By Adam Ehrenreich, Associate Director, Debt Finance, OakNorth 

There’s a persistent assumption in US CRE lending that adding affordable housing makes a development harder to finance. In our experience at OakNorth, that’s often not the case. 

The difference is whether affordability has been built into the project from day one. When the location, unit mix, tax strategy and management plan all make sense, the affordable component can strengthen the credit rather than weaken it. 

What’s changed in the New York market 

The affordable housing landscape in New York has changed significantly, and developers and lenders are still coming to grips with it. The old 421A tax abatement has been replaced by the 485X program, formally the Affordable Neighborhoods for New Yorkers (ANNY) program. As a result, we’re seeing a lot of 99-unit projects come to market because of how the economics work at that size. From a lending perspective, that’s changing the shape of projects coming to market. 

The City of Yes for Housing Opportunity has changed the picture again. Through its Universal Affordability Preference, developers in medium- and high-density areas can build 20% more floor area if the additional units are permanently affordable. 

For developers with plans approved under 421A, there’s now a choice: continue under the old program or amend those plans to take advantage of the new incentives. It won’t make sense for every project, but doing that analysis early can make the financing process much smoother later. 

What makes a deal work 

Two things matter particularly when assessing affordable housing: location and management. Affordable housing needs to be built where there’s genuine demand for it, and the economics need to reflect the market it’s serving. Unit sizes may be smaller and the finishes more functional than a luxury development, but that doesn’t necessarily make it a weaker credit. It means the project needs to be assessed on the fundamentals that actually drive its performance. 

Management matters too. Subsidized housing programs such as Section 8 require experienced property management. The government subsidizes the rent, but the day-to-day running of the building remains the operator’s responsibility. 

This is where experience makes a difference. Having a management team that understands this type of occupancy, alongside a clear leasing strategy, can give lenders greater confidence in how the building will operate after completion. 

A tax opinion letter can help too. Having one ready during underwriting confirms that the project qualifies for the program the deal relies on and shows that the structure has been properly considered. 

What good looks like 

The best sponsors build affordability into the development strategy from the start. Strong housing demand, good transit access and a shortage of supply can all support the project over the long term. Brooklyn’s East New York submarket is a good example. 

We recently provided a $25.5m construction loan for an 87-unit multifamily development at 2916 Atlantic Avenue, including more than 20% affordable units. We also provided a $33.2m loan supporting two further multifamily projects at 240 and 236 Highland Place, which also include affordable housing. 

The neighborhood has seen infrastructure investment, growing employment and clear demand for quality rental housing across different income levels. The affordable element works because the fundamentals are already there. 

Bringing in the right people early also helps. That means tax advisors who understand 485X and City of Yes, planning teams that can navigate approvals and management firms that know the type of occupancy the building will carry. 

Having those pieces in place before approaching a lender can make for a much stronger financing conversation. It means more time can be spent understanding the opportunity and structuring the right financing, rather than resolving questions that could have been addressed earlier. 

The demand case 

Whatever happens with policy, demand for affordable rental housing across New York City isn’t going away. The numbers tell a pretty simple story. New York City’s rental vacancy rate sits at around 1.4%, with vacancy for the most affordable units below 1%. Marcus & Millichap projects NYC’s apartment vacancy at 2.4% for 2026, the lowest of any major US market. It’s clear that New York needs more housing, and market-rate development alone isn’t going to close that gap. 

For developers, that creates an opportunity to think about affordability as part of the investment case from the outset, rather than something that has to be accommodated later. 

And for lenders, it means looking beyond the label. The word “affordable” isn’t what determines the credit quality. The location, sponsor, structure and management do. Get those right, and an affordable housing development can be a stronger credit than a market-rate project with a weaker business plan. 

The market doesn’t fully recognize that yet.