Alliant Capital 2021 Annual Outlook - Strong Foundations, Endless Possibilities.
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Alliant Capital
2021 Annual
Outlook
Strong Foundations,
Endless Possibilities.
1 ALLIANT CAPITAL
© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOK
Contents
INTRODUCTION 3
Introduction to Alliant Capital
ABOUT ALLIANT 4
Key Facts & Figures
EXECUTIVE SUMMARY 5
Shawn Horwitz, CEO, Alliant Capital
2020 IN REVIEW 6
What We Expected 7
2020 opportunities as we began the year
The Pandemic 9
How the pandemic impacted the industry
Top Trends 20
2020’s top trends according to our senior leaders
2021 OUTLOOK 21
Top Observations & Predictions 23
What’s in store for 2021?
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOK
Introduction to
Alliant Capital
Alliant Capital is a leading tax credit and incentives firm
focused on the development and financing of
affordable housing. Alliant is among the nation’s top
syndicators and has an unparalleled track record of
success. With a dedicated, growing team of
experienced and well-trained commercial real estate,
asset management, legal and tax professionals, Alliant
provides the highest level of fully integrated real estate
and investment support services.
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOK
1997
Alliant is founded by
About Us Shawn Horwitz, Sidney
Kohl and Scott Kotick to
address the critical need
7th Largest Low
Income Housing Tax
for affordable housing. 1998
Credit Syndicator Alliant develops
its proprietary
database.
2000
Alliant closes its
100th transaction.
1,000+ 2004
Tax Credit
Alliant starts OMNI,
Properties
a New York-based
affordable housing
developer, its first joint
venture partnership.
2007
$8B+ Alliant purchases
EF&A and closes
Equity Invested its 500th
transaction. 2012
Alliant closes on River
Park Towers, the largest
LIHTC deal in the
country, over $121 million
in equity and 1,500 units.
105,000+ 2013
Alliant sells EF&A to
Units
Ares Commercial
Real Estate
Corporation. 2014
Alliant sells its interest in
OMNI to Stone Point Capital,
having developed 38 deals
1,000+ totaling 9,041 units and
$547 million in equity. Begins
Investments 2015 additional JV relationships.
Alliant continues its
JV initiatives.
2019
Alliant closes its
117 2020
1,000th transaction. An
industry-first asset-backed
Funds Alliant reaches over $8B
securitization is executed;
in equity raised for the Shawn Horwitz becomes the
development of sole owner of Alliant.
affordable housing.
Executive Summary
2020: The only certainty is uncertainty
On behalf of the entire Alliant team, I’m proud to share
with you our first ever Annual Outlook. It is increasingly
important to analyze and share data reflecting the impact
affordable housing has nationally. More than ever,
affordable housing is critical for families as renters’
incomes lag behind housing costs1 in nearly every state.
The COVID-19 pandemic has intensified the focus on
housing issues in nearly every community. With
widespread job losses, home losses, increased rent
burdens, and continued economic uncertainty, access to
clean, safe, affordable housing is, and will continue to be,
essential.
Economic Impact
The economic impact of the pandemic has contributed to
a rise in homelessness. The affordable housing shortage
is now being discussed in circles beyond those of us that Shawn Horwitz
have worked in the industry for decades. We do not, CEO, Alliant Capital
however, anticipate current housing trends to improve in
the near future.
The economic uncertainty and distress we read about daily is reflected in the data
discussed in this report. We are focused on using data to anticipate and mitigate
challenges within our portfolio as it becomes increasingly important to do so. This
report, in its first year, is founded on original research conducted by the Alliant team
using data from our proprietary database, initially developed in 1998. With more than
20 years of data at our fingertips, it is a valuable resource for providing insights on
the affordable housing industry.
Looking Ahead
The need for affordable housing will only grow given the current climate.
Understanding emerging trends will help us all as we work to address the many
challenges facing our industry. We hope this analysis, coupled with the expertise of
Alliant’s veteran leaders, will contribute to expansion of housing opportunities for
the families in our communities and across the country.
Ellen, Ingrid Gould, Amy Ganz, and Katherine O'Regan. "A Renter Safety Net: A Call for Federal Emergency Rental
Assistance." Securing Our Economic Future (2020).1
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2020 In Review
What We Expected
Based on 2019 trends, our senior leaders at Alliant expected:
Easing of price escalations. 2019 brought a very tight housing
construction market with ongoing pricing increases due to
increased demand. Towards the end of 2019 and into 2020, that
trend started to ease, particularly on the pressure of limited
materials and limited manpower.
