3 Factors Weighing Down US Affordable Housing in 2025

According to Multi-Housing News, rising interest rates, alongside escalating construction and labor costs, have severely affected affordable housing development. 

Working better together

According to Debra Guerrero of The NRP Group, projects that once cost $70M now cost $110M. 

To offset these challenges, developers have embraced creative funding solutions that blend public and private resources:

• The Park Village project in New Jersey combines low-income housing tax credits (LIHTCs) with local housing trust funds.
• The Charles Earle Family Residences in Chicago uses a mix of federal historic tax credits, tax increment financing, and energy incentives.

However, as Julie Sharp of Merchants Capital noted, expiring tax provisions from the 2017 Tax Cuts and Jobs Act could impact investor demand for tax credit investments, creating deal uncertainty.

Role of Public-Private Partnerships

Public-private partnerships, also known as P3s, have become a cornerstone of affordable housing development, enabling the creation of much-needed units in regions with tight housing supply. 

The NRP Group’s collaboration with the Austin Independent School District to develop 650 housing units on school-owned land is a standout example of leveraging underutilized public resources for affordable housing.

Meanwhile, in Northern Virginia and other supply-constrained markets, rent growth and demand have made workforce housing projects increasingly attractive. However, developers stress the need for additional LIHTCs and more flexible funding options to meet the surging demand.

Policy Impacts

The upcoming political and regulatory environment will shape the affordable housing sector in 2025 and years to come. 

Guerrero highlighted the potential for LIHTC program expansions and the importance of replacing funds from the American Rescue Plan Act with stable, ongoing revenue sources to ensure continuity in development.

Meanwhile, the presidential election has brought affordable housing into the spotlight. Both major candidates have presented plans aimed at increasing housing supply, but debates around zoning regulations and NIMBYism remain contentious issues that could hinder progress.

Paying Attention

As developers navigate rising costs, expiring tax provisions, and an uncertain policy landscape, innovative funding mechanisms and strong public-private partnerships will be key to addressing the nation’s affordable housing crisis. 

With 2025 poised to bring both challenges and opportunities, the sector remains at a pivotal juncture in its effort to meet growing demand.