Berkadia recently held their BeEngaged Quarterly event, bringing together industry experts to discuss the current market state, specifically within seniors housing and the HUD space, and explore technologies that could advance and speed up processes. The panel featured Senior Director Craig Alloway of Berkadia FHA/HUD, Director of Operations for FHA and Seniors Housing Chris Yang, and HUD Construction Loan Specialist Emilie Gelsky. The audience included startup owners and other entrepreneurs interested in entering the commercial real estate space.
State of the market and emerging trends:
The market is still navigating several challenges with political uncertainty, higher interest rates, cost inflation, and declining valuations. In the HUD space, activity levels have increased, specifically with new construction deals and looming maturities, HUD provides lower rates and higher leverage relative to other financing sources. The tradeoff is HUD deals take longer to get done, but that gap has been closing. Market conditions are expected to continue stabilizing, leading to an optimistic outlook for 2025.
The demand for affordable and multifamily housing remains high. The FHA/HUD construction sector, like all construction, is still experiencing significant volatility due to strong demand. In recent years, supply chain issues, rapid inflation, labor shortages, and changes in available capital due to rising interest rates have all contributed to this volatility. Despite these challenges, valuable experience and lessons have been gained to navigate them effectively.
The senior’s housing sector has completely rebounded from the COVID-19 pandemic. While 2023 brought some uncertainty with interest rates, similar to most sectors, the transactional market began to recover mid-year in 2024, bringing many positives and tailwinds, with expectations of a 25% increase in activity in 2025 compared to 2024 in terms of deal count. The GSEs have restored their exposure to new seniors housing loans, with Fannie Mae now actively competing. Other lenders have also re-entered the market, and the recent NIC conference saw new entrants on the buyer side. Currently, the largest challenge for the industry is the lull in development, despite the strong demographics, since there is a value proposition to buy rather than build.
Unique HUD capabilities compared to other sources of funding:
The primary advantage of HUD funding compared to other sources is its lower interest rates and higher leverage. Economically, when projects face financial challenges, HUD’s services become particularly attractive. Interest in HUD financing has significantly increased over the past year due to its more favorable terms.
Technologies that could help navigate the overall process and cycles of HUD funding, construction financing, and seniors housing:
The overarching theme is data—not the quantity, but the standardization and translation of it. HUD, in particular, uses unique forms for underwriting, requiring extensive analysis. Technology that could standardize data and reporting for both borrowers, lenders, and asset managers would significantly speed up the process. Additionally, a smart, cloud-based deal calculator that ties into existing data sources would be beneficial for sizing deals in the HUD space.
Berkadia FHA/HUD Construction uses Rabbet for construction monitoring to efficiently manage project and portfolio risk, drive greater efficiencies, and gain increased portfolio visibility. Construction is experiencing a rapid increase in emerging technologies that enhance efficiency and save time, such as AI, Internet of Things, Building Information Modeling, and drone or robot site inspections. As the sector evolves, we can expect creative solutions to ongoing component and labor issues, including 3D printing, robotics, and variations of prefabrication, alongside the potential of artificial intelligence.
For seniors housing, the biggest challenge is staffing. Technologies that reduce staffing needs or minimize turnover, such as robotics, would be crucial for the sector.
Find out more about Berkadia’s BeEngaged program.
To connect with a Seniors Housing advisor, click here, to connect with a FHA/HUD loan specialist, click here.