Tax Returns. One of the big
“Heading into trends we expected to see in
Asset Management was the
2020, we were approach to tax returns and
8609’s. The new
expecting a
Administrative Adjustment
Request (AAR) procedure
added a level of complexity
fairly productive for filings and allocation year
of tax credits. We certainly
year.” thought this was going to be
the biggest change of the
year.
Business Expansion. Heading into 2020, we were expecting a
fairly productive year. We geared up for increased business and
broadening our relationships by adding to our team.
Increased Demand. As the need for affordable housing continued to
grow, we anticipated increased demand from renters, and our
investor and developer partners.
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOK
Construction Delays
The COVID-19 pandemic has most significantly
impacted the construction of tenant-in-place
rehabs. Of course the health and safety of
construction staff, site staff, and residents is of
paramount concern when there is a deadly,
airborne virus to contend with. The nature of
tenant-in-place rehabilitations means staff are
going in and out of occupied units. In the
COVID-19 environment, this elevates the risk
level of a project even higher than normal. Our
construction and development partners were
able to adjust and re-schedule these projects
- Matthew Breiner,
as rolling rehabs with tenant relocations.
SVP, Construction
Alliant worked with our partners to deal with labor shortages, work flow,
and supply chain disruptions in ways that minimized credit delivery delays.
With these factors impacting projected placed-in-service dates, our teams
needed to underwrite and model for all of these possibilities. Many states
recognized the impact construction delays were having on projects and
revised their deadlines. Some granted blanket extensions, while other
state agencies looked at projects on a case-by case basis, recognizing that
delays because of the pandemic impacted construction timelines heavily.
Concerns with modeling sufficient slack in construction schedules given
the uncertain future impacts of the ongoing pandemic will continue to be
one of the most significant trends of the pandemic.
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The Pandemic
Construction Delays conditions and impacts as the
pandemic waxes and wanes across the
At the onset of the pandemic, initial country is now the biggest challenge
stay-at-home orders paradoxically on projects under construction.
resulted in an increase in the
availability of manpower to affordable Rent Collections
housing projects in general. While
most construction projects were Rent collections were a major
forced to shut down, affordable
concern at the early onset of the
housing construction was generally
pandemic. In April and May, the
deemed essential work, so most of
the projects in our portfolio shutdown of the economy and
continued construction with massive job losses was expected to
increased manpower availability. lead to a significant decline of rent
collections in our portfolio.
While the speed of construction
Instead, detailed by the figures in the
initially increased due to added
following pages, economic
manpower, contractors had to learn
occupancy has remained around 94%
to work while social distancing and
manage new COVID-19 safety throughout the pandemic. The
regulations. additional unemployment support
available from The CARES Act
As stay-at-home orders were relaxed, allowed families to stay current on
general construction volume their rent payments.
returned to near previous levels; in
the residential sector, construction Although our overall portfolio’s
volume has significantly increased, economic occupancy numbers have
resulting in tighter labor market been stable throughout the
conditions. pandemic, we may experience some
softening in these numbers given the
Many factories are not producing at continued elevated unemployment
their previous capacity, or are rate absent additional federal relief.
experiencing intermittent shutdowns, We will continue to closely monitor
causing price spikes and shortages in rent collection rates throughout 2021.
material supply chains. Managing
varying regulations, market
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COVID-19 v. GFC
Traditionally, examining the relationship between varied macroeconomic factors and
the after-effects on the economy of prior downturns would be preferred means of
predicting what might happen in the current downturn.
For a few reasons, including aggressive action by the Federal Reserve, large early
stimulus by Congress, the suddenness of the downturn, and consumers’ relatively
strong position entering the pandemic, the economic outlook may, in some ways, be
better.
However, recessions often have long-lasting, unpredictable effects and touch
different sectors of the economy. They affect employment, earnings, spending,
saving, lending, and investing (among other things) differently, and the way in which
those aspects interact dictates the extent, depth, and composition of their damage.
In order to better understand what might happen going forward, we can compare
and contrast several of these factors from the Great Financial Crisis (GFC) and
current COVID-19 Crisis. First, let’s look at Alliant’s performance through the GFC:
Source: Alliant Capital
The uniform positivity of same-property income growth through both the GFC (where
an inability of tenants to pay risked negative growth) and three years following (when
lower AMI values put a damper on, but did not decline growth) speaks to two things:
First, affordable housing is an extremely scarce good. Demand relative to supply is so
strong that even with extreme stress on employment and confounding factors
dragging the economy writ large down, strong income growth was imminently
achievable. Second, median income is sticky. People are more likely to lose their jobs
entirely than accept lower wages, so median incomes tend to consistently grow,
even if at lower rates. That keeps income growth consistent in the affordable sector.
