It's never been easy building new homes affordable to people with moderate incomes, but selling them - that's usually a snap. Which is why no one at a Baltimore nonprofit that finished eight townhouses in December expected they'd still be sitting empty today.
Demand isn't the problem. It's the credit crunch.
With home prices and apartment rents both falling nationwide, it might seem like a good time to get more people into residences that don't overwhelm their monthly budgets. But affordable-housing activists say the reality is just the opposite. It's much harder now to get construction financing to build. Or to get permanent financing for affordable rentals once they're done. Or to connect low- and moderate-income workers with mortgages so they can buy, as the Brooklyn and Curtis Bay Coalition knows only too well.
When the nonprofit started planning its "green," affordable townhouse project, "People needed very little if any down payment," said Carol K. Eshelman, executive director of the coalition. "We had a $4,000 grant for them for closing costs, and we had the assumption that they would put between $1,000 and $2,000 in cash down. Well, now they need 3 1/2 percent at [the Federal Housing Administration]."
Definitions of affordable housing vary, but for example, a family of four moving into one of the coalition's new townhouses would need an annual household income of no more than $64,000.
The change in fortunes is also stalling development projects for apartments that are affordable to low-income workers and seniors. The state estimates that it will be able to finance 2,000 units of new or rehabilitated affordable rental housing this fiscal year, down from the usual 2,700 - which itself was never enough to close the gap between supply and need.
The trouble there, and for planned rental developments across the country, is that their main source of funding comes by way of the federal Low Income Housing Tax Credit program. States distribute the credits to developers, who then sell them to investors. Developers get cash to build, and investors get 10 years of credits against their taxes. But the market for those credits is a fraction of what it was before the financial crisis hit a year ago. The drop in new units would have been more drastic, the state said, if not for a temporary infusion of stimulus money.
All this as demand for lower-cost housing grows thanks to job losses and foreclosures.
