Acquisition, Development and Construction Financing

Financing is the lifeblood of the construction industry. Acquisition, development and construction (AD&C) lending was a casualty of the recent housing and economic downturn as significant losses on delinquent and nonperforming commercial real estate loans caused many banking institutions to eliminate or severely restrict lending to builders and developers.

As the nation’s housing industry emerges from the Great Recession, there are signs of improvement in the availability of AD&C credit. However, the credit pendulum has swung so far out of balance that many lenders are still refusing to make loans for potentially profitable new housing projects. Under pressure from federal banking regulators, some are even calling in performing loans.

Policy Statement

NAHB urges Congress and federal regulators to provide support for AD&C lending at financial institutions by discouraging lenders from calling construction loans where payments are current and establishing regulatory guidelines to allow the banking industry to restore lending for viable home building projects. Legislation introduced in the 113th Congress, H.R. 1255 in the House and S. 1002 in the Senate, would reduce regulatory barriers to AD&C financing at financial institutions.

Why It Matters

Home builders cannot keep their doors open and create jobs in their communities if they cannot get credit to build even pre-sold homes. When lenders call in performing loans, everyone suffers. Workers get laid off, sound projects go uncompleted and banks take possession of unfinished property. Restoring the flow of credit to home builders will not only help to put America back to work, it will provide badly needed tax revenues that local governments need to recover, and strengthen the economic health of countless communities across the land.

Track trends in the availability and cost of AD&C financing through NAHB’s AD&C Quarterly Financing Survey posted here

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