Uncertainty surrounds affordable housing development due to both market conditions and government transition.
Affordable multifamily housing completions should peak at 78,000 this year as construction starts have fallen due to rising costs, increasing insurance premiums and labor shortages. This could mean deliveries will be declining at a time when demand is growing, according to Yardi Matrix’s new affordable database.
The United States faces a shortage of affordable housing units estimated at more than 7 million units.
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Affordable multifamily unit starts fell by 28.7% to 66,000 in 2024, which is the lowest level since 2020. Market-rate starts have fallen even faster – by 47% to 208,000 last year, Yardi Matrix said. As a result, affordable multifamily construction is increasing as a share of all multifamily development activity.
As costs rise, affordable housing subsidies produce fewer units, and extended construction timelines reduce the amount of units that get delivered.
“Yet another potential problem for the segment is that the value of tax credits may be reduced if corporate taxes are cut, which means affordable development general partners must raise more equity to capitalize projects,” said the report.
Affordable housing construction across the country is distributed largely based on the level of support such projects receive from state and local governments. California, Texas and Florida lead the nation in affordable multifamily stock and development. California has 11,074 units under development, Florida has 6,688, Texas has 4,537, New York has 2,480 and North Carolina has 2,122, according to the report.
The largest federal subsidized housing program is the Low-Income Housing Tax Credit (LIHTC). This program provides a tax credit to investors in affordable properties that agree to limit rents for 30 years or more. The Urban Institute estimates about one-quarter of apartments built in the United States between 2000 and 2019 were supported by LIHTCs. Other programs include Section 8, public housing grants and low-cost loan programs.
The federal government allocated $10 billion of LIHTC credits last year, up from $9.4 billion in 2023, according to Novogradac.
The potential for change with the new administration is enormous, said YardI Matrix.
“The Trump administration campaigned on the promise of building housing. Developers can expect to retain favorable tax treatment for construction projects and lower corporate taxes,” said the report. “Trump’s picks to lead housing agencies have been proponents of opportunity zones, a program enacted during his first administration that lowered taxes on properties built in ZIP codes where residents have low incomes.”
Going forward, Matrix projects deliveries nationally to total 64,745 in 2026 as the impact of fewer starts begins to take effect.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
