As the affordable housing market faces increasing pressures, syndicators are being pushed to adapt. At the 2024 AHIC Fall Affordable Housing Summit, leading industry experts came together to discuss the latest trends impacting LIHTC transactions during the “In Conversation with Syndicators” panel. Moderated by Clarence Burleigh of BNY Mellon, the discussion featured Tony DiBlasi from Ohio Capital Corporation for Housing (OCCH), Jennifer Erixon from Walker & Dunlop, Eric Moody from RBC, and Noreen Short from Boston Financial. They shared insights on portfolio performance, rising expenses, staffing challenges, and how the industry is evolving to address these issues.

Post-COVID Challenges: Soaring Expenses and Rising Rents
One of the most pressing issues discussed was the dramatic rise in expenses across LIHTC portfolios. Tony DiBlasi kicked off the session by explaining OCCH’s deep dive into the performance of 488 stabilized properties between 2019 and 2023. The analysis revealed that operating costs had jumped by 30%, driven largely by surging insurance and maintenance expenses. Insurance premiums, in particular, had skyrocketed by 83%, and maintenance costs had increased by 38%, placing significant pressure on properties across OCCH’s five-state portfolio. (Tony's Presentation)

“The increase in operating costs is not surprising,” said DiBlasi, “but it’s certainly a major concern for all of us in the industry.” The issue was particularly acute for historic rehabilitation projects, where the cost of upkeep and repair tends to be even higher. DiBlasi pointed out that while rent increases had helped offset some of the financial strain, with rents rising by 18.7% across their portfolio, this was still not enough to fully counterbalance the rise in expenses. “If it weren’t for these rent increases, things would look a lot worse,” he emphasized.
Eric Moody added that vacancy rates had also become a concern, with many properties struggling to maintain full occupancy due to staffing shortages. These issues, compounded by inflation and aggressive rent escalations, created a situation where demand for affordable housing remained high, but the ability to serve that demand was increasingly constrained by operational challenges.

Staffing: The Silent Crisis Behind Operational Woes
A central theme of the discussion was the staffing crisis that has been quietly driving many of the operational challenges within LIHTC properties. Panelists agreed that the shortage of experienced property management staff was one of the biggest contributors to underperformance in LIHTC portfolios. DiBlasi explained that properties in the bottom quartile of OCCH’s portfolio often had the highest turnover rates among staff, leading to delayed unit turnover, increased vacancy rates, and rising maintenance backlogs.

“The staffing issue is a major driver of our portfolio’s performance,” DiBlasi said. “Properties where management companies have high turnover are struggling the most. We’ve seen turnover rates as high as 60-70% in some markets, and the people replacing those who leave often don’t have the necessary experience.” The result, he said, is that properties can’t turn over units fast enough to meet demand, which leads to longer vacancies and increased bad debt as tenant receivables pile up.

Jennifer Erixon echoed these concerns, stressing the importance of stability and experience in property management teams. She noted that developers are increasingly recognizing the need for stronger partnerships with their management teams and are involving their financing partners earlier in the development process to address staffing challenges before they become critical. “If you don’t have staff, you can’t turn units, and if you can’t turn units, your vacancy goes up. It’s a vicious cycle,” Erixon said.

To combat these challenges, many syndicators are deepening their engagement with property management teams and monitoring staffing trends more closely. Noreen Short from Boston Financial shared that her team is working with asset managers to track staffing levels at key properties and intervene when necessary to support underperforming sites. “We’re having real-time conversations with our asset management team and our developer partners to ensure we stay ahead of these issues,” she said.

Insurance Costs: An Industry-Wide Challenge
Insurance costs have emerged as another significant issue facing LIHTC properties, especially in regions prone to natural disasters. DiBlasi noted that insurance premiums had risen by more than 80% across OCCH’s portfolio, with some properties seeing even steeper increases. “It’s not just about affordability anymore—it’s about availability,” said Eric Moody. “In some areas, insurers are pulling out entirely, leaving properties without the coverage they need.”

This issue is especially concerning in regions where climate change is exacerbating the frequency and severity of natural disasters, such as hurricanes, wildfires, and flooding. The cost of insuring properties in these areas has soared, forcing many owners and developers to reconsider their insurance strategies or face the risk of being uninsured.

