The affordable housing market is facing a refinancing crisis as billions in loans come due at a time when borrowing costs remain high and operational expenses are rising. Over the next three years, $10.5 billion in mortgages backed by fully affordable properties will mature, with another $21.7 billion due by the end of the decade, according to Yardi Matrix. The gap between current interest rates and those secured a decade ago is creating significant refinancing challenges, threatening the nation’s affordable housing stock.
The 10-year Treasury rate has hovered around 5 percent, significantly higher than rates from a few years ago when many maturing loans were originated. For properties still in the lease-up phase, the situation is particularly acute. Dominium Apartments, one of the nation’s largest affordable housing owners, is grappling with loans taken out in 2022–2024 on properties not yet stabilized. “These have some commitments on the front end from long-term permanent mortgage lenders, but the question really is: Can we get these properties stabilized and leased up in today’s environment with the debt figures that we need to support the business plan?” said Katessa Archer, vice president and project partner at Dominium.
Higher borrowing costs are reshaping affordable housing deals. Subsidies, always critical, are now under greater pressure. David Leopold, Berkadia’s head of affordable housing, noted that rising rates have increased the need for tax credits per deal, driving up costs while reducing equity. Leopold detailed, “More need for subsidies means more credits per deal, which in turn means higher-priced deals, and lower prices per credit.”
Renters face crushing cost burdens
Renters are also feeling the strain. A March 2026 study from Harvard’s Joint Center for Housing Studies found that 22.7 million renter households—56 percent of all renters—are cost-burdened, spending over 30 percent of their income on housing. Margaret Salazar, CEO of REACH Community Development, described it as a “triple whammy”: rising rates, inflation, and stagnant wages are squeezing both owners and tenants. Salazar noted, “At the same time, we’re also finding that it’s harder for us to get financing to preserve our existing properties.”
Even firms with strong balance sheets are tightening their belts. Avanath Capital Management, managing $3.7 billion in assets, caps loans at 50 percent loan-to-value to mitigate higher debt costs. “We’re seeing loans that we originated 10 years ago at much lower rates, and now we have to refinance some 200 basis points more or higher,” said Ken McMackin, the firm’s executive vice president of investments. “It just puts a lot more pressure on executing efficiently.”
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The federal government’s shift away from tax-exempt private activity bonds has exacerbated the issue. After the One Big Beautiful Bill Act tightened eligibility, requiring 25 percent of units to be affordable instead of 50 percent, developers have turned to more expensive taxable debt. As a result, the firm has had to replace these bonds with more expensive taxable debt, where the cost advantage is diluted.
Tax credits and equity shrink under pressure
Budget cuts at federal, state, and local levels have also narrowed gap financing options, despite the Low-Income Housing Tax Credit program’s expansion in fiscal year 2026. Leopold pointed out that higher yield expectations from LIHTC investors mean less equity per deal. “Yield expectations for LIHTC investors are going up, which means that pricing and the amount of equity going into your deal is going down,” Leopold explained.
Despite these challenges, some owners are adapting. Dominium has shifted toward larger unit sizes and a more diverse renter base to maintain margins. Others, like The Community Builders, are cutting costs by adding insulation, upgrading equipment, or installing rooftop solar to offset rising utility bills. REACH Community Development has turned to third-party property management, boosted advertising for vacant units, and leveraged Portland’s Clean Energy Fund to fill financing gaps. “The city has an interest in trying to get units filled as quickly as possible because of our supply challenges, and that’s been a huge boon for us,” Salazar noted.
GSEs offer lifeline; but demand outstrips supply
For now, the most reliable financing remains with the Government-Sponsored Enterprises (GSEs), which increased their purchase caps to $88 billion each at the start of the year. “They’ll look at resyndication opportunities or preserving, even with lower targeting,” Leopold explained. But with demand for affordable housing outpacing supply, the question remains: Can the market keep up?
The refinancing crisis has forced developers to explore creative financing structures. Some are turning to resyndication, restructuring existing loans with new terms, to avoid default, even if it means slightly lowering income restrictions. Others are opting for shallow subsidies, where properties qualify for fewer tax credits but still meet affordability requirements. This approach allows projects to proceed without relying solely on expensive debt, though it reduces the number of units for lower-income households.