NOTE: All graphs in the following pages are separated between Tract/State/Country. These are averages across the portfolio for the communities around Alliant portfolio properties (Census Tracts),
the states those tracts are in, and the country as a whole. All data included in this report is from Alliant’s proprietary database unless otherwise noted.
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKEmployment
LIHTC properties are, almost by definition, leased to tenants in low-wage jobs. The
performance of the employment market for these jobs is extremely important in
gauging future performance of affordable rental properties.
Based on income and employment data from the Bureau of Labor Statistics, the
lowest-wage industries are Retail Trade (15.1M workers), Leisure and Hospitality
(13.4M workers), and Transportation and Warehousing (5.6M workers) and
presumably make up a large portion of our residents’ employing industries.
Employment by Industry – GFC vs. COVID-19
10.0%
0.0%
-10.0%
-20.0%
-30.0%
-40.0%
-50.0%
1 Year 9mo 6mo 3mo Start 3mo Into 6mo Into 9mo Into 1 Year
Prior Prior Prior Prior Into
Retail Employment - GFC Retail Employment - COVID-19
Leisure and Hospitality - GFC Leisure and Hospitality - COVID-19
Transportation and Warehousing - GFC Transportation and Warehousing - COVID-19
Source: U.S. Bureau of Labor Statistics
Looking at raw employment data, nine months into the current recession, the
impact of the pandemic on low-wage jobs is severe. Low-wage job losses, especially
in the Leisure and Hospitality industry are very high, several multiples worse than
the GFC at the same point in time. That said, what remains unclear is whether the
result will be significant.
What does seem clear, however, is that the rate of prolonged unemployment is
much less significant than was anticipated in March/April. Also potentially
encouraging is that employment is only one part of the picture: income is what is
ultimately used to pay rent and, so long as the lost wages from unemployment are
replaced and there is a successful vaccination campaign, the downside case can be
reliably revised upward.
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKIncome
As highly correlated as employment and income usually are, they can be
counteracted by fiscal policies seeking to alleviate the financial burden of
unemployment. The importance of income is much higher in LIHTC housing, as rents
are determined by area median income (AMI); a measure inclusive of all income, not
only wages earned. Congress effectively addressed the dire income situation in the
initial phases of the pandemic, though without continued aid throughout 2021, and a
successful vaccination campaign, the picture becomes far cloudier.
YoY Income by Measure – GFC vs. COVID-19
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
1 Year 9mo 6mo 3mo Start 3mo Into 6mo Into 9mo Into 1 Year
Prior Prior Prior Prior Into
Hourly non-supervisory - GFC Hourly non-supervisory - COVID-19
Disposable Personal Income - GFC Disposable Personal Income - COVID-19
Personal Income - GFC Personal Income - COVID-19
Source: U.S. Bureau of Labor Statistics and U.S. Bureau of Economic Analysis
From one perspective, the immediacy of aid during the current crises was
objectively good and established a cushion from which newly unemployed workers
could operate. On the other hand, without continued aid responsive to the
economic cycle, the increased income due to stimulus may suffer the same fate as
it did in the GFC, an initial bump followed by a rapid fade.
Given the dire nature of the employment situation, it isn’t far-fetched to think
incomes might fall further and faster than they did in the GFC, absent sustained
fiscal support. Still, the increased income through 2020 likely bodes well for
affordable max allowable rents across the country through 2024, when 2021’s
income numbers will be used to calculate new rents.
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKSpending
The lifeblood of a consumer economy is spending. The intent of stimulus beyond
simply affording the bare necessities is to spur spending, which has the highest
multiplier effect of the uses of money (spending, investing, saving).
The long-term health of the economy depends on reliable and growing
consumption, which keeps the virtuous cycle of growth positively recursive. If
consumption and the expectation of future consumption falls, everything tied to it:
investing, hiring, etc., slows and the recession has the potential to look quite a bit
worse (absent intervention).
