What is Affordable Housing?

Recently, I was at a local community board meeting, and the State Legislator, Brian Cunningham, came in to give us his monthly update. One of the issues he was working on was a bill to redefine how AMI is calculated. AMI stands for Average Median Income and is used by the U.S. Department of Housing to determine eligibility for affordable housing programs. However, in New York City, the AMI is skewed way too high because it is combined with Long Island and Westchester — areas with higher average incomes. This creates a major issue: affordable housing is not really affordable housing. Because of how high the AMI is, affordable housing units in low-income areas are still too expensive to be considered affordable housing. Instead, it's cheap housing for the upper class. This issue raised many questions in my head:

1. What constitutes affordable housing and who should it benefit?
2. Do government-led affordable housing programs fit the capitalist model of the United States?
3. Is affordable housing a fair system?
4. Can you fix the housing crisis without bringing down the price of homes?

When analyzing the history of the housing crisis in America, like many other issues it is helpful to begin at the New Deal era of the early 1900s. This is a key point because it signals the transition from the traditional hands-off model of the United States to one with increased government intervention to support the lower class. Up until this point, the United States had gone through the Gilded Age and multiple Industrial Revolutions leading to incredible economic growth. However, without government mediation, growth had ballooned the already present economic inequalities in the United States to an intolerable rate. The key reason why the country was able to grow so quickly is that the government used a largely hands-off approach which made private growth easy, leading to the creation of large corporations and widespread corruption. The rise in large companies was key to consolidating wealth, and ultimately leading to the inequalities that have endured into modern-day America. At a time of an economic depression, the New Deal was crucial in establishing precedent for government aid. It was perhaps the biggest expansion of government of all time and was key to keeping the working class above water. This was the first time the government decided to intervene in a largely private housing market to combat the flaws. At this time, homeownership was not the norm and in an unregulated housing market, many lived in overcrowded, unsafe homes. The New York tenements are a famous example of this, where large immigrant families were packed into extremely small buildings and apartments. It was clear slums were not humane and government subsidies were needed to keep the working class afloat. Housing was now becoming a public responsibility.

One of the most notable pieces of legislation was the 1934 National Housing Act. In this act, the Federal Housing Administration (FHA) was formed to help insure mortgages at a time when mortgage rates were unsteady and the housing market was in turbulence. Many mortgages were also refinanced, and fixed mortgage rates were created. This government intervention was crucial in stabilizing a market full of turmoil and removing uncertainty. This was also when zoning rules and therefore redlining were brought into play. Redlining is when loans or financial services are denied to residents of specific neighborhoods based on race, ethnicity, or national origin. Redlining gave America another chance to institutionalize inequality. While the government brought benefits, it also had its tradeoffs. This has continued into today, with a fierce debate over the role of government in housing has continued. The question remains: what is the responsibility of the US government in supporting Americans to ensure they have housing. On the far left you have politicians who support a model of government-owned housing which is accessible to virtually everyone, yet on the right there is support behind the more traditional free market. Clearly what we have right now isn't working, but what is the correct path forward?

After the federal government entered the housing market, homeownership exploded because housing was now much more accessible to the working class. Housing access was expanded, and although unevenly, it was still a clear step in the right direction. The Housing Act of 1937 was another major milestone, marking the first time the U.S. government owned and managed housing on a large scale. The goal of this piece of legislation was to manage the dangerous slums that many of the lower class had to settle for. Housing was now being built for low-income families, and the federal government was funding housing development. However, like many government projects at this time, the issue of racial segregation continued to be present. Imagine the huge housing projects you see when walking around New York City. From the 1930s through the 1960s developments were built at scale, and at first, were a key resource for working families to live in. However over time the average income levels of those projects fell, and they began to symbolize a concentration of poverty. The middle class moved out, and massive buildings were frequently placed in marginalized neighborhoods, becoming symbols of indigence. The conditions in these buildings rapidly deteriorated, and crime was high. This experiment proved how housing completely owned by the government is easily susceptible to failure because it doesn't coalesce well with the American capitalist model. The first reason behind this is that the only time government-run housing has been a success is when it has been made up of mixed-income residents, not only the lower class. However, the reality is that government housing is usually of a lower quality and ends up being filled with those struggling economically because those with money buy their way to a higher quality of housing. The second issue is that the government is unable to consistently fund the housing developments and asks them to operate off of rent revenue while not working on a deficit. This makes it incredibly easy for the conditions to quickly worsen without the proper maintenance which is often lacking.

