Confirming Demand

3 min read

In the world of low-income housing tax credit development, as in other kinds of real estate, the old saying, “Build it and they will come,” isn’t always true.

Sure, there’s a huge and ever-growing demand for additional affordable apartments; this need will never be completed satisfied. But there isn’t sufficient demand for a new affordable housing project in every corner of every community. That’s why market studies are so important.

Since the LIHTC program was made permanent in the early 1990s – ancient history for the young professionals in our industry today – a market study has been required for every proposed project receiving an allocation of housing tax credits. The market study provides an opinion on whether the proposed project is feasible, based on an extensive analysis of the characteristics of the property and the market, location, competing properties, and other factors. When I view market studies, I’m amazed at how much data, information, and analysis they contain and all the legwork by market analysts that must be behind them.

In this issue, we examine in detail what LIHTC market studies are and how they have become even more sophisticated and refined in recent years. (“The Critical Verdict,” p. 32) In addition, we provide a snapshot of the National Council of Housing Market Analysts, the unique trade group for preparers and users of market studies that has helped standardize and enhance the quality of LIHTC studies for affordable housing projects through development of model content standards, numerous white papers, and educational programming. (“NCHMA,” p. 40)

A newer trend than market studies – but something we hear more and more about today – is the importance of energy and water efficiency in affordable multifamily properties. While efficiency features can easily be funded in brand new projects or in existing properties undergoing a recapitalization, for most existing properties it can be tough for current owners to find the dollars to pay for retrofit improvements. But promising signs are at hand. As we learn from Deron Lovaas and Todd Nedwick, the National Housing Trust, National Resources Defense Council, and several other groups are actively working in nine states to try to increase state and utility funding for energy efficiency improvements to existing affordable multifamily housing properties. (“Energy Advocacy,” p. 28)

Finally, in our case study story, we provide the details about a massive preservation transaction occurring in Seattle, where the original general partners are staying on and renovating Lake Washington Apartments using 4% housing credits but no new gap sources. Oh, and by the way, there’s a basketball theme in there as well. (“Creative Financing,” p. 4)

Market studies, energy efficiency financing, preservation. Our industry always has a lot to talk about and learn from.

Enjoy the issue.