While investor sentiment around financing for affordable housing has seemingly improved over 2023, a new survey from Walker & Dunlop suggests that market participants remain divided on how the sector will fare next year.
More than half of survey respondents reported an increase in debt and equity investments in affordable housing compared to last year, signaling a more favorable investment climate for 2025. However, some remain cautiously optimistic, anticipating that systemic challenges such as high interest rates and inflation may dampen the sector’s outlook.
Walker & Dunlop conducted the survey at the Affordable Housing Finance live conference in November and found that more than 89% of respondents agreed on the need for zoning reform and increased resources to boost housing affordability across the board. The survey also highlighted that despite the uptick in investments, zoning and limited supply remain major barriers in dense urban areas, where resource constraints and zoning restrictions continue to hinder the development of new housing.
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Over 52% of executives in the affordable housing industry reported significant growth in debt and equity investments compared to 2023—a slight increase from 43% of respondents in 2023—with many expecting this trend to continue into 2025.
However, ongoing issues such as trade wars, inflation, and rising interest rates remain top concerns for survey respondents. Nearly 70% expressed concern that these broader economic factors could undermine sector growth.
Inflation has driven up construction costs, while supply chain disruptions and tariff increases have made it harder to access building materials. As a result, developers are struggling to meet budgets and deadlines, raising questions about the long-term viability of affordable housing projects.
Interest rates also continue to pose a significant challenge for affordable housing investors, with over 80% of respondents noting that higher borrowing costs have affected their ability to finance new developments. While some remain hopeful that a potential decline in rates could alleviate these pressures, most agree that a combination of policy reforms and financial adjustments is necessary to fully address the sector's challenges.
Despite these challenges, developers are focusing on strategic partnerships, innovative financing models, and new technologies to mitigate risks and maintain the momentum seen in 2023. These efforts will be crucial to sustaining growth and ensuring the long-term success of affordable housing projects, market participants said.
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