2024 Update: Local governments are closing the financial gap for affordable housing developments

<p>Earlier this month, DFI examined how local governments in North Carolina have stepped in to make new affordable housing construction economically viable after a historic increase in construction costs and elevated interest rates. In 2023, local governments contributed nearly $30 million in soft loans to new construction projects funded by 9% Low-Income Housing Tax Credits (LIHTC) — more than double the amount in any previous year.</p> <p>In August, the North Carolina Housing Finance Agency (NCHFA) released the latest funding awards for 2024. This update examines how gap funding trends have evolved in the past year for new construction projects awarded 9% tax credits.</p> <p>The data shows that affordable housing developers continue to struggle with closing financial gaps in their projects (Table 1). The median development cost per unit remained steady at $250,000, more than 50% higher than in 2020. And while approximately 100 more units were funded this year than in 2022 and 2023, developers are still building smaller projects than before COVID-19.[1]</p> <p></p> <p> </p> What’s changed? <p>Historically, affordable housing developers have accessed gap funding through a state program called the Workforce Housing Loan Program (WHLP), administered by NCHFA. However, funding for WHLP lapsed from 2021 to 2023, just as construction costs surged. In response, developers increasingly relied on local governments to fill the financial shortfall. Local governments can assist housing projects for low-to-moderate income households when they meet the requirements described by my colleague Tyler Mulligan in blog posts here and here.</p> <p>In 2024, the North Carolina General Assembly renewed funding for WHLP, with NCHFA awarding $32.5 million to 88% of [...]</p>