Cushman & Wakefield recently announced the return of a key executive within its Valuation & Advisory Affordable Housing practice.
Valuation & Advisory Affordable Housing Executive Director Kevin Lynch spoke with Dodd Frank Update about what lies ahead for the affordable housing sector.
“The most pressing emphasis in today’s affordable housing market is increasing supply to meet sustained and growing demand, particularly at the lowest income levels,” Lynch said. “Housing costs continue to rise, population and household formation remain strong, and yet inventory, both for ownership and rental housing, has not kept pace. Addressing this imbalance requires preserving existing affordable housing stock and incentivizing new development. In addition, protecting subsidized and affordable units from expiring affordability restrictions is critical.”
Lynch also spoke to the specific expertise people are looking for when it comes to the affordable housing sector. He noted clients are looking for practitioners who understand the full landscape of affordability programs and how each component impacts value at both the property and market levels.
That includes Low-Income Housing Tax Credit (LIHTC) structures, U.S. Department of Housing and Urban Development programs, rental assistance contracts and state and local incentives. Just as important is the ability to ask the right questions upfront.
“These are reasons clients seek service providers with specialized expertise and experience who are not learning while doing,” Lynch told us. “These assets are complex and require specialized knowledge to appropriately analyze and value.”
Cushman & Wakefield has a clear objective to expand its presence in HUD-insured and affordable housing valuation, and Lynch said that aligns well with his background and experience in this sector.
Affordable housing remains structurally undersupplied and is not cyclical in the same way conventional multifamily can be, he noted.
“Demand for services in the sector will continue to grow across valuation, consulting, litigation and physical due diligence,” Lynch said. “My focus is on supporting the full spectrum of our clients’ needs in the sector whether they are lenders, housing authorities, developers or investors.”
There are important factors to recognize about HUD-insured financing as it relates to MAP (Multifamily Accelerated Processing) lenders, housing authorities, investors and developers.
The most important factor, Lynch pointed out, is understanding that every HUD-insured transaction is unique and requires a clearly defined scope of work from the outset.
“Each deal carries its own regulatory requirements, affordability structures and market dynamics,” he added. “Establishing expectations early around scope, assumptions and deliverables is key to producing a valuation that meets the needs of our client who could be one of many stakeholders in a transaction.”
As to some of the asset types and transaction structures Lynch deals with, and how those key factors apply to affordable housing, Lynch has worked across a wide range of affordable housing structures, including LIHTC transactions, Section 8 HAP contract properties, Project-Based Voucher (PBV) deals with local housing authorities, HUD 202 elderly housing, tax-credit pilot programs and USDA rural housing.
“Each structure introduces different valuation considerations,” he said. “Understanding how these components interact is critical to producing credible valuations.”
Appraisers also need to constantly be updated on today’s market and possess the ability to render a proper valuation opinion based on those marketing trends.
“Appraisers must stay current on interest rate trends, regulatory and legal developments, evolving compliance requirements, and changes to housing programs and policies,” Lynch told us. “They also need a strong understanding of local market data quality, rent control impacts, housing policy shifts, and broader market volatility. Given that no two transactions are identical, adaptability and technical expertise are essential. Benefitting from proprietary data, market intelligence and having a team of sector-focused expertise enables professionals like me to keep pace with a changing market and develop well supported valuation opinions.”
He also shared his immediate goals as executive director of the company’s Valuation & Affordable Housing practice, the first being to build on the strong foundation already in place at Cushman & Wakefield and further position the firm as a best-in-class valuation provider in the affordable housing sector.
Lynch further stated that he will expand the company’s market presence and ensure clients have confidence in both its technical expertise and its ability to navigate complex affordability structures. Ultimately, he shared, it’s about being a trusted advisor to clients operating in one of the most critical segments of the housing market.
We then discussed what goes into (or should go into) creating a best-in-class affordable housing valuation platform.
“At its core, a best-in-class platform is built on competency and consistency. I’m a senior member of a national team of affordable housing experts at Cushman & Wakefield. This group does hundreds of affordable housing valuations each year,” Lynch said. “This body of work provides not only a deep data foundation used to serve clients across the spectrum of affordable housing, but specialized expertise to help clients in an advisory capacity as they evaluate asset strategies.”
Lynch also discussed the complexity of affordable housing transactions and how to successfully navigate them.
“Affordable housing transactions almost always involve multiple layers of financing, regulation and affordability requirements,” he said. “They are inherently complex. One recent example included a project ground-leased from a local housing authority, financed through the 4 percent LIHTC program, supported by PBVs under a Section 8 PBV HAP contract, and incorporating rent set-asides at 30 percent and 50 percent of area median income, along with below-market financing terms.
“Successfully navigating complexity like this requires clearly outlining the scope of work, breaking the transaction into its individual value components, and then integrating those components into a cohesive valuation and feasibility conclusion,” Lynch added.