Mixed-income averaging is cited by affordable housing executives as a way to increase affordable housing development in 2019, according to a Capital One survey.
by Gail Kalinoski
A majority of affordable housing leaders and lenders surveyed recently by Capital One on deals and challenges heading into 2019 expect mixed-income averaging passed by Congress in March as part of a bipartisan omnibus bill to spur increased affordable housing development.
“This is the kind of innovation and creative thinking that is going to be necessary if we are going to continue making progress addressing the demand for affordable housing,” Laura Bailey, head of community finance and community affairs at Capital One, said in a prepared statement. “As obstacles are ironed out, I think we will be seeing more of it.”
Of 101 attendees surveyed by Capital One at the recent National Council of State Housing Agencies 2018 Conference & Showplace in Austin, 68 percent said the income-averaging set-aside for low-income housing tax credit (LIHTC) properties will lead to more affordable housing, with 61 percent expecting it to have the most impact in urban markets. The provision, originally introduced as part of the Affordable Housing Credit Improvement Act in 2017 by Sen. Maria Cantwell (D-Wash.) and Senate Finance Committee Chairman Orrin Hatch (R-Utah), was included in the March omnibus spending bill. It replaces the 60 percent AMI maximum eligible income for LIHTC properties with 80 percent for apartments where the propertywide average does not exceed 60 percent. Affordable housing advocates hailed it as a way to serve a wider range of households and encourage development in more markets, particularly low poverty, racially diverse neighborhoods. Fifty-three percent of those surveyed by Capital One cited the social impact of income diversity as the primary attraction of income-average.
While supporting the concept, the respondents did raise some questions about the rollout of the new rules with 33 percent identifying “lack of clarity about state and local implementation” and 32 percent citing “gray areas in the legislation” as the greatest impediments to its adoption.
Despite some concerns cited by the survey respondents, Bailey told Multi-Housing News she was confident developers and lenders would work through them.
“We believe that developers are feeling like they have the information they need to put mixed-income averaging to work and increase their development of affordable housing,” she said. “When asked what the challenges were facing mixed-income development, widespread awareness barely registered a blip—coming in at only 2 percent of respondents. We also see that developers are interested because only 13 percent listed developer interest as a challenge. This is all very promising.”