Alliant Capital Sees Big Year Ahead for Affordable Housing

Rent collections, April-December 2020. Chart courtesy of Alliant Capital

The need for multifamily affordable housing will only continue to grow as 10.7 million people remain unemployed in the U.S.—but construction delays, cost increases and greater volatility are among the challenges that providers of the property type will need to contend with in the year ahead, a new report by Alliant Capital suggests.

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The company, a leading low-income housing tax credit (LIHTC) syndicator, found that rent collection remained at around 94 percent across its portfolio during the pandemic, with financial support from the CARES Act helping to avert an expected downturn in collections. The “primarily unsubsidized” category saw the lowest economic occupancy at 92.1 percent while “primarily subsidized” properties performed the best at 95.8 percent.

Alliant Capital “can’t build enough” affordable housing as the asset class remains highly desirable, according to the company’s new 2021 Annual Outlook report. The cost and time required to provide housing are increasing, however, as developers of tax credit properties face more complexities working with all of the relevant authorities.

Disruptions in the construction marketplace are expected to continue after a year in which the unavailability of certain materials caused severe delays and cost hikes. Composite framing lumber prices temporarily surged more than 200 percent, and developers were hit hard by uncontrollable costs such as utilities, insurance and tax costs.

Volatility and mobility

On the other hand, lending has weathered the crisis well, boosted by federal liquidity programs such as the Paycheck Protection Program (PPP), while interest rates are expected to remain low in 2021. Alliant Capital anticipates a flight to quality, in which deals will be structured with more cushions and higher levels of reserves, and the company may turn more of its attention to projects in weaker markets.

Increased mobility will likely play a role in the year ahead as more people relocate from cities into suburban or rural areas, bolstering secondary and tertiary markets. The company also believes that design strategies may shift due to a perceived need for more personal space. Developers may need to reallocate costs from common amenities to larger unit sizes so residents have flexible, personal spaces for working or learning from home.

Alliant Capital, which added more than 5,000 units of affordable housing to its portfolio in 2020, closed on a $130 million LIHTC fund in December that will help create and preserve about 1,100 units for senior sand families in 13 properties. The company has provided housing for more than 400,000 low-income families, seniors and veterans throughout the U.S.