eli5: How can they create affordable housing that stays affordable

Question

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?

In: Other

Answer 1

This might not be ELI5, but I hope it is informative.

Modern affordable housing has three buckets:

1. Affordable rental housing
2. Permanent supportive housing
3. Affordable homeownership

A. The main federal tool to build affordable housing is the low income housing tax credit. All states get an allocation of these credits. State governments award developers these tax credits that the developer then sells in order to finance their project. The project commits to affordability restrictions for 30 years. There are other programs besides the low income housing tax credit, like the HOME program, the national affordable housing trust, and others through USDA rural development. This caters to “low income” people, which could be as high as 65k /family of four (80% of the area median income)

B. Permanent supportive housing is sometimes known as “Housing first.” In my state, (oregon) this is funded through bonds based on future state revenue, federal tax credits, local funding, and even private equity. It caters to the very low and no income crowd.

C. Affordable homeownership is the realm of habitat for humanity. They can get access to federal, state, and local funds. Sometimes (but not always) these homes are built on a community land trust, where a organization holds the land underneath the house in “trust” and leases the house for 99 years. Sometimes habitat holds the mortgage of their participants, offering interest rates as low as 1%. The house typically has an affordable restriction where it can only be sold to low income families. Often in this case, low income is 80% area median income, but I’ve heard of some projects serving as low as 30% ami.

Here is a link to an in-depth workshop on putting together an affordable housing project: https://youtu.be/XeiuAPFifUc?si=JG9DY5Xg7M9DGeEu