Rising insurance premiums, surging utility costs, and persistent inflation are crushing affordable housing developers across the country, according to a new report from the Local Initiatives Support Corporation (LISC). The organization found that operating expenses now consume a larger share of revenue than ever before, leaving little room for maintenance, upgrades, or new development.

The pressure intensifies as 374,497 affordable units approach the end of their affordability covenants over the next decade. Without intervention, these properties risk conversion to market-rate housing or deterioration. Simultaneously, affordable housing starts are projected to drop sharply in 2026 as financing becomes harder to secure and development costs climb.

Insurance costs have spiked the fastest, driven by climate risk concerns and increasing claim frequencies. Utilities consume more revenue annually as aging buildings demand greater energy inputs. Inflation has pushed labor, materials, and operational overhead beyond what most affordable housing budgets can absorb.

The squeeze hits hardest in markets where rents remain artificially capped by deed restrictions. Developers cannot simply raise rents to offset costs, creating a widening gap between expenses and revenue. This forces difficult choices. Property managers defer maintenance, cut services, or attempt to exit affordability programs when possible.

LISC calls for immediate policy action. The report recommends increased federal funding for preservation, tax credit reforms to boost development economics, and streamlined insurance options for nonprofit owners. State and local governments should also expand subsidy programs targeting operating costs rather than capital alone.

For affordable housing residents, this squeeze threatens their tenure. Buildings in distress see declining services, neglected repairs, and potential conversion to market-rate units they cannot afford. For nonprofits managing affordable stock, the situation demands difficult triage decisions about which properties to save and which to let slip away.

Lenders face their own calculation. Affordable housing debt remains safer than market-rate investments,