During a lightning round of quick-fire questions, panelists offered potential solutions to the insurance crisis. DiBlasi suggested that broader industry-wide reforms are needed to address both the rising costs and the shrinking availability of insurance coverage. “Without systemic change, these issues are only going to get worse,” he warned.

Moody added that some regions might benefit from alternative structures, such as insurance co-ops or pooled risk models, which would allow properties to share the burden of high insurance costs. However, he acknowledged that implementing such models would require cooperation between the public and private sectors, as well as support from policymakers.

Underwriting Adjustments: Rethinking Traditional Assumptions
As the LIHTC market continues to evolve, syndicators are being forced to rethink traditional underwriting assumptions. DiBlasi explained that standard assumptions of 2% revenue growth, 3% expense growth, and 5% vacancy are no longer sufficient in today’s market, where expenses are rising at a much faster pace. “We’re resetting expectations,” he said. “It’s clear that the old models don’t apply anymore.”
Jennifer Erixon expanded on this point, noting that syndicators are now conducting much more thorough pre-screening processes before committing to new deals. “We’re spending more time digging into financials upfront,” she said. “It’s critical to ensure that developers have the liquidity and financial stability needed to weather the current environment.”

In addition to more conservative underwriting, syndicators are also placing greater emphasis on real-time data from asset management teams. Eric Moody shared that RBC has set up a new internal committee to regularly review portfolio performance data and adjust underwriting models accordingly. “We’re in constant communication with our asset management team,” he said. “This isn’t something we do quarterly anymore—it’s daily, weekly.”

Vacancy Rates and Sponsor Health: The New Areas of Focus
Vacancy rates, particularly in supportive housing, were another area of concern highlighted by the panelists. Erixon noted that in many markets, vacancies are being driven not by a lack of demand, but by operational challenges such as staffing shortages. This has forced some syndicators to adjust their underwriting assumptions, with higher vacancy rates now being factored into deals to reflect the longer turnover times.
Noreen Short added that sponsor health is becoming an increasingly important consideration for syndicators, particularly for smaller developers facing financial strain due to rising costs. “We’re seeing more requests for accelerated equity payments and other forms of financial relief,” she said. “Some developers just don’t look the same as they did three years ago, and that’s something we have to take into account when underwriting new deals.”

Moody agreed, noting that the combination of deal stress and sponsor stress is forcing syndicators to have difficult conversations with developers about their financial health. “It’s not always possible to say yes to every deal,” he said, “but we’re working closely with our developer partners to find creative solutions wherever we can.”

A Glimpse Into the Future: Emerging Issues in the LIHTC Market
As the session drew to a close, the panelists turned their attention to the future, identifying several emerging issues that the LIHTC industry will need to address in the coming years. DiBlasi pointed to crime as an increasingly important factor in property performance, particularly in urban areas. “We’re seeing crime impact both insurance costs and staffing levels,” he said, adding that property managers are increasingly turning to new technologies, such as voice-down systems, to improve security without relying on costly on-site personnel.

Another area of concern is the shifting regulatory landscape. Erixon highlighted the growing role of local governments in shaping the future of affordable housing, particularly through rent control measures and other regulations that could impact the financial viability of LIHTC properties. “We need to be vigilant about how these regulations will affect our portfolios,” she said. “In some markets, well-intentioned legislation could have unintended consequences.”

The panelists also discussed the potential impact of the Inflation Reduction Act and the growing interest in renewable energy tax credits. While the LIHTC program remains a cornerstone of affordable housing development, Moody acknowledged that some investors are shifting their focus to the renewable energy space, which offers easier execution and attractive returns. “There’s a lot of buzz around renewables right now,” he said. “It’s something we’re keeping a close eye on.”

Conclusion: Syndicators Adapt to a Changing Market
The “In Conversation with Syndicators” panel at the AHIC Fall Affordable Housing Summit provided a comprehensive overview of the challenges and opportunities facing the LIHTC market today. Rising costs, staffing shortages, and insurance issues are reshaping how deals are structured and underwritten, forcing syndicators to adopt more conservative approaches and collaborate more closely with developers and property managers.

Despite these challenges, the panelists expressed optimism about the future of the LIHTC program. “Our portfolios have been remarkably resilient,” Short concluded. “As long as we continue to adapt and work together, we can weather these challenges and continue to provide critical affordable housing.”