YoY Spending by Measure – GFC vs. COVID-19
20.0%
Start 3mo Into 6mo Into 9mo Into 1 Year
Into
10.0%
0.0%
1 Year 9mo 6mo 3mo
Prior Prior Prior Prior
-10.0%
-20.0%
-30.0%
Personal Consumption Expenditures - GFC
Personal Consumption Expenditures - COVID-19
-40.0%
Vehicle Sales - GFC
Vehicle Sales - COVID-19
Construction Spending - GFC
Construction Spending - COVID-19
Source: U.S. Bureau of Economic Analysis and U.S. Census Bureau
The news here is difficult to decipher. It is unclear whether spending has been hit
because of a simple inability to do so (lockdowns have negated the opportunity to
spend in many cases) versus short-term behavioral changes (those temporarily
hesitant to shop during a pandemic) versus long-term structural changes (those
losing desire to shop/dine/travel/etc.).
Encouragingly, construction spending is still rising year-over-year and vehicle sales
have rebounded materially. To determine what the ultimate attitudes of consumers
will be exiting the pandemic, we should also look at the flipside of spending: saving.
13 ALLIANT CAPITAL
© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKSaving
Saving isn’t, economically speaking, a particularly productive use of capital. It does,
however, establish an important safety net for consumers with debt. That safety net
is critical in determining the ultimate severity of downturns- if large portions of the
population lose their income and are without savings, the asset market can be put
into disarray through foreclosures and bankruptcies.
Leading up to the GFC, the Personal Saving Rate was near an all-time-low, lower than
3% for much of 2005. Conversely, this rate has been materially higher leading up to
the COVID-19 crisis- averaging around 7.5% for much of the 2010s.
Saving Metrics – GFC vs. COVID-19
30.0%
20.0%
10.0%
0.0%
1 Year 9mo 6mo 3mo Start 3mo Into 6mo Into 9mo Into 1 Year
Prior Prior Prior Prior Into
Personal Saving Rate - GFC
Personal Saving Rate - COVID-19
Personal Interest Payments as % of Bank Deposits - GFC
Personal Interest Payments as % of Bank Deposits - COVID-19
Source: U.S. Bureau of Economic Analysis and Board of Governors of the Federal Reserve System
The higher savings rate has led to healthier household balance sheets. While
household interest payments are similar in nominal terms to the height of 2007,
accumulated deposits are approximately 2.5 times higher. This is likely due to a
combination of tighter lending standards through the cycle, debt relief from the
stimulus, and lower spending. This bodes well for containing the downturn for a
period of time, though a prolonged contraction without sustained fiscal support
would erode this relative safety net.
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKLending
In many ways, lending is the economic cycle. Increased lending creates an
expansion of money; decreased lending creates a contraction.
On the consumer side, one can think of lending as a conduit for making future
consumption occur now. Because spending has the highest multiplier effect, the
added burden of debt payments associated with future purchases made now can
pay for itself if that leverage is kept to a manageable growth rate. One indicator that
lending is not running ahead of itself (and thus likely to spur a contraction) is
whether or not debt service is paid on time.
6.0% % of Loans 90 Days Delinquent – GFC vs. COVID-19
90 Days Delinquent - GFC 90 Days Delinquent - COVID-19
4.0%
2.0%
0.0%
1 Year 9mo Prior 6mo Prior 3mo Prior Start 3mo Into 6mo Into 9mo Into 1 Year Into
Prior
YoY Lending by Type – GFC vs. COVID-19
40.0%
30.0%
20.0%
10.0%
0.0%
1 Year 9mo Prior 6mo Prior 3mo Prior Start 3mo Into 6mo Into 9mo Into 1 Year Into
Prior
Commercial and Industrial Loans - GFC Commercial and Industrial Loans - COVID-19
Consumer Credit - GFC Consumer Credit - COVID-19
Real Estate Loans - GFC Real Estate Loans - COVID-19
Board of Governors of the Federal Reserve System
We are not currently witnessing widespread consumer distress. In comparison,
delinquency rates started to creep up even before the GFC started, a harbinger of a
steep spike that was to follow. Fortunately, delinquency rates are currently holding
steady at pre-crisis levels. Also encouraging is the general strength of lending. The
effects of the federal PPP program were seen in the dramatic rise of commercial and
industrial loans three months into the pandemic.
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKInvesting
Investing shares many characteristics with lending. In many ways, it can be
considered to be the hub of the economic cycle. Investing may also be our best
window into a distilled version of the economy without significant influence from
Federal or Congressional action, which has supported income and lending materially
during the COVID-19 crisis.
As with several of the other factors, the trend is difficult to discern. While there was a
steep initial drop in investment that eclipsed the concomitant drops during the GFC,
the next-quarter rebound has placed the metrics into ambiguity. Although
investment has rebounded significantly since the start of the pandemic, broad
investment metrics currently sit at roughly the same place as they did during the
same stage of the GFC.
