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Major Overhaul Ahead for America's Leading Affordable Housing Program
The Low-Income Housing Tax Credit (LIHTC) is facing its largest reform in 40 years.
Jordan B. & Han-Gwon Lung
March 06, 2024
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Good morning. The Low-Income Housing Tax Credit (LIHTC), vital for U.S. affordable housing since 1986, is facing its largest reform in 40 years. This development coincides with cities like Miami and Atlanta exploring bond markets to address their housing challenges.
Today’s issue is brought to you by Centra Capital Partners. Learn about their latest investment opportunity at the Meadows at Hugo.
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HOUSING REFORM
LIHTC Reform: A Leap Towards Addressing America's Housing Crisis
The Low-Income Housing Tax Credit (LIHTC), a cornerstone in America's approach to funding affordable housing since 1986, is poised for its most significant reform in nearly four decades.
This is a BIG deal: Since its inception in 1986, the Low-Income Housing Tax Credit (LIHTC) has played a pivotal role in generating millions of affordable housing units. Proposed modifications within the $78 billion Tax Relief for American Families and Workers Act are poised to revamp the program's reach and effectiveness.
Expanding access: The proposed legislation seeks to rejuvenate the LIHTC by…
Reinstating a 12.5% increase for the 9% LIHTC version, expired since 2021.
Permitting states to allocate more credits to affordable housing projects from 2023.
Lowering the required threshold for developers to qualify for maximum credits from 50% to 30% in terms of state and local tax-exempt bond financing.
What’s the potential outcome? These measures could create an estimated 200,000 new affordable housing units nationwide, marking a significant boost in the fight against the affordable housing crisis.
Between the lines: Industry experts like Dirk Wallace from Novogradac and Guerrero say these adjustments are crucial for amplifying the program's effectiveness. For instance, lowering the bond financing threshold could facilitate more developments by reducing project costs and tax burdens. This shift is significant for states like Texas, potentially leading to a boost in housing projects.
➥ THE TAKEAWAY
Zoom out: Despite bipartisan approval in the House, the bill's future in the Senate is uncertain amid budget and international spending debates. The LIHTC expansion aims to tackle rising homelessness and living costs, but critics claim it falls short of serving the lowest-income groups, highlighting the pressing need for affordable housing as the crisis deepens.
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✍️ Editor’s Picks
Miami vision: Citadel’s billionaire founder, Ken Griffin, plans to relocate from Chicago and build a new Miami HQ with a luxury hotel, creating one of the tallest city towers.
Get your free book: FranBridge is the #1 trusted source by real estate investors and entrepreneurs for the best opportunities in the 'non-food' franchise world. (sponsored)
Real estate royalty: Globe St. highlights the top CRE leaders of last year and offers helpful tips on employee perks, team leadership, DEI strategies, and property budgeting.
Lessons in resilience: NYCB's recent turmoil includes a quarterly loss, a 71% dividend cut, and stock drops, highlighting the importance of property equity and management.
Swooping in: Lightstone Group's $500M rescue capital platform targets $20M–$100M investments in multifamily, industrial, and hospitality assets, avoiding office properties.
Downtown revamp: Chicago Mayor Brandon Johnson is moving forward with a revitalization plan for vacant downtown buildings that is estimated to cost an estimated $1B.
🏘️ MULTIFAMILY
Bouncing back: The White House plan to convert commercial buildings to residential, creating affordable, energy-efficient housing while reducing greenhouse gas emissions by 30%.
Reshaping local: Florida lawmakers passed an updated Live Local Act expanding housing development provisions despite community criticism.
Money moves: Slate Property Group and Grobman Gross Properties secured $97M in refinancing for a 166-unit multifamily asset in Forest Hills, Queens.
ADU innovation: Multifamily adapts amidst the slowdown, focusing on accessory dwelling units. AvalonBay (AVB) already owns 60 communities with 18K units in SoCal.
Antitrust allegations: Federal agencies have opposed a dismissal motion in the lawsuit against Yardi for alleged algorithmic price fixing, as part of larger antitrust enforcement efforts.
🏭 Industrial
Insights of the year: Newmark predicts that 2024 will see industrial asset resilience amid ongoing economic uncertainty, and global supply chain dynamics will drive long-term demand.
Data center demand: Northern Virginia still leads the U.S. in data centers with a 1.6GW transaction volume, 581MW net absorption, and continuously rising rents.
Palm Beach lease: Dalfen Industrial signs 101KSF lease with National Millwork at Turnpike Logistics Center, the largest deal of its kind in Palm Beach County this year.
🏬 RETAIL
Retail reigns: Foot traffic is back in NYC as top NYC retail lease deals last month included GU in Soho (25KSF) and Avra Estiatorio in Penn Plaza (20KSF).
Mall Renaissance: The 1.45MSF Emporium Centre San Francisco, formerly San Francisco Centre, was recently appraised at $290M.
Market maverick: Wharton Properties' Jeff Sutton impresses with $1.8B in recent sales, signaling a promising outlook for mixed-use properties in NYC.
Luxury win: Fertitta Entertainment acquired the River Oaks District in Houston for $450M, featuring luxury retail, multifamily units, and office space.
🏢 OFFICE
LA goes back to work: In 2023, the LA metro area saw $1.7B invested in just 11.1MSF of office space, with the top deal valued at $104M.
Dallas dazzles: Despite high office vacancy rates nationally, Dallas stands out with a robust office construction pipeline.
Debt woes: Paramount Group (PGRE) may have to surrender three San Francisco properties, including Market Center, with values “significantly” below debt.
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HOUSING CRISIS
Miami Pitches $2.5B Bond to Stem Dire Housing Crisis
Daniella Levine CavaPhotographer: Eva Marie Uzcategui/Bloomberg
After years of easy growth, Miami-Dade County is facing one of the most severe housing crises in the nation, with home prices surging by a staggering 82%.
Fixing the problem: To address this pressing issue, Mayor Daniella Levine Cava is proposing a $2.5B bond measure, to be decided by voters in November. The bond aims to alleviate the housing crisis and enhance the county's infrastructure, including affordable housing projects and vital improvements to parks, sewage systems, and roads.
Everyone deserves housing: Amid the challenging housing landscape, the largest portion of the proposed bond ($800M) will be designated for affordable housing. After home prices have skyrocketed 82% over 5 years, it’s become increasingly difficult for many residents to afford housing in the area.
Innovative urban initiatives: Mayor Cava's housing plan emphasizes innovative strategies to address the housing crisis, including prioritizing projects that increase urban density and utilizing county land for large-scale property redevelopment efforts. Miami aims to create more efficient land use and improve housing availability while promoting sustainable urban development practices going forward.
Infrastructure improvements: The proposed bond will also contribute to vital infrastructure improvements in the county. Funds will be used to enhance road infrastructure and parks while preserving endangered land that serves as a buffer for the Everglades. However, the bond will not cover mass transit solutions, as transportation initiatives are not included in the current proposal.
➥ THE TAKEAWAY
Comprehensive solution: The $2.5B bond proposal presents a comprehensive approach to addressing Miami's housing crisis and infrastructure challenges. If approved by voters, it will play a pivotal role in reshaping Miami's housing market and addressing key development constraints facing the city.
📈 CHART OF THE DAY
Despite national challenges like high interest rates, tighter lending, and an ongoing economic slowdown, South Florida continues to outperform with low vacancy rates across property types and high asking rent growth compared to national averages. The market’s outperformance is expected to continue into year-end.
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