Affordable Housing Demand and Impact
Promises New Frontiers for Developers
BY CYNDI OAXACA
A
lthough the rate of growth slowed to
just 1.9% in 2016, and was under 2.7%
the year prior Denver continues to see
a heavy population boom, and remains one of the
fastest growing cities in the country. With this
growth, development follows, and although slow-
ing slightly in pace, the market remains hot, with
9,800 units completed in 2016, 25,382 units
under construction, and an additional 26,884
proposed as of the end of January 2017 . This
pattern has followed similar trends nationwide,
with cities like Houston, Dallas, and Seattle see-
ing significant growth in multifamily demand
and development within that past few years.
The nationwide push towards multifamily
development is heavily influenced by millennial
trends, a lack of availability and space for single-
family homes, and rapid population migration.
And there has been an increased need for afford-
able housing in these cities.
Also growing? Criticism. The population
boom coupled with a lack of available housing
has created significant rent growth, but very
little affordable housing development. The reasons
vary as to why. Most in the industry cite a lack
of incentive and potential threats to the value of
low income housing tax credits by the current
government. Others cite market demand for
26 | TRENDS • JUNE 2017
luxury apartments as a dominant reason that the
call for affordable development isn’t taken seri-
ously. However, by addressing affordable housing
upfront, developers actually have the opportu-
nity to create communities that benefit both
investors and residents, change attitudes in the
market, and transform urban areas.
The Low and Medium Income Tax
Credits
An increase in supply caused minor decreas-
es in the rental costs in Denver towards the close
of 2016 , however, prices are inching up again
which keeps housing out of reach for those seek-
ing affordable options. As in any case with high
demand, investors should not be expected to shy
away from their current multifamily development
plans, as the market encourages and thrives on
their supply. Nor does it mean that affordable
housing seekers should accept defeat and move
on elsewhere. Instead, both can mutually benefit
through application of the Low Income Housing
Tax Credit.
As the federal government is increasingly
unable to support Section 8 and public housing
development, the dependence on Low Income
Housing Tax Credits (LIHTCs) to support
affordable housing has grown—making it a
boon to developers and residents alike. In cre-
ating properties that meet credit requirements,
developers and investors can expect to not only
have development subsidized, but also get in
on the demand of the affordable market, which
is currently underrepresented. In turn, residents
benefit from the availability of affordable hous-
ing at nicer properties in locations with better
job opportunities, allowing the chance for up-
ward mobility.
At present, just 12 Colorado properties have
been awarded LIHTCs at the 4% level, with more
anticipated at the 9% awarding later this year .
Nationwide, this pull away from LIHTCs is con-
nected to the threat of President Trump’s proposed
cuts to the corporate business tax, which would
cut credit demands and decrease value. How-
ever, with recent events pointing to no sign of a
tax reform bill by the administration anytime
soon, now is the time to capitalize on these cred-
its. In doing so, the same developments can build,
but cater to a wider audience.
Perhaps more surprising than the standard
low-income needs in affordable housing, higher
demand is making it more difficult for “middle
income” individuals to find housing. This is con-
tributing to an ever increasing gap in America’s
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