Indexed Investing Metrics – GFC vs. COVID-19
105.00
100.00
95.00
90.00
85.00
80.00
1 Year 9mo 6mo 3mo Start 3mo Into 6mo Into 9mo Into 1 Year
Prior Prior Prior Prior Into
Gross Private Domestic Investment - GFC
Gross Private Domestic Investment - COVID-19
Private Nonresidential Fixed Investment - GFC
Private Nonresidential Fixed Investment - COVID-19
Source: U.S. Bureau of Economic Analysis
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKMultifamily affordable housing, despite everything
going on in the economy, is still a really desirable asset
class. Millions of people lost jobs in 2020; this industry
is critical. We can’t build enough of it. People need
this housing, access to it, and more of it.
– D Mark Livingston, SVP, Acquisitions
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKRent Collections
Alliant has taken a deep look at the economic effects of the pandemic on our
portfolio. We reached out to our partners seeking reports of their economic
occupancy. Throughout 2020, we consistently received reported total gross rent
collections of approximately 94%.
For additional analysis, we segmented our collections data three into primary
categories:
(1) Primarily Subsidized properties (projects with over 66% of the units benefiting from a rent subsidy),
(2) Moderately Subsidized properties (projects with between 33% and 66% of the
units benefiting from a rent subsidy),
(3) Senior Unsubsidized properties (excluding any Fully or Moderately Subsidized properties), and
(4) Family Unsubsidized properties (excluding any Fully or Moderately Subsidized properties).
Alliant’s portfolio is composed of: (1) 35% Primarily Subsidized properties, (2) 9%
Moderately Subsidized properties, (3) 14% Senior Unsubsidized properties, and (4)
42% Family Unsubsidized properties.
Primarily
Subsidized
35%
Source: Alliant Capital. Figures are representative of April – December, 2020.
The reported Primarily Subsidized properties have the best economic occupancy at
95.8%. Moderately Subsidized and Senior Unsubsidized properties follow at 94.5%
and 94.3% economic occupancy, respectively. Family Unsubsidized properties
reported somewhat lower economic occupancy at 92.1%.
18 ALLIANT CAPITAL
© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKRent Collections
Because Family Unsubsidized properties have the lowest economic occupancy
percentages, we analyzed them across several categories to look for any particularly
weak sub-segment. Consistent with prior analyses, we found that the Watch List
properties have the lowest economic occupancy at 87.0%, with all other segments at
91.9% to 94.8%. Suburban and New Construction properties are also below the 94%
portfolio average at 91.9% and 92.4%, respectively.
Although the overall portfolio’s economic occupancy numbers have been stable at
94% over the past six months, we may experience some softening in these numbers
given the continued elevated unemployment rate; absent additional federal relief.
We will continue to closely monitor economic occupancy rates into 2021.
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOK2020’s Top Trends
At Alliant, we keep our fingers on the pulse of the industry. Here are
the years’ top trends, according to our senior leaders:
Construction increases industry-wide. After a brief pause, residential
housing as a whole has rebounded, with construction reaching highest
levels since 2008.
Mobility. We’re seeing more people move from cities into rural or
suburban areas. We anticipate this trend will continue as employers re-
examine their need for centralized offices in high density areas and
employees take greater advantage of working remotely. This will be
beneficial for the secondary and tertiary markets we serve.
Section 8 stands out. We saw an increased commitment to fund
more properties with Section 8 contracts in 2020. Combined with aid
from government stimulus funding, the predictability of Section 8
contracts have made these properties more desirable during the
downturn.
Increased costs. Costs are typically expected to rise every year, but
2020 saw a drastic increase in construction and operating costs,
especially uncontrollable costs such as utility costs, insurance, and tax
costs.
Interest in individual assets. In 2020, our team saw a deeper level of
interest in our properties and their residents. This proves to be a trend
that is much stronger than it was a couple of years ago. Investors are
more hands on and more committed to the outcomes of the projects.
Focused underwriting. Pricing decreased in 2020 and underwriting
became more conservative as transactions sought a smaller investor
pool.
20 ALLIANT CAPITAL
© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOK2021
Outlook
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKWe anticipate the current economic uncertainty will
continue well into 2021. This will lead to less cash flow
at the property level, and a limitation of the flexibility of
property managers through the year, if not longer.
