In the United States today, a multitude of government policies and programs require or incentivize production of below-market housing units within market-rate developments. Yet such units will always represent a small percentage of new housing and will satisfy little current and future affordable housing demand.
The housing problem is acute. Recently, Washington Post columnist Petula Dvorak reported that in the District, 70,000 people are on a waiting list for one of only 8,000 units. Many people have spent decades on the list, characterized by Dvorak as “absurd.”
In his 2012 book “So Rich, So Poor: Why It’s So Hard to End Poverty in America,” author Peter Edelman writes that about 7.1 million tenants, more than half of all renters in the United States in 2009, paid more than 50 percent of their family income for housing. In the world of real estate economics, 30 percent is the generally accepted rule of thumb.
Edelman also notes that there is not a single state in the United States where a person working full time and earning minimum wage can afford to rent, at fair-market value, a two-bedroom apartment or home.
Beginning with the New Deal and for a couple of decades after World War II, America’s federal, state and municipal housing authorities built public housing projects containing subsidized units for low- and moderate-income tenants. Ultimately inhabited mostly by people living at the edge of or in poverty, projects labeled “public housing” became negatively stigmatized.
Stigmatization was attributable to poor design, often shoddy construction, inadequate property repairs and maintenance, neglected landscaping and pervasive crime. Plagued by these severe physical and socioeconomic problems, developing public housing was deemed politically and socially taboo.
In the 1970s, governments stopped developing affordable housing directly and adopted new strategies entailing financial subsidies in various forms: long-term, low-interest loans to non-profit as well as for-profit developers; loan guarantees for lenders; direct grants to local jurisdictions; tax credits for investors; and housing vouchers for tenants. The goal was to enable private sector construction of units at below-market rents.
Meanwhile, federal policy administered by the Department of Housing and Urban Development allowed local housing authorities to demolish some of the country’s most troubled public housing projects. New HUD initiatives, such as the “Hope VI” program, resulted in derelict projects being razed and replaced by better-designed, better-built affordable housing.