Summary
As land acquisition and construction costs climb -- with some areas reporting more than 300% increases -- affordable housing development in the mid-Atlantic region of US is decreasing. Yet, the demand for affordable housing continues to soar. Enter the Low-Income Housing Tax Credit (LIHTC). Created by the Tax Reform Act of 1986, the program gives states the equivalent of nearly $5 billion in annual budget authority to issue tax credits for the acquisition, rehabilitation or new construction of rental housing targeted to lower-income households. Despite the LIHTC program, a combination of escalating construction and acquisition costs and the condo conversion boom have driven many for-profit developers and managers out of the affordable housing market. Stephen Rigelsky, EVP, Castle Management, acquisition costs are so high that -- even with the tax credit -- they have found it impossible to make things work. Although the number of for-profit affordable housing developers has decreased, quality has not suffered, industry experts said.
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Give Credit Where Credit Is Due
When strong demand exists in specific real estate markets, the industry typically rallies to meet the demand. That is not quite the case with the affordable housing segment in the mid-Atlantic region of the United States, including the Washington, D.C., and Philadelphia areas.
As land acquisition and construction...See the full content of this document
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