P.J. McDevitt, Managing Director, Walker & Dunlop

In an interview with Invest:, P.J. McDevitt, managing director of Walker & Dunlop, discussed the evolving landscape of affordable housing and the challenges facing developers in the current economic climate. “One of the biggest challenges is the rising cost of development across the board.”

Reflecting on the past year, what have been some significant milestones or achievements for Walker & Dunlop’s New Jersey office?

Walker & Dunlop continues to grow as one of the largest financial services firms in the country. New Jersey has proven to be a highly profitable and strategically valuable market for us. We have a major office in Manhattan at One Vanderbilt and another in Englewood Cliffs, New Jersey. Personally, I work remotely near the Jersey Shore in Sea Girt, but we also have team members in Princeton and across various parts of the state.

One of the advantages of being based in New Jersey is our geographic proximity to many other states, which enables us to conduct transactions well beyond state lines. Our New Jersey operations have remained strong, particularly the Englewood Cliffs office, which is active in a variety of sectors. We provide investment sales solutions for multifamily real estate as well as capital markets services, including a range of debt financing options. A core part of our business is multifamily finance, particularly through government-sponsored enterprises like Fannie Mae and Freddie Mac, as well as HUD through the FHA. Our New Jersey offices have been engaged in all of these areas, supporting clients in both property transactions and financing.

Affordable housing is your area of expertise. What trends have you seen emerge over the past year?

Affordable housing is an incredibly relevant and evolving sector. It’s a topic that touches nearly every level of society, from local communities to national politics. Whether it’s a mayor or a member of Congress, everyone is talking about the growing need for affordable housing. It’s one of those rare issues that garners broad agreement, yet the solutions remain complex and multilayered.

At Walker & Dunlop, we’ve made a concerted effort over the past three years to expand our capabilities in this space. I joined the company three years ago, coming from another firm that also specialized in affordable housing. My role focuses on debt financing, working primarily with Fannie Mae and Freddie Mac. Since then, we’ve grown our platform to be more holistic, adding an investment sales team that focuses on transactions involving Low-Income Housing Tax Credit (LIHTC) properties and project-based Section 8 housing. In December 2022, we acquired Alliant Capital, the sixth-largest tax credit syndicator in the country. That acquisition enabled us to offer clients equity investment options in addition to our existing financing and sales capabilities.

The LIHTC program, implemented in 1986, remains one of the most successful tools for generating affordable housing. It’s been fascinating to see how this program has evolved over nearly 40 years. By combining tax credits with private investment, we’re able to raise equity that supports housing developments for residents earning around 50% to 60% of the area’s median income. It’s meaningful work, and I’m proud of the impact we’ve been able to make.

What would you say are the biggest challenges in the affordable and residential housing markets?

One of the biggest challenges is the rising cost of development across the board. With affordable housing, rents are capped based on what residents can reasonably afford, which is typically no more than 30% of their income. That’s where the LIHTC program comes in, restricting rents based on HUD-published area median incomes. But despite these rent caps, the operating costs for developers remain the same, or, in some cases, even higher, compared to traditional market-rate housing.

This results in thinner margins for owners and operators, which discourages many from entering the affordable space unless there are incentives. If you’re a developer and can earn higher returns on market-rate housing, it’s a hard sell to go the affordable route, unless you’re getting some form of financial support.

To address this, federal, state, and local governments offer various incentives like tax abatements, exemptions, subordinate financing, and grants. The complexity lies in stitching these funding mechanisms together. Every state, and sometimes every city, has different rules, programs, and requirements. That’s where Walker & Dunlop adds value. We’ve assembled a team of industry experts who know how to structure these deals and identify the right financing combinations to make them viable.

It’s a labor-intensive process that requires deep knowledge of the regulatory and financial environment. But it’s necessary if we want to address the affordable housing crisis meaningfully. We’ve built an entire division dedicated to making these projects happen and providing clients with comprehensive solutions under one roof.

Have economic pressures affected your clients or the projects you’re involved in, especially since the start of the year?

Economic factors are having a significant impact. Because the margins in affordable housing are already so tight, any increase in costs, whether from tariffs on materials or rising interest rates, can jeopardize the viability of a project.

Take tariffs, for example. If the cost of importing lumber from Canada increases, that directly drives up construction costs. Interest rates are also extremely volatile. For context, in May last year, the 10-year U.S. Treasury rate was around 4.70%. By September, it dropped to 3.60%, only to rise again to 4.80% by January. That kind of fluctuation makes it incredibly difficult for developers to forecast financing needs and maintain project feasibility.

Unlike market-rate deals that may close quickly, affordable housing projects require lengthy timelines due to additional layers of approvals and regulatory requirements. By the time a project is shovel-ready, construction costs may have increased 20-30%, rendering the original financial models obsolete. This volatility makes an already difficult process even harder, especially when you’re dealing with local, state, and federal coordination.

It really underscores the need for stability. Without it, developers are hesitant, deals fall apart, and we lose valuable time in addressing the housing shortage.

What are your top priorities over the next two to three years for Walker & Dunlop?

Looking ahead, especially from my perspective on affordable housing, our top priority is to continue integrating and expanding the services we’ve built over the past few years. When I joined Walker & Dunlop, we focused mostly on debt origination. Since then, we’ve added an investment sales team and a tax credit syndication platform. Now, we’re positioned to offer a full suite of services, with everything from advisory and financing to equity investment. The only thing we can’t do is physically build the properties – that’s up to our developer partners.

Our mission is to provide a one-stop shop for clients looking to build or preserve affordable housing. We want to be the go-to adviser for solving complex housing challenges. Our philosophy is to “do well by doing good.” Yes, we’re a business, and yes, our clients are financially motivated. But at the core, what we do is about making a positive social impact: creating housing that’s safe, clean, and truly affordable.

There’s rare bipartisan agreement that we have a housing crisis in this country. Every senator, representative, mayor, and city planner knows we need to do more. So, our outlook over the next few years is centered on continued innovation and collaboration, working closely with government, developers, and financial institutions to build housing solutions that work.

The rules will continue to evolve, especially with changing political administrations, so we need to remain flexible and forward-thinking. If we can stay focused on the needs of our clients and the people they serve, while continuing to streamline and enhance our service offerings, the next few years will be both impactful and successful for Walker & Dunlop.