– Chris Stigall, SVP, Asset Management
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKTop Observations
Our senior leaders share their top observations about 2020 and use
them to provide insights into 2021:
Multifamily affordable housing, despite everything going on in the
economy, is still a really desirable asset class. 33 million people lost
their jobs in 2020; the industry is critical. We can’t build enough of
it, there’s definitely an economic divide and it’s blatantly apparent
now. People need this housing, access to it, and more of it.
“The cost and The cost and time for
providing housing are
time for
increasing. If you
want to develop a tax
credit property,
providing working with the
states and all of the
housing are people involved in
getting the property
increasing.”
built – that’s all
increasing.
The degree of experience and expertise in our industry is
increasing. All of the players – developers, investors, GP’s, staff at
properties - there are more people who know how to manage tax
credits than ever before. More people are doing it – well – than
ever before.
Properties did much better than was initially expected, given
the level of unemployment. We really expected to see worse
rent collections and overall properties in decline. We need to be
realistic about the amount of unknowns and volatility, and try to
mitigate against that.
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© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKTop Observations
The state of the economy is in flux; while we don’t have clarity on its
direction yet, we can have some confidence in the secular strengths of
Affordable Housing as a whole.
Employment is in its worst situation since the Great Depression, however
fiscal and monetary support has been both timely and sizeable. High
prolonged unemployment is a significant risk to all investible assets, though
these risks are potentially mitigated by the relative strengths of affordable
housing as well as proactive federal and congressional support.
American households are in better financial standing than they were
entering the GFC, with higher savings, lower debt burdens, and higher real
incomes.
However, should consumer habits be permanently adjusted following the
conclusion of the pandemic, real risks could seep into the economy,
causing a negatively recursive effect that drags employment, income
growth, lending, and investing down with it.
Lending has proven resilient through the pandemic, helped largely by
liquidity programs from the Fed (PPP et al.) and displays a level of
confidence and support in the economy essential to its recovery, while
delinquencies remain low.
The economic situation is undoubtedly bad; but considering how bad it
could have been, we’re in a pretty good place (though we are not out of the
woods yet).
24 ALLIANT CAPITAL
© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKIn 2020, our industry
succeeded in fixing the 4%
tax credit rate after many
years of effort. This
additional infusion of
credits has the potential to
create more affordable
units by filling gaps caused
by increased costs. The
challenge presented is the
fixed investor appetite for
the hard debt leverage
typical of bond
transactions. In 2021, Alliant
will continue working on
innovative structures to
bring more capital to the
market to absorb the
increased volume of 4%
credits.
- Jen Erixon, SVP,
Originations
25 ALLIANT CAPITAL
© ALLIANT CAPITAL 2021 | ANNUAL OUTLOOKTop Predictions
Based on our observations and the experience and expertise of our
team, here are our top predictions for 2021:
Construction Traditionally, developers have sought
to differentiate their communities by
We will continue to see disruptions in providing rich community amenities
the marketplace in terms of materials, with large common rooms, pools, spa
supply, availability, and both labor and fitness rooms. As a result of the
and supply costs. Those areas will all pandemic, developers should be
be very volatile. Composite framing thinking about providing more usable
lumber prices spiked over 200% but space for residents to use in their
have since retreated. Pricing remains units. It is going to become more
above historical averages, and will important to tenants to have flexible
remain volatile due to high demand space in the unit for kids to learn and
and short supply. accommodate a work-from-home
opportunity. Costs may need to be
reallocated from common space to
We’re going to see this trend
increase unit size as developers look
continue; we’ve seen manufacturing
for ways to differentiate projects. This
and distribution disruptions from all
is going to be a big long-term change
over the world as shutdowns and
in what communities are looking for.
production delays have resulted in
some materials simply not being
Pricing
available. Projects have been unable
to source appliances and other
In 2021, we can expect pricing to
commodities due to factory
remain low or maybe even go lower.
shutdowns. This can create severe
construction delays and cost Interest rates will remain low so there
increases. This is going to be a will be a higher availability of debt.
continuing theme in 2021.
There will be a flight to quality – deals
Consumer preferences in project will be structured with higher levels of
amenities and design may be reserves and more cushions. Where
permanently altered by COVID-19. we once preferred projects to be
The perceived need for more located in markets that are considered
personal space may affect the to be strong markets, in 2021, deals
allocation of space during the design that are in weaker markets, are now
phase of projects. likely to find funding or connection.
26 ALLIANT CAPITAL
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Alliant Capital
21600 Oxnard St, Suite 1200
Woodland Hills, CA 91367
(818) 668 - 6800
www.alliantcompany.com
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