So a developer working with the government and getting incentives builds a nice neighborhood of homes that people can afford. People in the target income group buy the houses. All good. But when housing prices spike, what keeps the houses in the hands of the targeted economic group. When owner goes to sell, won’t the market dictate what happens, opening up the neighborhood to what has been referred to as gentrification?
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In most countries, when governments want to finance affordable housing, they give the money to a special type of business that does not have the objective of making more money. This special business – most often a nonprofit or cooperative – owns the building and rents out apartments to people with low income. When those people leave, because the special not-for-profit business doesn’t need to make more money to make more profit, it doesn’t increase rents as much as the market would “allow”. This allows it to continue renting its apartments to low income people, which is its mission.
If the government can’t or doesn’t want to work with these not-for-profit businesses, it can do a similar thing with contracts, for example by only giving you money if in exchange you accept to only increase rents by a little bit every year for a few decades. But then the housing won’t stay affordable forever, just for the duration of the contract.
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