The affordable housing crisis has been years in the making. As we head into 2026, developers, financial institutions, and communities alike are seeking innovative ways to bridge the gap between demand and supply. Meeting this need also fuels economic growth, creating jobs, stimulating development, and strengthening neighborhoods.
Finding Hope in a Challenging Market
Despite the headwinds expected in 2026, affordable housing professionals remain cautiously optimistic about the sector’s potential. A TD Bank survey of 238 participants attending the Governor’s Conference on Housing and Economic Development in Atlantic City, New Jersey, revealed that 52% of respondents are confident that access to affordable housing will expand next year, while 62% anticipate an uptick in development activity. The conference brought together leaders and innovators from across New Jersey’s public and private sectors involved in housing and economic development.
This optimism, however, is tempered by persistent structural challenges. The survey identified the strongest projected demand in multifamily housing (64%), housing for seniors and elderly populations (58%), and workforce housing targeting essential and middle-income workers (50%). The ability to meet these needs continues to be constrained, with the biggest barriers to development being mounting construction costs (55%) and price hikes tied to tariffs (39%). As a result, only 29% of respondents plan to expand their housing developments in 2026, underscoring a tension between aspiration and feasibility.
The challenges are not uniform across the country, differing in urban and rural markets. States such as New York, Florida, Texas, and California, which are each facing affordability crises in both urban and rural markets, illustrate the diversity of local barriers. In large metropolitan areas, the high cost of land and complex permitting processes slow development, while in rural regions, the scarcity of builders and inadequate infrastructure compound the problem.
Still, affordable housing professionals are finding creative ways to adapt. Transit-oriented developments that place residents closer to jobs and public transportation are gaining traction, offering a model that links housing stability with economic mobility. Similarly, adaptive reuse, which transforms underutilized commercial spaces such as malls, schools, and office buildings into residential units, is emerging as a practical and sustainable strategy to expand housing supply more quickly. These approaches demonstrate a shift in mindset: from building outward to reimagining what already exists.
As one New Jersey developer observed, “We have some of the most developed land in the state—it’s just not developed for today.” That sentiment captures the industry’s central challenge and opportunity: rethinking how to use existing assets, policies, and partnerships to meet modern housing needs. In an environment shaped by economic uncertainty and regulatory flux, success will depend on the sector’s ability to innovate, collaborate, and invest in resilience, ensuring that optimism translates into real progress.
2026: A Turning Point in Affordable Housing
Next year is shaping up to be a defining year for affordable housing, one that could set the tone for the next decade.
Across the country, demand continues to far outpace supply, and the gap is widening. The National Low Income Housing Center reported earlier this year that the U.S. is short 7.1 million affordable rental homes for extremely low-income renters. Meanwhile, as more aging baby boomers and homeowners in general stay put, the housing market continues to feel the squeeze. The result? Rising prices, shrinking options, and fewer paths to homeownership.
Adding to the pressure, tariffs and surging construction costs, highlighted in the TD Bank survey, are expected to weigh heavily on how many affordable housing projects actually reach completion in 2026.
As we approach the new year, policy changes that could affect lending and borrowing costs are also under close watch for affordable housing professionals. The Big Beautiful Bill is another factor to consider, which plans to expand the Low-Income Housing Tax Credit (LIHTC), the nation’s primary tool for financing affordable housing. The expansion is expected to support new development and advance previously delayed projects.
The outcome of the FY26 federal budget is also a question. The proposal calls for a 44% funding cut to the Department of Housing and Urban Development (HUD) compared with FY25. The plan consolidates key rental assistance programs to achieve the reduction by consolidating HUD’s largest rental assistance programs and eliminating several initiatives tied to homelessness prevention, fair housing, and community and development. Additional reforms to housing programs under other federal agencies could further reshape the landscape. For example, the TD Bank survey reported that 60% believe proposed changes to the Section 8 Housing Choice Voucher Program will shape their development strategies. Among them, 84% anticipate a negative impact.
Beyond the federal government, cities, towns, counties, and state governments play a critical role in developing affordable housing. Many local governments are pursuing a wide range of solutions, including land use reforms that help to implement zoning policies to meet the specific needs of the community. States such as Connecticut and Massachusetts have been leading the way in trying to encourage zoning reform. This trend may widen in the coming years as local governments grapple with trying to meet the need for affordable housing.
Working Together for Impact
As we head into the new year, financial partnerships are crucial in helping affordable housing professionals overcome challenges from a development, cost, and policy perspective. Financial institutions can offer support with dedicated affordable housing lending programs or teams, flexible lending terms, and bridge financing or gap funding solutions. Many leading financial institutions have long been pushing for access to this capital and are among the largest investors in affordable housing.
In addition to lending and equity investments, philanthropy and partnerships are also crucial. Charitable foundations and housing programs play a vital role, helping fill funding gaps and ensuring that communities have the resources they need to grow and thrive.
Each grant given through a charitable program helps sustain homeownership for families facing rising property taxes, costly repairs, or the threat of foreclosure. Grants help support purchase counseling, energy-efficiency improvements, and emergency financial assistance.
At TD Bank, in 2024, there were 138 ($1.7 billion) loans or letters of credit for affordable housing, creating or retaining 6,710 units of affordable housing for low- and moderate-income families.
In short, 2026 will test the resiliency and creativity of affordable housing developers, a year of both headwinds and hard-won opportunities. At its core, affordable housing is about more than construction. It’s about community—about giving people a place to thrive, not just survive. This work matters and is the foundation of stability for families, which ultimately drives broader economic growth.
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