Key Takeaways
- • The United States expanded LIHTC capacity in 2026, with 9% credit allocations up 12% and the financed-by threshold for 4% LIHTC deals using tax-exempt bonds reduced from 50% to 25%, which the Joint Center for Housing Studies at Harvard, citing Novogradac, estimates could support as many as 1.2 million additional affordable homes by 2035.
- • Expanded bond volume does not eliminate development costs; replacing tax-exempt debt with higher-cost taxable debt can create financing gaps that developers must fill with increasingly scarce tax credit equity and soft funds.
- • Airbnb's $250 million Housing Accelerator aims to provide "last-dollar financing" for stalled multifamily projects, with an expected $5 billion-plus in housing investment over a decade, roughly $20 per dollar committed.
- • Airbnb's research cites roughly 750,000 housing units, representing about $225 billion to $265 billion of potential investment, that are stalled by a single missing capital stack component.
- • The author, Jim Gillespie, executive vice president at BWE, argues the priority is moving from layering capital to structuring leverage and scrutinizing costly development requirements.
Summary
An opinion piece by Jim Gillespie, executive vice president at BWE, argues that private capital, structured strategically, is the next frontier for affordable housing finance. Gillespie contends that the value of a modest amount of well-placed capital lies in unlocking multiples of private investment, and that the economics of producing affordable housing have become more difficult even as need has grown.
The United States has recently expanded the capacity of the low-income housing tax credit (LIHTC). In 2026, annual allocations of the 9% credit rose 12%, and the financed-by threshold for 4% LIHTC transactions using tax-exempt private activity bonds was lowered from 50% to 25%. Citing Novogradac, the Joint Center for Housing Studies of Harvard University estimates these changes could support as many as 1.2 million additional affordable homes by 2035. Gillespie cautions that capacity does not equal production. Reducing tax-exempt debt often means substituting higher-cost taxable debt, which can raise borrowing costs and create new financing gaps that developers must fill with scarce tax credit equity, soft funds, and other limited sources.
Gillespie describes LIHTC as a major public-private success that has drawn substantial private capital over nearly four decades, but notes tax credit equity has become scarce. He argues private credit should complement, not replace, banks, Fannie Mae, Freddie Mac, the Federal Housing Administration, and public subsidies, with its greatest value in solving problems standardized capital cannot.
As an example, Airbnb recently announced a $250 million Housing Accelerator focused on "last-dollar financing" for multifamily developments that have secured most funding and cleared regulatory hurdles but lack one final piece of capital. According to Airbnb's research, this gap affects roughly 750,000 housing units, representing approximately $225 billion to $265 billion of potential investment. Airbnb expects its commitment to unlock more than $5 billion of housing investment over the next decade and intends to recycle proceeds into additional projects.
Gillespie also warns against assuming every financing gap requires more capital, noting that many development requirements raise costs. He argues that each requirement should be evaluated for its cost, its benefit, and the number of homes that could be built if the funds were redeployed, concluding that the goal is more housing rather than simply more capital.
The United States has recently expanded the capacity of the low-income housing tax credit (LIHTC). In 2026, annual allocations of the 9% credit rose 12%, and the financed-by threshold for 4% LIHTC transactions using tax-exempt private activity bonds was lowered from 50% to 25%. Citing Novogradac, the Joint Center for Housing Studies of Harvard University estimates these changes could support as many as 1.2 million additional affordable homes by 2035. Gillespie cautions that capacity does not equal production. Reducing tax-exempt debt often means substituting higher-cost taxable debt, which can raise borrowing costs and create new financing gaps that developers must fill with scarce tax credit equity, soft funds, and other limited sources.
Gillespie describes LIHTC as a major public-private success that has drawn substantial private capital over nearly four decades, but notes tax credit equity has become scarce. He argues private credit should complement, not replace, banks, Fannie Mae, Freddie Mac, the Federal Housing Administration, and public subsidies, with its greatest value in solving problems standardized capital cannot.
As an example, Airbnb recently announced a $250 million Housing Accelerator focused on "last-dollar financing" for multifamily developments that have secured most funding and cleared regulatory hurdles but lack one final piece of capital. According to Airbnb's research, this gap affects roughly 750,000 housing units, representing approximately $225 billion to $265 billion of potential investment. Airbnb expects its commitment to unlock more than $5 billion of housing investment over the next decade and intends to recycle proceeds into additional projects.
Gillespie also warns against assuming every financing gap requires more capital, noting that many development requirements raise costs. He argues that each requirement should be evaluated for its cost, its benefit, and the number of homes that could be built if the funds were redeployed, concluding that the goal is more housing rather than simply more capital.
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