Bryan Dickson, general manager, NewPoint. Image Courtesy of NewPoint
The lack of affordable housing remains a daunting reality for the entire US Meanwhile, rising construction costs, supply chain problems, labor shortages and higher interest rates are making it increasingly difficult to secure capital and build new affordable housing.
Multi-Housing News reached out to Bryan Dickinson, director of affordable originations at NewPoint Real Estate Capital, to learn more about some of the challenges of assembling a capital stack to fund affordable housing. Dickinson, who joined the company about a month ago, was previously CEO of Affordable Housing Originations Citi. Prior to joining Citi, he was Director of Affordable Housing Policy and Products at Freddie Mac.
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What are your goals in your new position?
Dickson: I joined NewPoint to use the NewPoint platform to help create a leading provider of debt and equity for the affordable housing community in the US. We create a complete range of products and solutions to serve our customers. We will use new processes, structures and technology to achieve our goals and meet the needs of the market.
Our expertise in brokerage lending, in addition to decent credit solutions such as bridging loans, taxable and tax-free private placements, permanent loans and preferred equity financing, enables us to provide new opportunities and alternatives to developers and investors of affordable housing.
Creating and preserving affordable housing across the country is at the heart of our mission, and we’ve set our sights high and assembled a talented team from across the industry to make a lasting impact in the housing finance industry. affordable housing.
How do you view the current state of the affordable housing crisis across the country?
Dickson: The pandemic continues to create uncertainty and major challenges for our country, and in particular for low-income tenants, as property prices and apartment rents have soared across the country. This has put further pressure on the already acute need for affordable housing.
Low-income people are struggling as households have lost income, rents are rising and inflation is gripping the economy. With low-income renters in distress, there is concern about families failing to pay rent and being displaced. Federal and state governments have intervened by introducing incentive payments, expanded unemployment benefits and moratorium on evictions that helped prevent large-scale tenant displacement.
In addition, the Build Back Better legislation, if passed in one form or another, will be the largest expansion of affordable housing spending ever enacted in a single piece of legislation. The expansion of affordable housing programs will come when our country urgently needs additional resources to help those who suffer the most.
The Build Back Better agenda includes several financing solutions to drive affordable housing construction. How effective do you think these incentives are?
Dickson: We won’t know how effective these incentives will be until they’re applied, and we’ll look back after a while.
Provisions in the Build Back Better legislation — such as increasing LIHTC allocations, lowering the test threshold from 50 percent to 30 percent, and providing a permanent base boost of 50 percent — could help inject more dollars into affordable housing transactions. Still, the bill has not yet been passed, and the final effects are expected to be positive, but are still unknown.
More resources are needed to create and maintain middle-income housing. The agencies have long been major providers of loan capital for middle-income multi-family housing. However, there is an even greater need for construction and moderate rehabilitation credit programs, subordinated debt, and equity programs designed to create and maintain middle-income homes.
NewPoint is committed to developing innovative debt and equity products and creative financing approaches targeting the mid-income segment of affordable housing.
What are some of the key challenges in the affordable housing financing landscape?
Image Courtesy of the Province of British Columbia via Flickr
Dickson: Rising construction costs were a problem in 2021 due to higher material costs, supply chain problems and labor shortages. Rising commercial insurance costs have also been a major concern. Given the continuation of COVID-19, resulting in inflationary pressures, construction cost increases look set to continue for the foreseeable future. In addition, commercial insurance rates are being impacted by higher jury awards, increasing catastrophic storm losses and historically low interest rates.
While interest rates have fallen towards the end of 2021, the Federal Reserve has announced three possible rate hikes in 2022, pointing to a higher interest rate environment. These conditions will last into next year, making it more difficult for developers to raise the entire capital stock to fund affordable housing transactions.
What are your predictions for the affordable housing sector in 2022?
Dickson: The pandemic will continue to create uncertainty and major challenges for our country in 2022, especially for low-income tenants. Property prices and apartment rents are likely to continue rising across the country, putting more pressure on the need for affordable housing.
The effect of the pandemic on the economy and the labor market will evolve. Still, low-income wage earners will continue to struggle as rents rise and inflation persists in the economy. The Federal Reserve has announced it plans to raise interest rates three times next year and cut its bond-buying program, meaning general interest rates will rise, making it more difficult to fund deals for affordable housing.
If passed by Congress, the Build Back Better legislation will be a major incentive to enable greater preservation and production of affordable housing. Still, the general question is whether the legislative stimulus will offset the negative effects of the health crisis in the short term and boost affordable housing production in the longer term.
One thing is certain, the need for affordable housing construction and conservation will remain acute.