Cities, States Step Up With Funding To Fill Affordable Housing Gaps

The nation’s affordable housing crisis is getting worse.

What used to be a niche issue has now become a major policy debate within city halls and the federal government as people around the U.S. continue to spend an outsized share of their paychecks on housing costs. 

The trend is driving state and local leaders to amp up their subsidies and incentives to spur more affordable production, developers said at Bisnow’s East Coast Affordable Housing Summit.

“More municipalities are opening up to the idea of deep real estate tax exemptions and pilots, and those help tremendously on these types of deals,” Andy Cohen, managing director of development at New York-based real estate firm BRP Cos., said onstage at the Washington Hilton on Wednesday.

In an environment where it is difficult to make any multifamily development pencil, especially projects with lower rent thresholds, those benefits are a vital piece of the funding equation. 

“We're seeing capital stacks rely on a lot more local funds — so county funds, city funds,” JPMorgan Chase Executive Director Brett Macleod said.

Last week, New York City Mayor Zohran Mamdani unveiled a sweeping housing plan that aims to create 200,000 new housing units over the next decade and preserve 200,000 more. City Hall is proposing to support that plan with $22B of investment over the next five years. 

More localities are also considering tax abatements as a tool to help financing get over the finish line, according to Amazon Housing Equity Fund Managing Principal Senthil Sankaran.

He pointed to the success that a project in Alexandria, Virginia, found through a city tax abatement: Stonebridge’s redevelopment of a long-vacant office building into 377 units of fully affordable housing. The city of Alexandria is contributing its inaugural 25-year tax abatement for housing. 

“It actually helps unlock real value,” Sankaran said. “In certain areas, it's an underutilized tool, but I think there needs to be continued innovation.”

At least 34 states and Washington, D.C., have created new or expanded investments to address affordable housing or homelessness in their most recently enacted budgets, according to the Center on Budget and Policy Priorities, a nonpartisan research and policy institute.

Those state investments most commonly focused on increasing affordable housing supply, with at least 27 “using funding for capital grants, reduced cost loans, development-focused tax credits and incentives, and deposits into state Affordable Housing Trust Funds,” the institute found.

“Historically, it's been the federal government solving things,” Macleod said. “Now it seems to be more like state and local municipalities solving things. So, there's a different approach to how we're getting to the finish line, but there's a lot of political will.”

States and cities are stepping in as the federal government is cutting back on funds and instead turning its attention to deregulation. 

“There is a way I think the federal government can help, and that's get out of the way,” Department of Housing and Urban Development Deputy Secretary Andrew Hughes said in a keynote address. “And so one of the big initiatives from this administration, from President [Donald] Trump and Secretary [Scott] Turner, is deregulation.”

He pointed to the administration’s rollback of a Biden-era requirement that new homes receiving federal funding comply with certain energy-efficiency standards. The Trump administration also scrapped a proposed Biden administration rule that would have required localities receiving federal funds to track patterns of segregation.

Meanwhile, Trump’s 2027 budget proposal would trim 13% of HUD's funding, equating to a $10.7B budget cut. 

That would include cutting $4.6B in community development funds and eliminating several programs, including the community development block grant and the HOME Investment Partnerships and Pathways to Removing Obstacles to Housing programs, all of which target affordable housing production and preservation. 

While deregulation helps, cash is king, said Priya Jayachandran, president and CEO of the National Housing Trust.

“My own two cents is deregulation is great, but if I had to pick, would I prefer deregulation or subsidy and investment? I would take subsidy and investment any day of the week,” she said. 

“I think that the cynic in me would tell you that part of the reason that deregulation is so popular right now is that it costs nothing and that subsidy and investment come with a price tag,” she added, arguing that the federal government subsidizes “every other national priority,” like healthcare, education and transportation. 

“This is a national priority, and we subsidize our national priority. So, great on the deregulation, but bring on the national investment,” she said, drawing applause from the audience.