By: Pat Craig, SVP Commercial Banking Team Lead 

Developing and preserving affordable housing is critical to addressing the nationwide housing crisis. And despite common misconceptions, affordability doesn’t have to come at the expense of quality, functionality, or sustainability.

How do we know? At Bridgewater Bank, we’ve been successfully helping developers navigate the complexities of affordable housing financing since our founding in 2005. With deep expertise in structuring complex deals and a level of adaptability that larger institutions often lack, we’ve built lasting relationships with many developers in Minnesota and across the United States who count on us to help bring their projects to life.

For over a decade, I’ve had the privilege of working closely with many of these developers, witnessing both the challenges and the opportunities in this space. If you’re looking to build or preserve affordable housing that serves communities while remaining financially successful, I encourage you to keep these five strategies in mind:

1. Engage with the Community Early and Often

Affordable housing developments can face resistance due to misconceptions about property values and community integration. That’s why proactively engaging with residents, businesses, and stakeholders from the outset can help build support and minimize opposition-related delays.

Hosting community meetings, maintaining transparency, and addressing concerns early can foster trust. Involving local voices in the design process also helps create developments that truly serve the needs of the community, fostering a sense of ownership and pride.

2. Explore Emerging Markets

Post-COVID population shifts have driven significant affordable housing development in states like Florida, Texas, Arizona, and Georgia. However, these markets are becoming increasingly competitive. Firms willing to look beyond traditional development hotspots can find promising opportunities.

For example, Oklahoma City is often overlooked in favor of Texas but offers a business-friendly environment, strong job and wage growth, substantial municipal bonds, and ample (flat!) development sites. Identifying underserved markets can provide a strategic advantage and reduce competition.

3. Maximize Government Incentives and Grants

Government programs play a crucial role in making affordable housing financially viable. The Low-Income Housing Tax Credit (LIHTC) is one of the most well-known tools, offering significant cost reductions. Additionally, lesser-known programs provide direct loans and grants for sustainability upgrades in HUD-assisted affordable projects. Many state and local agencies also offer funding for community-driven housing initiatives. Tapping into these resources can dramatically improve a project’s financial feasibility.

4. Prioritize Energy Efficiency and Sustainability

Sustainable design isn’t just good for the environment; it also lowers long-term operating costs for both developers and residents. As property expenses continue to rise, energy-efficient buildings can help mitigate costs. Consider upgrading appliances to energy-efficient models, installing solar panels on unused property space, and replacing outdated lighting with LED alternatives.

Simple improvements, such as preventing excessive toilet water usage and installing water-saving faucets, can yield significant cost savings. While some of these investments require higher upfront costs, they pay off in the long run by enhancing affordability and reducing operational expenses.

5. Partner with a Relationship-Based Bank

Securing financing for affordable housing can be complex, requiring a deep understanding of funding structures and regulatory requirements. Having a banking partner that specializes in affordable housing can streamline the process and provide critical financial solutions, from predevelopment land bridges to construction-to-permanent loans, acquisition bridges, and partnership financing.

At Bridgewater, we go a step further. As a true strategic partner, we’re proud to be a one-stop shop for affordable housing developers, offering not only versatile lending options but full-service banking capabilities, including a full suite of treasury management solutions, to help developers optimize cash flow and streamline operations, ensuring projects remain financially sound from start to finish.

Developing affordable housing comes with challenges, but with the right approach, and right banking partner, developers can create high-quality, financially sustainable housing for those who need it most. Implementing these five strategies will help ensure your projects remain viable while delivering much-needed housing to underserved populations, making a lasting impact on communities.

Looking for a relationship-focused bank who values flexibility, understands the nuances of affordable housing financing, and can help navigate the challenges to get projects to the finish line? We’d love to connect with you.

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