Around the 1960s many public housing projects were failing and instead of facing the issue head-on, the government decided to halt public housing projects under the leadership of President Richard Nixon. Another facet to this decision was that as the US entered the Cold War era, government-built housing was viewed as un-American — there was a fear of the socialist and communist models America was fighting against. The private market was prioritized, and in the late 1900s, funding for public housing projects was cut, with many of them being destroyed.

One key change from this time period was the increased use of subsidies and vouchers. Now instead of building housing, the government was instead helping people afford housing, but still leaving it up to the private market to provide that supply. This model drives forward much of modern-day affordable housing, and the introduction of LIHTC was a key part of this effort. LIHTC stands for Low-Income Housing Tax Credit, and offers tax credits along with financing for private developers to build affordable housing units. However, the issue with these affordable housing units is that they are built at a limited scale. When I opened the article talking about AMI, this is where AMI comes into play. Once projects are built, they are given a price tag that is meant to be affordable to the residents of the neighborhood. For many, the definition of affordable housing is when it costs less than 30% of one's income. So after private developments are made, the price is calculated using AMI to find a so-called affordable price tag. The benefit of this model is that there are no longer huge concentrations of poverty in a given area, and buildings do not have to depend on the government for upkeep of the building. It is just that this blueprint must be improved.

Arguably the biggest indicator of wealth and status in America is the home. For many families, buying a house is the biggest investment they will ever make and a house's value is a major factor in one's economic status. A house determines who surrounds you, which schools and jobs are available, and what kind of lifestyle you can have. When the "American Dream" is pictured, with that comes an image of a big house. However a major issue has arisen over the last 100 years; income growth can't catch up to the rate at which housing prices grow. Until the World War II era, housing prices followed income growth and the discrepancies were not as major. However, since then the divide between the two has risen. Over the last 50 years, housing costs increased much quicker than household income levels, and according to Harvard Joint Center for Housing Studies (JCHS) in the last five years, median home prices rose by 48 percent compared to a 22 percent increase in median income. The Visual Capitalist says that since 1985 alone, house prices have surged over 415%, while median household income rose only roughly 255%. No longer can a working-class person afford to dream of buying their dream house. That is reserved for the upper-middle class, which translates to a low quality of housing available to the lower classes. It is clear that housing growth needs to slow down so income levels can catch up. But, what cannot be missed is how important a home's value is to a family's wealth. It is crucial home values are not lowered, instead their growth must slow down so the market can catch up.

It is impossible to point to one issue that will solve the housing market. It is an incredibly layered problem that must be dissected. The first thing that must be tackled is zoning rules. Unlike other topics I will go on to discuss, zoning rules are unique because there is bipartisan agreement that they must be rolled back. Zoning rules were first introduced in the early 1900s to retain order, security, and safety in neighborhoods. At a time when houses were being placed next to factories, low-quality housing was being built, and neighborhoods were becoming increasingly dense, zoning rules were crucial to retain a high quality of housing. Essentially, zoning rules decide what you can build, where you can build it, how big it can be, and who it's meant for. The most important zoning rule is single-family zoning. According to the Bipartisan Policy Center, 60–80% of residential land in America is reserved for single-family homes, creating a major supply-side issue. Even more, in cities where there are fewer single-family zones, there are still a large number of low-density housing zones that are characterized by one- or two-family homes. For conservatives, zoning rules are a barrier to the free market, while for liberals, zoning has historically correlated with segregation, and has unfairly protected wealth.

