Tackling the U.S. Housing Crisis with Affordable Housing Development

Tackling the U.S. Housing Crisis with Affordable Housing Development
November 23, 2016 AD&V
affordable housing development


For most people, housing is their greatest —and most stressful—expense.

Lack of affordable housing continues to strangle the budgets of mid- and low-income families, with many spending more than 50 percent of their income on rent and mortgages, while living one paycheck away from facing foreclosure and homelessness.


A new report by the Joint Center for Housing Studies of Harvard University shows just how devastating our housing crisis and lack of affordable housing has become.

According to Harvard’s State of the Nation’s Housing 2016, more than 11 million renter households in the U.S., that is one in four, spend more than half of their monthly income on rent. More than 36 percent of households are renting: the highest level in 50 years. The rental market is the tightest it has been in three decades thanks to the Great Recession of 2007-2009, which pushed millions of people out of their homes and shrank the incomes of millions more.

From 2008 to 2014, the number of cost-burdened households went up 3.6 million to 21.3 million. Even more alarming is the number of severely burdened households—those paying more than 50 percent of their income for housing— a population that grew by 2.1 million to a record 11.4 million during that time frame.  At least half of the lowest-income renters have heavy housing cost burdens, and this tendency is spreading its way amongst moderate-income households, as well, especially in the higher-priced coastal markets.

Only 25 percent of income-eligible renters receive assistance of any kind, while the rest struggle to find affordable housing in the private market, Harvard’s JCHS reported. Housing that would be affordable to them is often occupied by higher-income households.

The National Low Income Housing Coalition (NLIHC) estimates that, for low-income renters, only 57 percent of available units are actually affordable to them. The housing shortage for extremely low-income families—those earning 30 percent or less of the area median—is even more acute, with only 31 percent of available  housing units being affordable  to these renters.

New York City, San Francisco, Los Angeles, Seattle, Philadelphia and Washington, D.C. are notorious for their lack of affordable housing, but the affordable housing crisis affects every single city in the United States.

Recent research  by the Urban Institute shows the supply of housing for extremely low-income households continuing to decline, with  only 28 percent of families being able to afford their rental homes in 2013.

Using data from the Census Bureau and the U.S. Department of Housing and Urban Development, Urban Institute researchers built an interactive map to illustrate the nationwide reach of the affordable housing crisis. According to the data collected, not a single county in the entire United States can meet the demand for affordable housing among extremely low-income families.


The lack of adequate income to pay for housing is also a growing problem.

According to Out of Reach, NLIHC’s latest annual report, in not  one single state of the country can minimum wage workers, working a standard 40-hour work week, afford a one-bedroom rental unit at the average Fair Market Rent— without paying more than 30 percent of their income. Even fewer full-time minimum wage workers can find affordable rent for a two-bedroom unit.

Based on Fair Market Rent affordability figures calculated by the U.S. Department of Housing and Urban Development (HUD) that cap the percentage of income spent on housing at 30 percent, workers would need to make $16.35 an hour on average to rent a one-bedroom apartment and $20.30 an hour for a two-bedroom, Out of Reach reported.

affordable housing development


The affordable housing crisis is a complex problem requiring a host of precisely orchestrated solutions.

Following are some of the measures being discussed and/or implemented in numerous cities throughout the U.S.

1. Promote affordable housing development

Cities such as San Francisco, St. Louis, Dallas, and San Diego share a common problem: far more people want to live there than the cities can accommodate. Building new affordable housing units and rehabilitating existing homes must happen in the thousands to meet increasing demand. These cities should also consider making at least a third of the new units permanently affordable to low-income residents.

2. Invest in housing production trust funds

To boost construction of affordable housing units, more money needs to be directed toward affordable housing development. Housing production trust funds are used to help developers finance new buildings that include units for low-income and working-class residents. The money can be raised through taxes on real estate deals and voluntary contributions from developers and loan repayments.

3. Incentivize developers and reduce exemptions

Density tends to be a controversial issue among city residents, causing some cities to establish density limits on new building projects. For developers, however, the more units a development has, the more income they get from that project. Without that income, there is no reason for developers to focus on building affordable housing rather than luxury condominiums. Leaders in some cities are proposing raising the density limits for projects in which a certain percentage of the units qualify as affordable housing and eliminating density limits completely for projects in which 100 percent of the units are affordable housing.

