As the great 20th century philosopher Yogi Berra said, “it’s tough to make predictions, especially about the future.” What lies ahead of us is fundamentally unknowable. While the impact of the new administration on affordable housing is unclear, the months ahead may be consequential.
- Corporate tax cuts could weaken tax credit appetite and diminish equity flows into projects.
- Tariffs may spike inflation both for projects in construction and at operating properties already struggling under the weight of insurance and other cost increases.
- Inflation may keep interest rates higher for longer.
- Deportations might diminish an already strained labor supply and hike expenses.
As Yogi said, we can’t see the future through the fog. But another wise person advised we should never waste a crisis. Now is a great time to be thoughtful about your risk management practices. If you have been meaning to tighten things up but not gotten around to it, you may want to use the start of the new year as an opportunity to revisit your risk identification and mitigation. If you have been procrastinating, please take advantage of the time you have now. Take a fresh look at your underwriting, risk grading, and borrower analysis in the context of potential changes. You want to replace the roof while the sun is shining even if it turns out you never get drenched in a downpour. No predictions here. Always keep in mind the wise words of John Kenneth Galbraith who said the role of economic forecasting is to make fortune tellers look good.