The clear solution is to roll back zoning restrictions. While they might have been a necessary and effective solution in the 20th century, it seems like they are now an outdated part of the issue. Ezra Klein's book Abundance made the argument that the biggest issue in America is the lack of everything. He argued the solution is to simply build and create an abundance. While his ideas were perhaps too utopian, he is without a doubt correct when he talks about the American bureaucracy. While designed for efficiency and fairness, over time by adding more and more layers to governmental decisions, many processes are slow, rigid, and overly focused on paperwork. This makes it incredibly hard to gain approval for a project when you have to get five different committees to agree to accept your idea. A study by the America First Policy Institute found that regulations imposed by all levels of government account for 23.8% ($93,870) of the final price of a new single-family home. It's not that the government needs to be cut back, but it is necessary to ease the difficulty with which housing projects are approved, and it is clear the first step to that is limiting zoning. While some aspects of zoning laws are crucial to maintaining a community's wellbeing, single-family zoning laws are clearly hindering the ability of many private groups to build at scale. This means eliminating single-family zoning laws, legalizing duplexes, triplexes, and small apartment buildings in residential areas, and reducing minimum lot sizes. If the government truly wants to trust the private market to build the majority of housing in America, they can't then go and limit developers from building the supply the working class so badly needs.

In cities like San Francisco and New York City, even if zoning allows an apartment building, developers often face environmental review, community board hearings, city council approval, design review panels, lawsuits, appeals, and political negotiation. In the manufacturing world, time is equivalent to money, and in the years developers wait to begin construction, prices pile up or a project is never completed. According to the National Conference of State Legislatures (NCSL), in a developer survey, 97% reported project delays, with 83% of those citing permitting issues as the primary cause. This can be solved by setting strict deadlines for lawsuits and committees to complete their assessments, and creating clear thresholds that send a project to streamlined review if met. Additionally, the government may need to funnel approval of housing projects through fewer decision-makers. The key is that proper due diligence is still carried out, and the quality of housing remains high. Even in a new system with fewer regulations, no house will be built if it's detrimental to the community in some way, but what matters is the number of people who get to determine whether that is true. Right now the system is simply too blocked up and the chain of command is too large.

What the U.S. should be doing is continuing to invest in the private market with subsidies. A private housing development group doesn't want to build affordable housing because it will minimize their profit. However, if the government is able to make up the margins then that issue won't loom as large, and the residents won't have to rely on the government for upkeep of their utilities. The priority needs to be to build as much working-class housing as possible. The National Low Income Housing Coalition (NLIHC) estimates a specific shortage of 7.1 million affordable and available rental homes for extremely low-income renters. Some say the U.S. lacks 3 million homes; others say that number is closer to 10 million, but the clear point is that supply must be increased. As seen earlier, when examining the failed housing projects of the 20th century, affordable housing projects become failures when they begin to concentrate poverty. However, when they are truly for the working class and placed in areas with strong infrastructure around them, it is much easier for these projects to be a success. Affordable housing is not supposed to be handed to extremely low-income households for free and create dependency on the government. It's supposed to provide the hardworking lower-middle class of America with a viable housing option they can afford and safely live in. This is why the prices of affordable housing units cannot be extremely cheap, because they will translate into poor living conditions and the capitalist nature of America will inevitably translate these homes to the poorest of society. Housing policy should be structured to preserve upward mobility and avoid permanent dependency, while still preventing extreme hardship. The big hurdle is that it will be hard for the government to convince the upper class it is okay for housing price growth to drop from 8% to 3% a year. This is an inevitable effect of adding needed supply to the market, but politicians may have a hard time making this commitment.

At the same time, many attempt to point out that there are still many unsold houses in America, but what is key to understand is what houses are remaining unsold. The houses that aren't being bought are expensive, or in a stagnant area with a surplus of housing. This is because the private housing development market wants to prioritize economic return. Every year, I go to Delaware on vacation and I drive past massive gated housing communities being built. Half of the buildings look empty, while in New York even finding an affordable one-bedroom apartment is a struggle. This is yet another example of how the government must play the role of the regulator — incentivizing housing developers to build in places where supply is low, and there is a vibrant working class. It is clear housing precision is needed. Instead of letting the federal government make one big blanket decision, it is key that housing is at the center of the state and community agenda. Illinois Policy found that in Minneapolis, eliminating single-family zoning and other local reforms raised housing supply by nearly 12% from 2017–2022, while Chicago, with tighter local rules, grew only ~4%. During the same period, rents increased by only ~1.8% in Minneapolis versus ~16.5% in Chicago. This shows that by rolling back the federal restrictions and giving state and local levels more authority, change will be more effective. While some might call this a contradiction of my earlier point on rolling back the bureaucracy, I would argue that the opposite is true. By giving the state level more power, efficiency will increase.