Washington, D.C., for example, allows many exemptions to inclusionary zoning laws that result in numerous projects and thousands of units—none of them affordable. Others produce thousands of affordable units but lose them to time limits. To increase the number of available affordable units, these exemptions must be limited and the time period for which affordable units must remain affordable must be extended to at least 30 years— or permanently, if possible.

4. Legalize in-law apartments or granny flats

Some cities are considering legislation that would turn illegal in-law units into legitimate housing. In-law units, or granny flats, range from converted garages to guest houses, attached or detached from the main house. Often, these units are in violation of zoning laws or building codes. This type of housing has gained popularity since the Great Recession because the rents for these type of units tend to be lower.  When restrictions were loosened in Portland, Oregon, the number of permits granted increased from 30 to 200 in a single year.

5. Get employers pick up the slack

Another proposal being considered in cities facing significant affordable housing shortages is to incentivize private companies to offer housing assistance to employees who choose to stay in an area rather than move because of rising housing costs. Local governments could encourage businesses by offering tax incentives to those who help their staff stay living within the city’s municipal limits.

 affordable housing development


Affordable housing development is one of the most effective ways to fight the expanding housing crisis, but only if the number of affordable units added in an area is higher than the number of units lost to non-affordable status or conversion to high-end condos, for example.

Affordable housing is housing deemed affordable to people with low or modest incomes based on the median household income as rated by country, state, region or municipality by a recognized housing affordability index. In the United States, families that pay more than 30 percent of their income for housing are considered burdened and likely to have difficulty affording other life necessities such as food, transportation, clothing and healthcare.

Well planned, managed and developed affordable housing can benefit everyone in the community, including residents, businesses, and developers. Here are a few of these benefits.

1. Economic prosperity

Affordable housing development provides direct economic advantages because affordable housing enables people to have extra money to spend on food, clothing, healthcare, education, and other goods and services. Research shows that low- and moderate-income households are more likely than other groups to spend this extra money. Increased spending generates greater business and employment opportunities for the surrounding community and its often challenged economy.

2. New jobs

Developing or rehabilitating affordable housing creates jobs in the construction field.  Research by the National Association of Home Builders estimates that, for each 100 affordable housing units built through the Low-Income Housing Tax Credit program, a project’s construction phase can create, on average, more than 120 jobs.

3. Diverse workforce

Affordable housing accommodates individuals of various backgrounds who bring with them different skill sets that are beneficial to the neighborhood. From construction workers to retail clerks, teachers to healthcare workers, all provide essential services to the community.

affordable housing development

4. Social integration

Affordable housing allows people to continue living in areas where they have lived for a long time. When housing is truly affordable, residents can afford to stay in their homes even after life-changing circumstances such as illness, retirement or divorce, keeping their support systems and contributing to overall community stability. Being able to stay in one’s home also improves job security on a larger scale.

5. Employee attraction and retention

Lack of affordable housing makes it more difficult and costly for employers to attract and retain employees. Adequate affordable housing improves the ability of companies to find and hold onto qualified workers, lowering turnover and increasing productivity.

6. State and local government revenue

Affordable housing development produces revenues for the government in the form of sales, income and property taxes, as well as fees for permitting, zoning, and utilities. When affordable housing takes the place of a vacant lot or a dilapidated building, the local government benefits from increased property tax revenues.

7. Lower foreclosure risks

Low- and moderate-income homeowners or prospective buyers who participate in affordable homeownership programs have a much lower risk of delinquency and foreclosure. Reducing foreclosures helps stabilize neighborhoods and saves local governments the costs associated with property maintenance, court, and legal expenses, increased police and social services for the affected neighborhoods, and ultimately, the demolition of abandoned houses. Abandoned homes decrease property taxes, utility revenues, and other taxes and fees the government typically collects, and can affect the value of nearby homes, further reducing property tax revenues.

Check out this video from one of our recent Affordable Housing projects: Las Gladiolas Revitalization.



  1. Danny Ruiz, Puerto Rico. Mortgage Loan Originator 6 years ago

    Thanks for sharing this information. I liked to read the article because you have depth knowledge in the topic. Incentivizing developers giving exemptions in rehabilitating buildings for affordable housing will help the low and middle class to purchase a home without the burden of a high monthly payment. For FHA, the housing payment should not excess 31% of the gross monthly income (including HOA). Thanks again.

    • AD&V 6 years ago

      Thank you for your comment, Danny!

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