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---Several market forces, many of which we have touched on in previous correspondence, are applying pressure on the Multifamily Affordable Housing Sector. Inflation, energy prices, interest rates and construction costs to name a few. One factor we have not discussed is supply of affordable housing. The Wall Street Journal ran an article yesterday that highlighted the issue at hand. “The U.S. is at risk of losing nearly 200,000 affordable housing units over the next five years, as government protections end at hundreds of rental properties and landlords become free to set their own rents.”[1] Meanwhile, new construction of affordable-housing units isn’t keeping up with demand and has been challenged by rising interest rates and inflation. Construction costs are also compounding the problem with less of these units being delivered. Certainly, the picture painted is a pretty gloomy one for most affordable-housing developers and owners as well as a good number of residents at these properties.
---With that said there is hope for owners. In our estimation, there is recourse in two ways. Back in August of last year we touched on the Inflation Reduction Act and the nearly $1 Billion in the form of direct loans or grants to eligible properties for the express purpose of improving energy or water efficiency. One such program is the Green and Resilient Retrofit Program for Multifamily Housing or GRRP (see link below). This is the best resource we have come across outlining the process and if you are considering some capital improvements, I encourage you to read. It includes everything from the available approaches for your building or “cohorts” as they are referred to as, to the grants and loans themselves and the respective payment terms along with the interest rate. It also includes information regarding the requirements and commitments that need to be met to be eligible. Please note that applications are for these “cohorts” have already begun so the time is now to begin the process. The second recourse and this can also be done today, is an audit of the utility allowances at your property. We have had great success reducing these allowances for owners which, in turn, means they can potentially charge incrementally more in rent. Hedgerow Partners can assist in either approach and in reality the two go hand-in-hand. Please contact us today if you are interested in exploring further.
Resources:
Green and Resilient Retrofit Program for Multifamily Housing (GRRP)
https://www.hud.gov/sites/dfiles/OCHCO/documents/2023-05hsgn.pdf
Compliance Approaches or “Cohorts” (GRRP)
https://www.hud.gov/grrp
[1] https://www.wsj.com/articles/wave-of-rental-resets-to-further-deplete-affordable-housing-62c8d063?mod=Searchresults_pos1&page=1
Disclaimer: All information provided is deemed reliable, but is not guaranteed and should be independently verified with the appropriate housing authority.
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