situation is not sustainable. As one nonprofit housing leader recently said, “we’re waiting for the other shoe to drop from COVID delinquencies.”

What happens if even a small percentage of these housing providers are forced to limit their operations or, worse yet, fail? What happens if these financial challenges push their properties into disrepair or foreclosure? In an incredibly tight housing market, what happens to the families that could be displaced and the stability of the communities where they live?

We’ve already seen the implosion of both nonprofit and for-profit firms as a result of ongoing conditions. These firms are bellwethers, not outliers, and the industry cannot sustain many more of these closures. While affordable housing developers/owners are doing their part to stabilize their portfolios and uphold their organizations, in this moment it is time to course correct with private and public support and interventions. There have been examples in the State of Minnesota and in Washington D.C., where elected officials and policymakers have allocated funds to support and preserve existing affordable housing, nonprofits, and their residents. But the sector needs much more.

For me, all of this is quite personal. I spent much of my career leading a nonprofit affordable housing development organization, and we prioritized strategies to keep people in their homes when they faced difficult financial, family and health circumstances. We made an explicit choice to be supportive whenever possible, because it was the right thing to do, and it contributed to the social stability of the properties we owned and the communities where we worked.

Now, as CEO of HPN, I see that same ethos reflected not just in our 100+ nonprofit members, but across the housing sector more broadly. I see how market conditions are pitting our support for residents against our support for the affordable properties where they live—even though, in reality, they are part of the same whole. I see the disparity in how market-rate developers raise rents when their expenses rise, while affordable housing providers are required to hold the line, both because of government restrictions and their missions to provide quality affordable housing.

Many nonprofit owners have leaned heavily on resident outreach and education to engage with those who have fallen behind, working to develop realistic payment plans that recoup a portion of the revenue lost without imperiling already struggling families. In some cases, housing providers have raised funds to offer emergency assistance, like food support, to those facing dire choices; in others, when there are no workable options, they help residents find a home that is more affordable for them, even helping manage and pay for moving costs.

The point is that even in the worst housing situations imaginable, we can still treat people with dignity. We can protect already-scarce affordable housing resources for the next family, and the one after that, long into the future. As housing leaders, we can lean on our expertise and experience to offer the best outcomes possible—even as we recognize that there may be some who will refuse to take advantage of the help offered and may face eviction.

The affordable housing sector is at an inflection point. But I remain hopeful. I've seen the resilience of nonprofit housing providers, the creativity with which they've met past crises, and the unwavering commitment to their mission. I've seen the strength of the families they serve, and the transformative power of a home that is secure, affordable, and within reach.

But I've also seen the limits of what can be accomplished alone. It's time for policymakers, funders, the wider housing community and beyond to step up. It's time to stabilize the finances of affordable housing providers and ensure that they can continue to deliver the homes that millions of Americans depend on.

The future of affordable housing is uncertain. But with collective action, we can write a different story – one in which every family has a place to call home and the opportunity to thrive.