Bridging the Gap: Opportunities in Short-Term Loans to Address Long-Term Affordability
Owners and developers seeking to establish long-term affordability in the multifamily apartment space have long faced the dual burdens of having to compete against market-rate buyers while simultaneously jumping through the hoops of applying for government-sponsored housing credits. Higher borrowing and building costs brought about by rising interest rates and inflation in recent years have only made that job harder.
On a broader scale, the demand for accessible housing continues to outstrip supply. This underscores the critical need for adequate financing, especially when dealing with programs like the Low-Income Housing Tax Credit (LIHTC) and Housing Assistance Payments (HAP) contracts. Short-term affordable housing bridge loans have emerged as a lifeline, offering the necessary time to secure long-term affordability amidst these challenges.
Bridge loans can play a pivotal role in attracting new investors to the affordable housing market segment: due to bridge loans’ short duration, investors can participate in what is otherwise typically a long-duration asset. Not only does this grow the universe of institutional investors who can now invest in affordable housing at scale, it expands the types of investment strategies that provide long term affordability.
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