After agreeing to build a house, construction is still extremely expensive. There are two ways I have thought of to directly lower the cost of construction. The first is to lower the price of land, and the other is to lower the price of materials. While these solutions may not drastically lower the price of production, on the margins they will help make the market more manageable for the developers who are so crucial to increasing supply. The primary step towards minimizing the cost of materials is to lower tariffs. Groups like the National Association of Home Builders estimated steel/aluminum tariffs added several thousand dollars to the cost of each home. America has a major reliance on Canada for lumber, which is crucial in housing construction. Under the Trump administration, Section 232 tariffs were imposed on imported steel (25%) and aluminum (10%). Additionally, in the wake of recent conflict, tariffs are now in the 30–40% range. The National Association of Home Builders has estimated lumber tariffs can add $10,000–$30,000 to the price of a new home during high-price periods. While it is true tariffs can be beneficial in protecting the domestic industrial market, they must be targeted on industries that are truly at risk of becoming too international. The government must understand that in some cases tariffs directly raise consumer prices and should lower the tariff rate.

Before I talk about land, there is a second method I want to touch on. Many call it modular construction, but the simple label is off-site construction, and it is exactly what it sounds like. Parts are assembled in a factory, and then sent to the construction site to allow for quicker and more efficient assembly. According to the National Housing Crisis Task Force, off-site construction can reduce total construction costs by approximately 20%, reduce construction timelines by 30–50%, and significantly lower waste. This also allows for higher-quality parts and less room for error during construction because in a factory the parts are checked for quality before getting shipped out, and those assembling the house have an easier role to play. The biggest weakness of this model is that it will require a massive preliminary investment by the U.S. government, one that will be high-risk, high-reward. In cities such as Singapore, modular construction has been a major success with the Singapore Building and Construction Authority (BCA) reporting that general PPVC (PPVC is a type of modular construction) projects in Singapore consistently report 40% to 50% reductions in construction time and 25% to 40% savings in manpower compared to conventional methods. But for this to work, factories need to be constructed, and a system will need to be put in place that allows the modular construction model to be effective in the areas where housing development is needed. Even more, modular housing codes will need to be created and passed, which are essentially zoning rules but specialized for off-site construction. These ensure safety and that construction is carried out to meet the requirements of a home. The other risk of this model is that it relies on a constant demand for housing. In an extremely volatile market, if all of a sudden housing construction slows, then factories will become useless and will create a major deficit. However, if put in a few key areas that especially lack housing, the modular construction model can work. I feel the need to continue to stress that housing is a localized issue. Each and every community has their own needs and their own problems they need to solve. Modular construction can be effective, but only if applied to places where it is truly needed and is possible to be scaled. In a perfect world, developers and the government will be able to profit from this model because prices and efficiency will improve, and the speed at which housing is built will quickly increase. It requires a large amount of investment and faith from the American government, because this model will only work if applied at scale.

In terms of land, the biggest impact will be from changing zoning rules. Currently, land costs make up around a quarter of housing construction, and by making land cheaper, all parties will increase their profits. As I mentioned earlier, part of my plan to create affordable housing is to eliminate single family zoning. If a $2 million lot can hold:

• 1 single-family house → land cost per unit = $2 million
• 4 townhouses → land cost per unit = $500k
• 20 apartments → land cost per unit = $100k

