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Now Is the Best Time to Close the Affordable Housing Gap

Today, housing insecurity still places a heavy burden on families, affecting their mental and physical health. While the rest of the country is preparing for a post-pandemic world, others are still hung up on the previous world defined by housing insecurity, economic disinvestment, and limited educational opportunities.

However, there is hope. As the country starts to rebuild, it is also the perfect backdrop for a long-awaited policy reset. As lawmakers in Congress mull over different ideas and policies to support communities for the next decades, addressing the nation’s affordable housing crisis should be among the top priorities.

There are many benefits to be obtained. Homelessness decreases, as people are off the streets. The community benefits as real estate prices are protected (instead of contributing to its decline in value), and in some cases can increase the value of nearby homes.

Right now, there are multiple housing policies in place, some of which can work against each other. We think lawmakers should start by harmonizing these existing federal policies.

Government agencies look at two mechanisms to encourage the private development of affordable housing units: Low-income Housing Tax Credits (LIHTC) and Private Activity Bonds (PABs).

Recently, the government has already done something about the LIHTC, by setting a 4% floor price on the number of tax credits. While this could spur developers to get into affordable housing development, it is still not enough. Unfortunately, before any developers can avail these LIHTCs, 50% of the project should be financed through PABs.

This is where the problem lies. Volume caps restrict the state's issuance of additional PABs each fiscal year. Even though many developers are eager to build affordable housing units, they have no choice but to shelve such ideas because of this restriction, as demands for PABs easily outstrip supply. The developers then will have no choice but to abandon the idea and look for something else that is profitable and is subject to less bottleneck.

LIHTCs and PABs are related, and it is important to address both for the federal government’s policy to be effective. Instead of setting the limit for PABs at 50% each fiscal year, reducing it to 25% for example would help build or preserve more than 1.4 million units of affordable housing over the next 10 years.

Should this come to fruition, Congress should also design policies that protect consumers from unscrupulous developers who are out to rip off the government (by taking advantage of LIHTCs) and ultimately, the low-income communities. Just because they offer affordable housing does not give them a permit to sell low-quality housing units. Those two are not mutually exclusive.

The pandemic, while devastating, has created an opening for a unique chance to recalibrate America’s housing institutions for the better part of the coming century. We must take advantage of this once-in-a-lifetime opportunity to get housing issues right for all Americans.


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