Housing Affordability
Perhaps the bellwether of the current affordability crisis, housing costs have ballooned since the Great Recession and are the largest expense on most household books. Rents have increased by 54 percent and home sale prices by 81 percent since 2017, while earnings have grown just 38 percent nationwide. Younger generations openly worry they will never be able to buy a home like their parents did, and climbing costs have pushed long-time residents out of their neighborhoods. Recent cuts to federal housing programs will require state and local leaders to fill the resulting gaps in housing investment and assistance. Policy solutions for housing affordability will require a comprehensive strategy that increases housing supply, supports first-time homebuyers, protects renters, reduces costs for families with low and moderate incomes, and assists the unhoused.
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- Adopt pro-housing and land use policies. In communities nationwide, single-family homes dominate the housing supply in large part because of zoning regulations that prevent a variety of more affordable homes from being built. Simply reducing minimum lot size requirements for a single-family home can enable builders to create more affordable starter homes. Altering local zoning codes to allow for more types of housing and more units on single parcels of land can create greater diversity of housing construction and potentially allow families to bring in more income by adding accessory dwelling units to their properties. Cities and counties nationwide have already taken steps to ramp up construction through zoning changes, such as Portland, Oregon, which allowed accessory dwelling units in all residential zones.
- Remove red tape and permit more housing. Another reason single-family homes cover most available residential land is because they are the easiest housing type for developers to get approved. To increase housing supply, local leaders can remove or loosen regulatory barriers on other more affordable housing types, such as multifamily buildings, small apartment buildings, plexified housing, factory-built housing, and office-to-residential conversions. For example, cities can remove minimum parking requirements for new apartment buildings, saving developers money and freeing up more land for new units.
- Lower the cost of and increase availability of development capital. The reduction in financing available for smaller, local developers and builders following the Great Recession has directly contributed to the low production of housing over the last 15-plus years. Additionally, high interest rates make it harder to develop new affordable housing. Local policymakers can use incentives and subsidies at their disposal to provide low-cost public capital directly or to encourage private capital. For example, Montgomery County, Maryland’s revolving Housing Production Fund makes it easier to develop mixed income housing.
- Repurpose public land for housing where appropriate. In high-cost areas, land acquisition can take up a large share of development budgets. Local policymakers can spur construction by selling public land to developers at a discount. In Loudoun County, Virginia, for example, a former school site was sold to developers to build multifamily, affordable housing. And many cities across the country have worked to renovate or reconstruct aging libraries into combined library–affordable apartment complexes, with others well-poised to do the same. Policymakers should also consider introducing social housing programs, like the one implemented in Montgomery County, Maryland, to leverage public land as an equity investment in mixed-income complexes with guaranteed affordability.
- Preserve naturally occurring affordable housing. Preserving affordable units already on the market is just as important as building new affordable units, and ensuring that affordable units remain affordable is generally more time and cost efficient than pursuing new development. To acquire and rehabilitate affordable properties, local leaders can provide short- and long-term financing, develop relationships with local developers, and set up policy frameworks to ease preservation efforts. For example, the Los Angeles NOAH Impact Fund acquires and rehabilitates at-risk, market-rate rental properties, offering low-cost financing to property owners in exchange for affordability restrictions on rents for 55 years. Community land trusts also offer an innovative way to preserve affordable housing, and local policymakers can support these efforts by easing regulatory barriers, creating grant programs to fund acquisitions, and facilitating relationships with housing developers.
- Offer limited property tax relief. Local governments depend on property taxes, which account for nearly three-quarters of all local tax revenue. Yet property taxes also shape housing markets, as potential homeowners, developers, and landlords all consider tax burdens when deciding to buy, build, or rent. To encourage greater housing supply, local leaders could offer limited forms of property tax abatement for the development or preservation of affordable units or relief for residents struggling with the cost of housing. One study found that a “split-roll” tax, which kept property taxes level on residences while raising them for commercial properties, could incentivize more residential construction and conversion. And tax circuit breakers, which help keep property taxes manageable for homeowners relative to their income, can ensure that lower-income residents don’t pay an exorbitant share of their budget in property taxes. However, local policymakers should be mindful of the potential negative repercussions of any property tax relief program on city budgets and housing affordability.
