Need for Affordable Housing Preservation

Introduction

Without aggressive intervention, the country risks losing a vast portion of its existing affordable stock due to expiring agreements, physical deterioration, financial distress, and climate-related disasters. This summary explores the document’s core arguments, legislative priorities, and federal agency recommendations, emphasizing why preservation is faster, cheaper, and more equitable than new construction alone.

The Urgent Need for Affordable Housing Preservation

The document opens with a stark reality: the United States is failing to meet the housing needs of extremely low-income and very low-income individuals, including a rapidly growing population of older adults, people with disabilities, and essential workers. While new construction is essential, it is not enough. Every year, thousands of existing affordable homes disappear from the market. Some lose their affordability status because of expiring federal or state agreements. Others become uninhabitable due to deferred maintenance, poor physical conditions, or weather disasters.

The need for affordable housing preservation stems from a simple mathematical truth: building new units costs significantly more and takes far longer than renovating and preserving existing ones. According to the document, preservation costs up to 45 percent less per unit than new construction. Moreover, preservation projects can be completed in a fraction of the time often months instead of years. This speed is crucial for families on the brink of homelessness, for older adults seeking stability, and for employers who depend on a reliable workforce living near job centers.

Preservation also honors prior public and private investments. Many affordable housing properties were originally funded through Low-Income Housing Tax Credits, HUD programs, USDA Rural Housing Service loans, or local bond initiatives. Letting these properties deteriorate or convert to market-rate housing wastes decades of taxpayer and philanthropic support. By extending the life of these homes, preservation leverages past investments while delivering immediate community benefits.

Why Preservation Is a Workforce and Aging Strategy

The document makes a powerful connection between affordable housing preservation and economic competitiveness. Employers in retail, healthcare, hospitality, and manufacturing cannot retain workers if those workers cannot find stable, affordable homes near their jobs. When affordable properties are lost, low- and moderate-income workers are forced into long commutes, unstable living situations, or homelessness. Preservation keeps families in place, maintaining neighborhood cohesion and reducing turnover costs for local businesses.

For older adults, preservation is even more critical. The U.S. population of people aged 65 and older is growing rapidly, and many live on fixed incomes from Social Security or modest pensions. Without affordable rental homes, these individuals face premature nursing home placements or housing instability. The document notes that supportive services reserves funds for on-site services like meal delivery, health monitoring, and transportation should be an eligible basis for tax credits. This would enable permanent supportive housing and properties serving vulnerable populations to offer integrated care, reducing costly medical interventions and hospitalizations.

Legislative Priorities for Affordable Housing Preservation

The document outlines eight major legislative priorities, with detailed sub-recommendations. These are designed to expand funding, streamline processes, and protect existing affordable housing assets.

1. Expand the Low-Income Housing Tax Credit (Housing Credit)

The Low-Income Housing Tax Credit (Housing Credit) is described as the nation’s most important resource for affordable housing preservation. The document urges Congress to pass the Affordable Housing Credit Improvement Act (AHCIA) , which would substantially increase the amount of Housing Credits available. This is essential because the current allocation is insufficient to meet preservation demand.

Additionally, the document calls for:

• Exempting preservation transactions from state Private Activity Bond (PAB) caps. Currently, many preservation deals must use scarce PAB volume, limiting their feasibility.

• Enhancing the use of the Housing Credit for preservation by providing a clear option for nonprofit sponsors to purchase properties at the statutory minimum price at the end of affordability periods. This prevents for-profit investors from outbidding nonprofits and converting properties to market rate.

• Permitting funding for a supportive services reserve account to qualify as eligible basis under the Housing Credit for permanent supportive housing and properties serving elders and people with disabilities. These funds would cover resident services, case management, and emergency assistance, making preservation projects more viable and humane.

2. Expand the Investor Base for Preservation Transactions

Many affordable housing preservation projects, especially those owned by nonprofit housing organizations, struggle to attract equity investors. The document recommends enacting legislation that expands the investor base, potentially by creating new credit pools or reducing barriers for community banks, foundations, and social impact funds to participate in preservation transactions.

3. Reform the Opportunity Zone Tax Incentive

The Opportunity Zone (OZ) program was created to spur investment in distressed communities, but in practice, much of the capital has flowed to luxury development or commercial projects. The document calls for reforming the OZ incentive so it can explicitly facilitate affordable housing preservation, for example, by requiring that a minimum percentage of units remain income-restricted for a defined period or by offering bonus credits for rehabilitating expiring-use properties.

4. Fully Fund Rental Assistance Programs

Preservation only works if both the property and the tenants are stable. The document demands full funding for HUD and USDA’s project-based and tenant-based rental assistance programs. This includes Section 8 Project-Based Rental Assistance (PBRA), the Housing Choice Voucher program, and USDA’s Section 515 rural rental housing program. Adequate funding ensures owners have the resources to maintain properties and protect residents from displacement. Importantly, the document calls for funding to implement recently authorized rent adjustments for struggling HUD-assisted properties, which are currently at risk of default.

5. Support the Rental Assistance Demonstration (RAD)

Public housing and older HUD-assisted properties are among the most physically distressed in the nation. The document includes an appropriation for the Rental Assistance Demonstration (RAD), which allows public housing agencies to convert traditional public housing units to long-term, project-based rental assistance contracts, unlocking capital for renovations. RAD has been a successful preservation tool, but it needs continued funding to address the backlog of capital needs.

6. Pass the Rural Housing Service Reform Act

Rural America faces a unique preservation crisis. Many USDA-financed properties are aging, and owners lack incentives to maintain affordability. The Rural Housing Service Reform Act would give USDA additional authorities such as flexible loan terms, partial claims, and transfer incentives, to maintain its legacy financed affordable housing stock as affordable.

