Preservation of Affordable Multifamily Housing

A Look Inside...

by Barry Wides, Deputy Comptroller for Community Affairs

Privately owned affordable multifamily housing provides shelter to millions of U.S. households that do not own their own homes. A significant share of this housing is made affordable to lower income families through federal subsidy programs. These programs began in the early 1960s and continue today. Over the past 40 years, the programs have supported the development of more than three million housing units.

Each of these programs provides some form of subsidy to help maintain rent levels affordable to their targeted tenants. All of these programs incorporate subsidy expiration dates, generally 20 to 40 years following the start of the subsidy for each project. Some of the subsidies in the form of initially below-market interest rates have lost value in the current environment of low interest rates. We are now entering a phase in which these expiring and obsolete subsidies will ultimately affect the loss or preservation of millions of subsidized affordable multifamily housing units in communities across the United States.

Source: Department of Housing and Urban Development's Multifamily Assistance and Section 8 Contracts Database, 2006; no data available for Hawaii or Alaska.

Affordable multifamily housing preservation is a complex puzzle with many pieces, including multi-layered financing, tenant relocation, local regulations governing rehabilitation, and other issues. Successful projects typically involve the participation of specialized partners, and, fortunately, industry experts are available to help coordinate these efforts.

This issue of Community Developments examines how banks can participate in preserving the affordability of these multifamily housing units. It examines how four banks of various sizes have invested their resources toward meeting this important goal. It also examines several prominent multi-lender consortiums that support affordable multifamily housing preservation.

Banks that invest their resources in affordable multifamily housing preservation can receive not only a market-rate return on their investments, but may also obtain positive Community Reinvestment Act (CRA) consideration for these activities. Supporting the supply of affordable housing is one of the core activities addressed by the CRA. Indeed, preserving the existing supply of affordable housing is a critical investment strategy toward maintaining healthy communities.

We hope you will find this newsletter helpful as your bank explores opportunities in the affordable multifamily housing preservation arena. With the help of banks partnering with other specialized actors, we can stem the loss of affordable multifamily units and help maintain the affordable multifamily housing that is so essential to the well-being of our nation’s neighborhoods.