“The affordable housing challenge is a complex one, but it is one that can be solved through innovation and collaboration.”

By: Karen G. Hatcher, CPM®

The affordable housing crisis is a big problem in many cities across the U.S.

Rising housing costs make it hard for low- and middle-income families to find a place to live. This is leading to a shortage of affordable housing options, and many people are being forced to live in overcrowded or substandard conditions.

Municipalities have a big role to play in addressing this issue.

They can provide incentives for developers to build affordable housing units, and they can promote the construction of these units. By working together, we can ensure everyone has a safe and affordable place to live.

Developers can be encouraged to build more affordable housing using various methods.

Closing the gap in profitability

1. Offer financial incentives such as tax breaks, grants, or loans to boutique developers to offset holding costs and allow flexibility for scale.  Most municipalities offer breaks for large multi-family apartment developers, but there are many small to mid-size builders that should be incentivized to encourage participation and offset costs.  ––for example, Austin, Texas, provides developers with tax breaks of up to $100,000 per unit for each affordable housing project.
2. Offer government subsidies to developers to pay for the road, sidewalk, low voltage, and sewer infrastructure costs.  These site work and hardscape costs can be exorbitant and, if incentivized, could close the gap in profitability. 
3. Supply land at discounted rates for creating affordable housing developments like San Francisco, California’s program.
4. Offer public trash collection.  Some municipalities do not cover trash collection for some multifamily and townhome communities or cap it at a low number, like 6.  Yet, these homeowners still pay property taxes at the same millage rate. The cost of the homeowners association to have to pay for private trash collection results in higher HOA monthly costs, which increases the mortgage loan for the buyer and can price lower-income buyers out of purchasing.  This ultimately lowers the buyer pool for the builder and increases days on market. 

Removing Government regulations that increase the cost to the end buyer:

5. Ease zoning regulations that typically hinder the construction of affordable housing units. In the industry, we call this exclusionary zoning.  Zoning regulations require larger square footage homes, larger lot parcel sizes, or require 4 sides brick – to name a few.  These regulations hinder developers from building more inclusive, affordable units at various smaller unit sizes that appeal to a diverse set of buyers at multiple income brackets. 

Fast track permitting and rezoning for affordable housing developments:

6. Collaborate with community groups to pinpoint areas needing affordable housing and educate developers on this issue, similar to Boston, Massachusetts’ approach.

By taking these steps alongside additional measures such as providing technical assistance, advocating for changes to state and federal laws, and educating the public about affordable housing, municipalities can play a vital role in addressing the housing crisis and helping low- and middle-income families find suitable accommodation.

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I look forward to working with you!