- Incentivize new development near public transit. When tackling housing affordability, local policymakers must consider not only how to build more units, but also where those units are placed. Often, people seek out less expensive housing farther from their jobs and other services, leading to higher transportation costs. By linking housing incentives to development near public transit options, local policymakers can tackle multiple factors increasing the cost of living: housing costs, gas prices, and lack of economic opportunity. These kinds of policies can ensure more choice in housing options, allowing more people to live in vibrant, transportation-rich areas if they want to do so.
- Expand opportunities for residents to use low-cost transportation options. Homes that are far from transportation networks or that can only be reached by car may not be options for some families, reducing the effective supply of available affordable housing. Local policymakers can increase access to affordable housing by investing in more frequent and reliable public transportation, expanding low-cost public transportation options, or even making some public transportation free to ride. In 2021, Alexandria, Virgina, stopped collecting bus fares and expanded its bus network, which led to an increase in ridership. Research on discounted fare programs has shown that they induce demand for transit and support greater economic growth. Local policymakers can also create more comfortable and convenient pedestrian and cycling routes and implement free or discounted transit options.
- Consider rent stabilization or anti-gouging policies. Rent stabilization and anti-gouging policies can help to decrease rents for tenants in controlled units and prevent displacement. However, they can also limit tenants’ mobility and reduce the overall supply of rental housing, so such policies should be designed with care and paired with complementary policies that increase the overall stock of rental housing such as upzoning, removing parking minimums, and streamlining permitting.
- Encourage cost-effective construction through zoning and regulatory reform. Although most housing construction regulation is conducted at the local level, states still have opportunities to encourage housing construction. States can ease restrictive zoning ordinances, like in Washington, where a 2023 bill allowed for small-scale apartment buildings in most single-family neighborhoods. States can also ease regulatory barriers, like California, which committed to speedy reviews of residential conversion projects with 150 units or fewer. Lastly, states can set clear housing-production targets with incentives for developers, which has a track record of making housing construction easier in the places that need it most.
- Lower the cost of and increase availability of development capital. The reduction in financing available for smaller, local developers and builders following the Great Recession has directly contributed to the low production of housing over the last 15-plus years. Additionally, high interest rates make it harder to develop new affordable housing. State policymakers can use federal incentives and subsidies at their disposal to provide low-cost public capital directly or to encourage private capital. For example, Colorado and Massachusetts have established funds for communities and developers to leverage private capital more quickly and easily.
- Repurpose state land for housing where appropriate. Land acquisition has become one of the largest cost barriers to housing production, impeding the construction of small apartment buildings most of all. To ease this burden for developers, state officials can leverage public land for affordable housing development. By working with public entities with surplus land available, such as transportation authorities or hospitals, states can reduce costs for housing development and ensure new units are situated near public amenities.
- Incentivize developers through the allocation of federal funds. Federal funding through programs like the Low-Income Housing Tax Credit can spur additional affordable housing units, and state housing finance agencies often control how these dollars are allocated. To incentivize developers, states can encourage cost controls on development to yield more housing per dollar, reward projects that employ cost-saving building techniques, promote mixed-income developments, and support projects in areas with looser zoning and permitting policies.
- Preserve naturally occurring affordable housing. Like local jurisdictions, states can also take steps to preserve existing affordable housing. To promote the acquisition and rehabilitation of affordable housing, states can provide financing and tax credits. State support of community land trusts has also shown promise for preserving affordable housing, such as New York’s Neighborhood and Rural Preservation Programs, which provide support to community nonprofits.
- Regulate rising property insurance costs. Recent disasters such as Hurricane Milton and the Los Angeles wildfires have brought to the forefront an often overlooked contributor to housing costs: property insurance. In Harris County, Texas, for example, homeowner’s insurance has increased 61 percent in the last decade. To bring down costs, state policymakers can increase climate data transparency, coordinate across regulatory sectors, advance resiliency measures, and take steps to stabilize the insurance market through greater investment and consumer protections.
