icon Blueprint for February

Riding Out the Economic Storm

By
3 min read

I talked to a handful of leading affordable housing developers for an article in this month’s issue on what challenges and opportunities they are facing in 2021. While not a comprehensive survey, I think it represents a good sampling of larger developers.

It’s no surprise that I heard a lot about weathering the storm. We’re almost a year into that storm now, sparked by the COVID-19 pandemic that rages on, and the economic crash that followed. The storm has swamped many small businesses, and as they’ve gone under so too have the jobs. While there was some better job news in the fall, December jobless claims went up again. It’s clear we’re still in the middle of the storm, and there’s no telling when it’s going to let up.

We’re at a unique time in the affordable housing industry where the demand for the product is soaring as families struggle to make ends meet. There have been other economic crises and other spikes in demand for affordable housing, like the financial crisis in 2008. But this time the storm seems to have no end in immediate sight, and it’s easy to feel like we’re stranded in the middle of the ocean as the wind, rain and waves whip around us. It’s hard to think about making it safely to shore when you’re just trying to ride out the crest of the next wave.

There are vaccines rolling out and hopes that a new presidential administration and Congress can help right the ship. The Low Income Housing Tax Credit four percent “fix” passed by the outgoing Congress in December is a welcome lifeline. Developers know that the economy, at some point, has to get better. However, there are some long-term unknowns about the pandemic economy that will echo for years to come.

What if the pandemic permanently alters human behavior to the point where fewer people are willing to go to restaurants, stay in hotels and have in-person meetings? Will all of those jobs in the service and hospitality sectors come back? Are some of them simply gone forever as we rely more on virtual meetings, Amazon deliveries and takeout delivery services? Will there be concerts and baseball games? Will the development pendulum swing from the renaissance of city centers to favor sprawl and suburbs? Economists and market analysts study the data to help predict these trends, but it’s the human behavior factor that will be one of the great unknowns when we do finally emerge from the storm and make it back to shore.

Developers are doing their best to steady the helm. Some are taking advantage of new opportunities to acquire real estate when the pandemic economy halted commercial development. But they still are facing some operating difficulties. COVID-19 has wreaked havoc on the supply chain for construction materials, and the boom in single-family construction creates additional competition for building resources. Developers with construction affiliates expect lumber prices to fluctuate as much as 30 percent.

The good news is everyone I spoke with expects brighter days ahead, even if it may take many more months to get there. I believe they will, and I wish them all the best. As the saying goes, a smooth sea never made a skilled sailor.

Paul Connolly
Executive Editor

Tax Credit Advisor welcomes reader comments. Contact the executive editor at [email protected].