Industry Insights
Equipping Moonshot Goals With Rocket Fuel
By Kaitlyn Snyder
4 min read
New York Mayor Eric Adams recently set a ‘moonshot’ goal of 500,000 new affordable homes over the next ten years. It’s an audacious goal backed up by policy reforms that will make it easier to “Get Stuff Built,” as the name of the report suggests.
Mayor Adams is not alone: states and local governments across the country have adopted similar goals, along with the White House’s Housing Supply Action Plan, which aims to “help close America’s housing supply shortfall in five years, starting with the creation and preservation of hundreds of thousands of affordable housing units in the next three years.”
I’m inspired by these goals and know that National Housing & Rehabilitation Association’s members are ready to help meet them. I also know that developing affordable housing is harder than it need be and that barriers to development won’t go away overnight.
Rising interest rates increase the cost of capital and push already tight deals onto the cutting room floor. Many are hopeful that rising rates will lead to a cooldown in the construction industry and bring astronomically high labor and material prices back down to earth. But in other areas (think operations and insurance), increased costs are likely here to stay.
Knowing this, what can governments do to make sure they’re not contributing to the very problem they’re hoping to address? The most obvious answer is to devote additional funding resources to bring those lofty goals to fruition. We may soon find ourselves with fewer resources for affordable housing at the precise moment when they are needed most. Many states robbed the proverbial Peter of 2023 tax credits to pay Paul’s increased 2022 deal costs; a decision that was well-warranted in the moment but will nevertheless have painful consequences absent congressional action.
Consider the strings that are attached to those funding sources and evaluate the requirements of funding through a cost-benefit analysis with a bias towards producing the most units possible. Cue maxims of bells and whistles and Christmas trees overloaded with ornaments and let me offer some advice as you take down your tree this January: consider which ornaments are worth keeping and which stand in the way of building more units.
Securing one-off Payments in Lieu of Taxes (PILOTs) for every affordable housing deal is unsustainable and governments serious about building affordable housing need to set up tax relief programs to help make that housing feasible and viable in the long term. Nashville’s Metropolitan Development and Housing Agency PILOT program provides significant property tax relief for a period of up to ten years. Chicago and Cook County recently created an Affordable Housing Special Assessment Program. The incentive structure creates and preserves affordable housing by reducing a property’s post-rehab or post-construction assessed value depending on the number of affordable units within the property. (Read more in Cities and States Step Up in 2022 to Bolster Affordable Housing Stock.)
Someone recently described conducting tenant certifications as more intensive than buying a house. It doesn’t have to be this way. How can governments, lenders and equity providers distill what information they really need and create simplified, single documentation that meets everyone’s needs?
And finally, bolstering the civilian workforce. Affordable housing developers work with local government employees in a myriad of ways from property taxes, gas, water, sewer, electric to rezonings, permits and code inspections. Staffing shortages are painfully acute in many local governments and can cause significant delays and in turn, significant cost increases. We need state and local governments to remedy those staffing shortages with problem solvers who are working towards Getting Stuff Built.
I applaud every community that’s already taken the initial step to recognize that its dearth of affordable housing is an issue and to set a goal to close that gap. More communities around the country need to do that and then engage in the hard work that is policy and systems change.
