Affordable Housing 101

Who are the major players and what are their roles?

Government Agencies

The “government” role in housing refers to the variety of activities- taxation, zoning, subsidizing, regulating, lending, and others- that take place at several levels of governance- federal, state, and local.

At the federal level, the government serves primarily as a funder, providing financial resources through federal tax policy such as the home mortgage interest deduction, direct subsidies such as assistance to low- income renters and indirect subsidies such as tax credits (LIHTC) to builders of affordable homes. Through its other funding mainstays- the Community Development Block Grant (CDBG) and HOME- the federal government provides funds to states and localities as well as the flexibility to address their area housing needs.

State governments play an important role in housing too. They help lower the cost of homeownership through mortgage revenue bond programs and also can allocate their portions of CDBG and HOME funding, along with state matching funds, to areas throughout the state. Low Income Housing Tax Credits (LIHTCs), a major source of funding for new and rehabbed rental homes, also are allocated at the state level. Some states promote housing and community development through state- run housing trust funds or other funding mechanisms.

States can also provide incentives or requirements to encourage localities to adopt policies that will help expand the supply of affordable homes. States serve as conveners and educators, as well as facilitators, through strengthened enabling legislation.

Local governments are where the rubber meets the road. From implementing zoning regulations and processing requests for waivers to issuing building permits and conducting housing code inspections, localities play a direct role in shaping the housing that gets built in their communities. Some localities also donate publicly- owned land or property that has gone into tax foreclosure and contribute local funds to build or rehabilitate homes.

When considering what local governments can do to expand their impact, it’s worth noting that not all government initiatives require spending money. By reducing barriers to development, expanding allowable densities, and creating incentives or requirements for the inclusion of affordable homes within new development, local governments can expand the supply of affordable homes with minimal public expense.


Private Sector

When the lack of affordable homes- both rental and homeownership- threatens the vitality of the community, homebuilders, bankers and realtors certainly are affected, but so too is the local community at-large. Individual employers as well as the Chamber of Commerce, economic development groups, and other industry associations can work alongside Mayors, local officials, and affordable housing developers to help expand housing opportunities for low- and moderate- income working families and to ensure they are able to stay in their homes.

What can they do? The private sector can participate in and underwrite media campaigns to raise awareness of the need for workforce housing. As the drivers of jobs, tax, revenue, and economic development, area employers and business associations hold considerable sway with city council members and legislators when it comes to reforming zoning regulations or other practices that limit the supply of affordable homes. By advocating for more effective local housing policies and actively supporting efforts to expand the supply of housing, private employers can help both themselves and their communities. They also can advocate for state grants for communities that meet their fair share of the need for affordable homes and tax credits for employers that help employees obtain housing. Finally, they can participate directly in Employer Assisted Housing programs that help employees with their housing and, in turn, provide themselves with a stable workforce.

It is also important to recognize the critical role that private- sector developers play in expanding the overall supply of housing. One reason why housing prices are rising faster than wages is that housing supply has not kept up with demand. With the right set of market incentives in place, private- sector developers will respond by increasing the supply where needed, slowing the rise of housing costs. With creative policies to keep that housing affordable over time also in place, communities can go a long way towards meeting both their economic development and affordable housing goals.

Private financial institutions- namely lenders and servicers- are critical partners to help ensure long- term affordability for homeowners and help families stay in their homes. With the dramatic shifts in the housing market currently taking place, lenders and servicers have the capacity to modify mortgages for families paying more than the current value of their home or refinance unaffordable mortgages to troubled borrowers at risk of losing their homes. Lenders can explore the different refinancing products as options to help borrowers, such as a low- interest loan or a shared appreciation second mortgage, which splits a mortgage into two mortgages- a fixed rate mortgage and a silent second mortgage in which no payments are due until the home is resold.

Lenders and services are able to work with housing counselors on behalf of the borrower or through voluntary agreements with the federal government to assist households that qualify for the federal program Making Homes Affordable. Through the Making Homes Affordable program, lenders and servicers receive a financial incentive for helping troubled borrowers that are eligible for the program with a loan modification or in refinancing their mortgage to afford monthly payments over the long term.


Nonprofit Sector

Nonprofit organizations have been the sponsors, developers, and operators of housing- particularly for low- and moderate- income people- for many years. Some nonprofit community development groups focus on the overall improvement of targeted neighborhoods. Others have as their mission serving vulnerable populations such as the homeless or physically and mentally disabled. Still others are sophisticated housing developers who specialize in putting together multiple funding sources to expand the supply of affordable homes. Housing often is utilized by nonprofits as a platform to provide supportive services such as job training, health care, child- care, or transportation. Generally, most nonprofits are committed to making the housing they provide permanently affordable. This means they will be unlikely to opt out of affordable housing programs when market prices rise. Nonprofits also have the flexibility to participate in unique partnerships. For example, some nonprofits provide housing counseling to the employees of private sector firms that offer employer- assisted housing benefits to their workers. Other nonprofits build close connections with residents of particular neighborhoods, gaining the trust of local residents that may be essential for the success of revitalization efforts. Nonprofits also can work with state and local governments to pool financing for specific housing developments. Or, they can advocate for broader policy changes, such as zoning changes that create more affordable housing opportunities in the communities they serve.