7. Provide Sufficient Resources for the HOME Investment Partnerships Program

The HOME Investment Partnerships program is one of the most flexible federal housing resources. It can be used for acquisition, rehabilitation, and rental housing preservation. The document urges Congress to provide sufficient HOME funding so states and localities can fill gaps left by other programs, especially for small-scale preservation deals that don’t fit Housing Credit requirements.

8. Ensure Administrative Resources for HUD and USDA

Even when funding exists, preservation transactions can stall due to understaffing at federal agencies. The document calls for sufficient resources for HUD and USDA to administer affordable housing programs and meet preservation transaction timelines. Without adequate staffing, deals die during underwriting, environmental review, or legal closing.

9. Legislative Solutions to Rising Insurance Costs

A growing and under-discussed threat to affordable housing preservation is the increasing cost of property insurance. Climate change-induced wildfires, floods, hurricanes, and severe storms have driven up premiums or caused insurers to withdraw from entire regions. Affordable housing properties are disproportionately impacted because they operate on thin margins and cannot pass along huge insurance increases to tenants. The document urges Congress to develop legislative solutions, such as a federal reinsurance program or dedicated preservation insurance pools.

Federal Housing Agency Priorities

The document also addresses executive branch actions specifically through HUD and USDA, that can accelerate affordable housing preservation without new legislation.

Streamlining Federal Housing Programs

Redundancy and bureaucracy drive up costs and delay preservation. The document recommends:

• Aligning administration of HUD rental housing programs under a new Office of Rental Housing to simplify compliance and oversight. Currently, multiple HUD offices oversee different programs (Section 8, RAD, Section 202, etc.), creating confusion.

• Developing federal performance metrics for closings and other preservation transactions, especially to align with Housing Credit timelines, which are often rigid.

• Coordinating with state housing finance agencies (HFAs) to eliminate redundant transaction reviews and physical/compliance inspections for properties that receive both HUD assistance and Housing Credits.

• Eliminating redundant “previous participation” reviews for owners already approved in the same calendar year. Currently, the same mission-driven owner must be reviewed for each transaction, sometimes multiple times on a single deal, wasting months.

• Clarifying that affordable housing should be exempt from Build America, Buy America (BABA) requirements, which were designed for public infrastructure like bridges and highways. BABA increases material costs and project timelines, directly harming preservation deals.

• Streamlining the Section 8(bb) transfer process, allowing PBRA to move from one property to another without losing assistance for existing families, and ensuring that receiving owners have long-term commitment and capacity.

• Reforming HUD’s environmental review regulations, including providing categorical exclusions for properties that have previously received federal assistance, so that routine rehabilitation doesn’t trigger full-blown environmental impact statements.

FHA-Federal Financing Bank Risk-Sharing

The document supports continuation of the FHA-Federal Financing Bank (FFB) Risk-Sharing initiative, which provides low-cost, long-term financing for preservation transactions. This program reduces interest costs for nonprofit owners and should be expanded.

Protecting Use Restrictions

Premature exits from the Housing Credit program are a major threat. The document calls on HUD and Treasury to protect and reinforce use restrictions, including limiting Qualified Contract abuse (a legal loophole allowing owners to exit affordability early) and strengthening first-purchase options for nonprofits and public entities.

Housing Finance System Obligations

Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs), must maintain their obligation to preserve affordable rental housing. This includes providing liquidity, favorable terms, and reasonable interest rates for affordable multifamily housing preservation. The document also supports continued GSE transfers to the National Housing Trust Fund and Capital Magnet Fund, which are critical sources of preservation capital.

Medicaid Funding for Supportive Services

A novel recommendation is to preserve and increase the use of Medicaid funding to support service provision at affordable housing properties. Medicaid can pay for case management, behavioral health, and nursing services, reducing the need for costly institutional care. Expanding proven, cost-effective practices that enable residents to remain stably housed would lower overall healthcare spending while preserving affordable homes.

Addressing Serious Deficiencies

HUD already has authority to address serious physical and financial deficiencies at existing affordable housing properties. The document urges HUD to use this authority proactively, including receivership, forced transfer, or special claims processing for distressed properties.

Full Enforcement of the Fair Housing Act

Finally, the document emphasizes that affordable housing preservation must occur within a framework of civil rights. HUD must fully enforce all aspects of the Fair Housing Act, including affirmatively furthering fair housing, preventing discriminatory land-use policies, and ensuring that preserved properties are accessible to people with disabilities.

Conclusion: Preservation as a National Imperative

The 2025 Policy Priorities document is a clarion call. It argues convincingly that building new affordable homes is only half the equation; the other half is protecting the existing stock from expiring subsidies, physical decay, financial distress, and climate risk. Affordable housing preservation is cheaper, faster, and more equitable than new construction. It stabilizes communities, supports older adults and people with disabilities, and strengthens local economies.

To achieve meaningful progress, Congress must expand the Low-Income Housing Tax Credit, fully fund rental assistance, pass the Rural Housing Service Reform Act, and address rising insurance costs. Simultaneously, HUD and USDA must streamline redundant reviews, exempt preservation from BABA requirements, reform environmental rules, and use existing enforcement powers.

Without these actions, the nation will continue to lose affordable homes faster than it can build new ones. The Preservation Working Group’s recommendations offer a practical, bipartisan roadmap. For policymakers, developers, advocates, and tenants alike, the message is clear: preservation first, preservation always.

Also Read: 14th Annual Demographia International Housing Affordability Survey: 2018