Additionally, many cities have large minimum lot sizes and require a certain number of parking spaces for each household. By changing zoning rules, it will be possible to limit the amount of land needed to be purchased to create a basic working-class house that may not require a large plot of land. Similar to how housing is a supply and demand issue, so is land. Many state governments own large amounts of underused land, and by releasing that land for development, the government will gain yet another tool towards incentivizing working class housing construction. A 2024–2025 analysis by Pew Charitable Trusts identified significant surpluses in key states that could be repurposed for housing:

• Massachusetts: ~25,800 acres
• Florida: ~20,800 acres
• Washington: ~15,900 acres
• California: ~14,600 acres

Cheap land can save developers millions of dollars and can be a powerful tool to convince companies to build cheaper housing. It is necessary to leverage all land, and find creative ways to keep land affordable, yet the key is that, through it all, the quality of community still remains high. I am not proposing to drastically change the density of a given neighborhood; I am simply asking the government to take a more proactive role in making a world in which housing becomes more affordable.

On the opposite demand side, homebuyers need support. One program expanded recently is the first-time homebuyer program. In order to support the first-time homebuyer who may have fewer financial assets, state governments have implemented programs that incentivize Americans to transition from the rental market to ownership. Often these initiatives allow for lower down payments, low-interest government loans or even grants, and even closing cost assistance. These programs are present in all 50 states, but considerably more robust in Democratic states such as California and New York; however, there is clear room for expansion. However, it is clear for many lower-class Americans, they don't have the funds to consider homeownership. Around 5 million Americans use Section 8 vouchers; Section 8 typically covers the difference between a unit's rent (up to a set payment standard) and 30% of the tenant's adjusted monthly income. They give renters support and help to lessen the economic burden on the working class. The issue is that only a small portion of eligible renters receive a Section 8 voucher, and even more, many landlords don't accept the vouchers. Applicants can spend years on the waiting list. According to WBEZ Chicago, one in three landlords reject Section 8. Sometimes this is because vouchers pay below-market rates and force the landlord to go through a large amount of paperwork and inspections. Currently in most places, those eligible for Section 8 generally make below 50% of the AMI, leaving a large portion of society eligible for a small fund. The reality is that without a major government investment into Section 8, this program will continue to be inequitable in whom it supports. While this may be unpopular because of how it cuts some renters off, I believe it is necessary to lower the threshold to Section 8 to those making 30% of the AMI. Then in the 30–50% range, you gradually lower the amount of support renters receive so that there is no strict cutoff. The reason why there must be a gradual cutoff is to avoid work disincentives; if it is possible for someone to work less and receive more government aid, upward mobility can end up being discouraged. In my proposal, those who need the financial support the most will receive economic aid. However, this will still require a major economic commitment, and the government must realize that if it wants Section 8 to be effective, it cannot go halfway. Either commit or don't, but to give the service to only 1 in 4 Americans who request it is unjust. This is why I have a problem with the lottery systems that many places have begun using. In my neighborhood, new affordable apartments have been constructed, and people under a certain income threshold enter a lottery to gain access. While this benefits those who win the lottery, it leaves everybody else out in the cold and it is not an effective solution to randomly give certain people increased government aid. On the other side, landlords should be required to accept Section 8 if the renter can make a financially acceptable offer. The key thing to note is that this can only work if it's paired with the increased housing supply I have described throughout this article. This is because Section 8 vouchers give more power to the buyer, and therefore increase demand, so that will require more supply for a larger buyer pool.

After completing this analysis of the U.S. housing market, it is clear that many changes are needed to fix the housing market, but they can only work if carried out together and directed locally with clarity. The solution to housing in New York City is not the same as fixing housing in Idaho. While the federal government can help with funding and forming the framework for housing expansion, it is crucial that increased power is handed to those at the state level. This must be done with caution, as I mentioned, the American bureaucracy is a severely limiting factor in the supply-side issue, and it is important that the process for approving housing projects becomes shorter. My philosophy is that housing is not a right, but a hardworking American shouldn't have to worry about whether they can pay for comfortable housing. Finding the balance between the private and public market is challenging, but the first step is without a doubt to build housing so that America does not have a shortage of millions of homes. The first responsibility of housing policy is to remove artificial barriers to supply. Only then can targeted public support work effectively.