Affordable housing:

• Offers developers of all sizes a low-cost entry into new markets

• Reduces out-of-pocket investment

• Is a feasible market for developers when sufficient financial backing is available

Small Investments Lead to Growth
Affordable housing projects typically require lower-level investments than larger projects. For startups and smaller developers, that makes affordable housing projects especially attractive. Chuck Heintzelman, an Indianapolis-based developer, agrees.

Heintzelman has been involved in housing for most of his career, including for-profit housing developments and not-for-profit housing consulting and financing. Nearly six years ago, Heintzelman, along with Carla Naum, founded Milestone Ventures, Inc., an Indianapolis development company involved in a variety of projects, including affordable housing.

"For smaller-scale developers, affordable housing projects create an opportunity to be involved in a market more economically, and that can help them grow," Heintzelman says.

Reduced Out-of-Pocket Risk
But affordable housing projects hold benefits for larger developers, too. There are limited opportunities for investing in market-rate properties, even for large-scale developers. Investing in market-rate properties can mean greater risk, and can lead to becoming over-extended. "But when [federal or state] funding is available for affordable housing, it takes less money on the developer's part to do the project," Heintzelman says.

The challenges surrounding affordable housing include leaner profit margins and a lack of financing tools that further exacerbate the risks associated with those developments. "For-profits tend to stretch the margins on these projects pretty tight, and any hiccup can cause problems," Heintzelman says. "So to make them feasible, we need sufficient funding tools...especially when we're trying to get into areas where the market rents are already low to begin with."