For banks trying to fulfill Community Reinvestment Act (CRA) requirements in major markets, the competition gets tougher every day.

The Act is one of the primary drivers of affordable housing investment and lending in the country. It ensures that banks and thrifts meet the credit needs of everyone in their retail banking footprint, specifically those low- and moderate-income sections of town.

Coastal markets such as New York and California are where it is hardest to meet the CRA requirements. The current CRA rules focus on “assessment areas”—key metropolitan statistical areas or counties. For the largest, multi-state banks, these activities are confined to one or two parts of each state—what’s known in the industry as “CRA hot spots."

“In those cases, I’m not sure that the pricing can get too much lower, it’s just simply a matter of banks trying to fill their CRA books and there’s not enough product to go around for everyone,” he said.

JPMorgan Chase has a construction loan program that supports about $1 billion in transactions each year, Ed Sigler, the head of JPMorgan Chase Community Development Real Estate, said.

Although competition is tight, many affordable housing developers are working on more mixed-income projects, as well as projects that fall far outside of a bank's CRA footprint, and banks aren’t opposed to following their customers on those endeavors.

“Our geographic footprint has expanded and we now do transactions outside of our CRA assessment areas,” he said. “It makes sense--- we have the ability and capacity to do it, so we should just do it. We would love to get CRA credit for it but that doesn’t keep us from doing the deal.”

Kyle Hansen, executive vice president of the U.S. Bank Commercial Real Estate, agreed that U.S. Bank officials have been following well-respected clients into mixed-income projects as well as market-rate communities.

“Our footprint markets will always be a priority—but we are not limited to those markets,” he said. “If our developers are developing outside of our footprint, we will follow them as well.” U.S. Bank did about $950 million in the affordable space last year.

And although banks didn’t stop lending to affordable developers during the downturn, this is a new trend, which is being fueled by the health of the banking industry, Hansen noted.

“Whenever competition is growing as it is today, there will always be pressure for pricing to go lower and leverage to go higher,” he said. “We’re clearly seeing that today.”