“America is short millions of affordable homes, and that shortage has led to acute housing affordability challenges for a large share of low- and moderate-income households,” according to an October 29 report from the Urban Institute. “Federal housing programs play an important role in addressing the housing challenge, but they have insufficient scope and funding to improve affordability on their own. Absent more robust federal policy, what can state and local policymakers do to solve the housing challenge?”

As the report indicates, there have been a number of efforts to accomplish this important feat including changing zoning and land-use rules, speeding up permitting times and reducing fees. 

But, as the report states, “these policies on their own are unlikely to quickly reduce rents substantially enough for rent-burdened households to no longer pay more in rent than they can afford.”

With that in mind, the paper advocates for the potential of targeted incentives to increase affordability. As it points out, “By using tools such as tax abatements, low-cost financing, and public land disposition, jurisdictions can lower the cost of delivering affordable and mixed-income housing and stretch limited public dollars further.”

The Urban Institute offers the following four principles for making this approach work:

1. “Explicitly promote housing production and preservation with incremental long-term affordability for low- and moderate-income households in a manner that is tailored to local market conditions and potentially with a broader definition than for federal subsidies.”

   
   

2. “Build or preserve housing that would not happen without the additional support and in a manner that is a cost-effective use of taxpayer dollars. 

   
   

3. “Make administration and access as straightforward as possible, including for developers and investors that are typically less focused on subsidized affordable housing.”

   
   

4. “Set up programs so they can build and preserve housing at scale.”

Though these efforts may help with the rent burden for low-income households, the paper points out that there’s much need for assistance for middle-income renters, as well. In fact, it notes that “As of 2023, 37 percent of middle-income renters were cost burdened, a 7 percentage-point increase from 2019 . . .  The share of rent-burdened middle-income households has risen faster than other income groups and renters overall.”

There’s a potentially big payoff to be made by addressing this group. In fact, as the paper states, “From the perspective of state and local governments, targeting renters with moderately higher incomes than those who are covered by federal rental assistance and LIHTC (low-income housing credits) presents an opportunity, as there is substantial need and less subsidy is required to solve rent burden for renters in this group.”

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