Citi Community Capital provided $160 million in construction financing and $117 million in permanent financing to DevCo, LLC, for Solera, a mixed-income project with 590 units of affordable and workforce housing in Renton, Washington.

Worries about the coronavirus pandemic fell away in 2021—at least for leading lenders of affordable housing properties.

“Construction shortages, rising labor costs, and rising materials costs—those are high on our list of worries,” says Kathy Millhouse, co-head of Citi Community Capital. But, affordable housing lenders like Citi no longer worry that COVID-19 will hurt the economics of their deals.

Lenders face many of the same challenges and opportunities in the pandemic recovery that they faced beforehand—only more so. The need for affordable housing has never been greater.

State and local housing officials are offering new housing programs, while a gridlocked Congress has not. Investors—from large national banks to Freddie Mac and Fannie Mae—are setting bold affordable housing goals. But escalating costs for materials, labor, and land make it harder for affordable housing lenders to put their capital to work. And as prices rise throughout the U.S. economy, Federal Reserve officials also are increasingly likely to raise interest rates.

All these factors make the race to lend to affordable housing properties faster and more challenging.

In 2021, Affordable Housing Finance’s Top 25 affordable housing lenders provided more than $63 billion in permanent and construction loans to developments that serve households earning up to 80% of the area median income (AMI). This is up from $51.8 billion in 2020 and $41 billion in 2019.

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