As affordable housing policy and financing tools continue to shift, execution has become the defining variable. The question is no longer whether capital exists but whether projects can move from concept to closing while absorbing cost volatility, regulatory uncertainty and tighter operating margins.
TD Bank’s November 2025 survey of affordable housing professionals captures that tension. While 52 percent of respondents expect access to affordable housing to expand in 2026, they also point to persistent headwinds such as high construction costs (55 percent), federal policy changes (50 percent) and tariff-driven price increases (39 percent) as ongoing barriers to development.
In this environment, lender perspectives matter. In this interview with Multi-Housing News, Andrew Warren, senior vice president & leader of TD Bank’s community development lending vertical, discusses what’s driving cautious optimism in 2026, how underwriting is adapting and where capital stack gaps are most likely to surface this year.
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What underpins affordable housing professionals’ optimism and what would have to happen for it to translate into real progress?
Warren: Affordability is a top concern across the U.S., regardless of geography or income level. As housing costs continue to rise, the need for attainable housing has become a central issue not only for policy makers and their constituents worried about where they’re going to be able to afford to live but also for industry leaders, city managers and business owners who are struggling to hire people due to local housing shortages.
This growing awareness and increasingly bipartisan focus on housing affordability is a key driver of optimism that creative ideas are being considered. Public and private stakeholders are aligned in recognizing the urgency of expanding housing supply at all levels, for-sale and rental. For that optimism to translate into real progress, continued policy support, reliable funding sources and streamlined development processes will be essential to accelerate project delivery and scale solutions that meaningfully address the affordability gap.
Where are costs of all kinds most likely to break a deal in 2026, and how are developers adapting?
Warren: Several factors—labor, materials, insurance, operating costs, contingencies to buffer unpredictable tariff and policy risks, and interest rates—are critical cost drivers that can threaten a project’s economic viability and create hesitation by organizations looking to make long-term, impactful investments.
Affordable housing projects are especially sensitive to these pressures, because they cannot raise rents in the same way as market-rate developments to adjust to supply and demand. Affordable projects break down when the subsidies needed to offset rising costs are unavailable or insufficient to allow developers to keep rents low while maintaining the services and building maintenance that keep housing safe and stable. In response, developers are adapting by prioritizing projects with stronger funding alignment, moving to different markets, closely monitoring subsidy availability and taking a more strategic, selective approach to capital deployment.
Beyond just the costs, though, extended timelines for planning, approval and closing on financing—especially NIMBY resistance—place significant risk before shovels get into the ground and cool some of the tailwinds even in markets like New York City, where local support and subsidies are high.
Tariff-driven price increases are also a hurdle. How does tariff volatility show up in underwriting and loan structuring? And what risk-mitigation steps are you asking developers to take?
Warren: Tariff volatility introduces a high degree of cost uncertainty into construction underwriting and structuring. Even after a project is approved and contracts are executed, developers and lenders may face unexpected cost escalations tied to material pricing fluctuations or subcontractors willing to commit to a project.
This uncertainty necessitates more conservative underwriting assumptions, larger contingencies and increased financial buffers to protect project feasibility. In some cases, it may also require scope adjustments or timeline extensions.
To mitigate these risks, developers are incorporating more robust contingencies, conducting real-time market monitoring and using more conservative financial modeling. There is also greater emphasis on flexible deal structuring, additional capital reserves and extended timelines, particularly for large-scale projects with longer development horizons that are more exposed to tariff-related cost swings.
As developers lean into contingencies and more disciplined structuring, how does asset selection factor in? How do affordable, senior and workforce housing differ in feasibility and financing?
Warren: Each asset class presents distinct dynamics. Affordable housing often benefits from established subsidy programs and public-private partnerships, which can enhance feasibility and help stabilize operating risk. The social and economic benefit to these projects tends to focus on low- or moderate-income renters or homeowners, earning up to 80 percent of the local median income. They require subsidies to ensure deep affordability can be achieved, delivering impact.
Independent senior housing, particularly when subsidized, shares some of these characteristics but may have specific focuses on the needs of the intended tenancy and the typically fixed income they’re living on.
Workforce and attainable housing, however, generally receive fewer or no subsidies, making feasibility more challenging. These projects are the lost middle between affordable and luxury housing but serve a critical need for middle-income renters. These projects often rely more heavily on conventional financing and capital sources, while operating risk can be higher due to thinner financial buffers. Without targeted public support, maintaining affordability and avoiding displacement remains a key challenge, especially since there are typically no restrictions or regulatory agreements to maintain affordability.
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To support all these developments, a strong bank–developer–community relationship is critical. What does that mean exactly and how can it practically shape a deal?
Warren: Affordable housing transactions are inherently complex and require coordinated financing structures. A strong bank-developer relationship enables more effective deal execution through aligned goals, deeper understanding of local needs and long-term collaboration. We’re their partner, not just their financing source.
By working alongside developers, housing agencies and community organizations across multiple projects rather than single transactions, financial institutions can provide flexibility in structuring, support faster closings, help fill capital gaps and offer continued support through stabilization. This long-term partnership approach ultimately strengthens both project outcomes and community impact.
When the numbers don’t pencil for an affordable housing project, what are the most common capital stack gaps you see?
Warren: The most common gap is the shortfall between total development costs and the combined availability of conventional financing and subsidies. Rising construction costs and rent restrictions often widen this gap, making traditional funding sources insufficient on their own.
What are some of the most effective solutions in 2026?
Warren: In 2026, effective solutions continue to include layered public subsidies at the city, state and federal levels, as well as flexible capital from Community Development Financial Institutions. Additionally, social impact capital and mission-driven investment funds are playing a growing role in bridging financing gaps through innovative structures and partnership-based models.
Ultimately, a blended capital approach combining subsidies, flexible lending and impact-focused investment is proving most effective in advancing projects that would otherwise be financially unfeasible.
If you could change one thing in how affordable housing projects are financed or executed to improve delivery outcomes this year, what would it be and why?
Warren: I wish more people could get a chance to see some of the buildings that are created. I think seeing the quality of the buildings and the impact it makes, they’d realize the full value that affordable housing brings to their communities.