Jeremy Johnson, Citi's Co-Head of Citi Community Capital, recently joined New Cities Foundation for a discussion on the affordable housing space in the U.S. We recap the dialogue here.
Check out our recent partnership with New Cities called "The Big Picture: Affordable Housing" for perspectives from experts across the industry. Follow #CitiforCities to continue the conversation in social.
Could you tell us a little about Citi Community Capital and your role at the firm?
Citi Community Capital (CCC) is Citi's community development lending and investment arm. We provide products and resources to finance underserved areas across the U.S. At CCC, I co-head our origination efforts across Project Finance and Structured Lending and Investing. Last year, Citi financed approximately $6.7 billion in transactions in the affordable housing, healthcare, education, urban renewal and small business sectors across 153 U.S. cities.
How would you define affordable housing?
The definition of affordable housing is now quite broad and is often dependent on context. Eligible affordable housing typically includes both regulated and non-regulated (i.e., workforce) multifamily housing developments where rents are affordable to individuals earning not more than 80% of the Area Median Income (AMI) in the community where the project is located. The term "affordable housing" may also include housing plans established by state and local governments at AMI levels that more specifically reflect the AMI demographics of their constituent populations.
Can you talk about some of Citi's recent transactions in the affordable housing space?
Abrams Hall Senior, a former Army barracks at the Walter Reed Medical Campus, will feature 64 apartments for seniors earning 50 percent of AMI and 16 permanent supportive housing apartments for seniors earning 30 percent or less of AMI. The barracks were originally constructed in 1976 as housing for soldiers receiving long-term medical care who were able to live semi-independently. Citi also provided $213 million in financing to renovate Ocean Bay Apartments, a 1,395-unit distressed public housing development that suffered considerable damage caused by Hurricane Sandy in 2012. The project will convert through HUD's Section 8 Rental Assistance Demonstration ("RAD") program and will be issued an automatically-renewable 20-year Section 8 Project Based Voucher Contract to be administered by the New York City Housing Authority (NYCHA).
What are your biggest challenges in the affordable housing sector?
The critical need for affordable housing sharply outpaces the available supply . Access to financing plays an important role in lessening that gap. Housing is a critical element of any healthy community, in addition to other factors like access to healthcare and education. Solving the challenge of insufficient affordable housing is a high priority for Citi, as well as for nearly all the communities we serve.
What is driving the housing affordability crisis?
Overall demand for rental housing has exceeded supply. Households that rent are increasingly renting for longer periods before entering into homeownership. Both these factors have contributed to a sharp increase in rents across the multifamily rental market. Rents have outpaced incomes, causing more individuals and families to become rent-burdened.
Is the lack of affordable housing primarily an urban issue, or does it impact the suburbs as well?
While the issue is most acute in high cost urban areas the issue is a national one. It touches both cities and suburbs and even some rural communities. People aged 65 and over have been and continue to be the most burdened segment of the population, and many of those individuals live outside the big urban centers.
Are there any easy solutions to ironing out these issues?
As with any difficult problem, there is no single, one-size-fits-all solution. The low-income housing tax credit (LIHTC) has been the most direct and effective means for creating more affordable multifamily housing, and we anticipate it will continue to be an important component of future solutions.
What does the future of affordable housing look like?
I believe we will continue to see a trend toward more mixed income developments, where affordable housing is integrated with conventional multifamily housing. We have seen this trend in cities across the country as it helps to create incentives that support the ongoing creation of additional affordable housing.
With the population aging and more seniors than ever rent burdened, how do we take care of our growing seniors' needs?
Affordable housing focused on seniors is of critical importance in the US. Resources should be prioritized for affordable seniors multifamily housing that is close to public transportation, health centers and other health service providers that care for a growing and largely underserved segment of our country's population.
Are there other programs that should be emphasized to encourage the development of multifamily affordable housing?
One of the most common forms of direct support to affordable housing has been local tax abatements, which are provided by municipal authorities in exchange for restricting units for low and moderate income households.These tax abatements have been particularly effective in preserving at-risk affordable housing that would otherwise be sold and converted to market rate apartments. We also believe there should be more sharing of "best practices" between municipalities, as we see some very good ideas executed in certain pockets of the nation that are not frequently enough replicated elsewhere.