- Improve low-cost transportation infrastructure. The typical US household spends about 15 percent of income on transportation because most people have to use a car to get around, with the lowest-income Americans burdened the most. These costs are exacerbated when gas prices are high. Current transportation spending is disproportionately allocated to projects that improve driving infrastructure, but by reallocating transportation capital funding from highways to public transit, bicycling, and walking infrastructure, states can help reduce transportation costs, induce demand for transit, and support greater economic growth.
- Expand affordable financing through federal mortgage programs. Federal mortgage entities like Fannie Mae, Freddie Mac, and the Federal Housing Administration can promote expanded housing options by extending low-rate and long-term financing to manufactured homes and accessory dwelling units. Further, these entities can streamline refinancing options to reduce the number of defaults and foreclosures, allowing borrowers to make lower monthly payments.
- Bolster public housing options. Currently, more than 1.5 million people live in public housing, which provides stable and affordable homes. Although public housing is a vital safety net for many, the US capped new public housing units at the number in operation as of October 1, 1999. Repealing this policy, called the Faircloth Amendment, would allow states and local areas to build new public housing, addressing supply shortages and affordability. This policy must be combined with additional assistance for the US Department of Housing and Urban Development’s public housing program, which has been underfunded for decades.
- Create additional levers for guaranteed housing affordability. Federal policymakers can take steps to bolster publicly assisted housing in the short-term by expanding the Section 202 and Section 811 programs, which support seniors with low incomes and people with disabilities, respectively. Policymakers can also expand the Housing Choice Voucher program, which is only able to assist about 30 percent of households who would qualify if funding weren’t limited. Federal policymakers can also create funding options for local governments to invest in land, especially near transit, that can be used for affordable housing.
- Lower the cost of and increase availability of development capital. The reduction in financing available for smaller, local developers and builders following the Great Recession has directly contributed to the low production of housing over the last 15-plus years. Additionally, high interest rates make it harder to develop new affordable housing. Federal policymakers can use the tools at their disposal to provide low-cost public capital directly or to encourage private capital through incentives and subsidies. For example, federal policymakers can offer a tax incentive similar to the Low Income Housing Tax Credit to spur more affordable homes for sale.
- Invest in assistance for people experiencing homelessness. Roughly 770,000 people experience homelessness on any given night in the US, an 18 percent increase from 2023. Recent federal actions have focused on clearing encampments and citing people for being unhoused, but these policies do not effectively address homelessness. For people who lose their housing because of insurmountable rents, rapid rehousing programs can offer short-term financial assistance and other services to help them quickly stabilize in a new housing situation.
- Ease costs on housing construction and materials. New sweeping tariffs on imported goods and targeted tariffs on lumber, gypsum, and steel have driven up the costs of housing construction. Easing or removing these tariffs can encourage housing construction instead of working against it. Further, stricter immigration enforcement targeting undocumented workers has hit the construction industry hard. Scaling back deportations and creating long-term pathways to citizenship can prevent construction labor shortages and help bolster housing supply.
- Invest in community development financial institutions (CDFIs). In many communities nationwide, mission-focused organizations provide the bulk of lending to develop multifamily housing to great effect: every $1 of investment can unlock $5 to $10 of private funding. Recent staffing and funding cuts to the federal CDFI Fund will undermine CDFIs’ ability to make loans and spur affordable housing development. To support communities with the greatest housing affordability challenges, federal policymakers can restaff and allocate greater funding to the CDFI Fund.
- Refocus federal transportation spending on low-cost transportation options. Because of the prominence of single-family zoning across America, many areas have become large, sprawling communities where residents must drive long distances to meet daily needs. In tandem, the vast majority of federal transportation funding over the past 70 years has been allocated to highways, helping to reinforce the automobile dependency of American households and increasing their day-to-day transportation costs. Federal policymakers can reduce household costs by directing a greater share of federal funding to public transit, cycling, and walking investments to improve transportation options that are more affordable to households.