Key Facts
1 in 4 poor Americans get subsidies for housing, while the rest find other arrangements, sometimes paying 60 percent or more of their income to pay the rent. (Business Insider)
Homelessness rates in 2017 in the U.S. rose for the first time since 2010. (The Data Face)
Currently over two million low-income families participate in the Section 8 program, amounting to over 5.3 million people. (Center on Budget and Policy Priorities)
A household is termed “cost-burdened” if more than 30 % of its income is put towards housing costs. 80 % of renters and 63 percent of homeowners making less than $30,000 annually are cost-burdened. (State of the Nation’s Housing 2018 report)
As part of President Johnson’s Great Society, in 1965 Congress established the Department of Housing and Urban Development (HUD).

Building Blocks of The American Dream: Housing and Affordable Housing

Thomas Jefferson claimed that “small landholders are the most precious part of a state.” Senator Elizabeth Warren has been quoted saying that homeownership is the source of “stable communities that are the backbone of this country,” and that instilled in the American dream is that of the importance of homeownership. (Washington Post)

For a real story about the role housing plays meet Tamarha:


From the Great Depression through the most recent housing market crash of 2008, housing has been a pressing policy issue in the United States. And new trends are emerging with millennials choosing to rent instead of delving into home ownership.

Despite this potential shift, the housing market still constitutes a significant part of our economy. In the early 2000s, overall investment in housing made up approximately 20% of GDP.  According to the National Association of Home Builders Eye on Housing Report, at the end of 2017, housing’s share of GDP was 15.4%. According to the National Association of Home Builders, constructing 100 units of single-family housing supports over 200 full time jobs and produces over $11 million in wages. (Book: Opportunity and Progress)

So, is owning a home still a crucial part of the American Dream? And what about housing for those for whom it has been a perennial struggle? What roles do society and government play to meet the universal need for a safe place to call home?

Housing is an ongoing issue with many facets, from the plight of homelessness to the shortage of affordable housing.  More than one third of Americans spend more than 30% of their income on housing. In 2017, homelessness rates  in the U.S. rose for the first time since 2010. (The Data Face).

Since the 2008 housing crisis, low income families have recovered more slowly than others.  PolicyLink finds that “as the 10-year anniversary of the subprime mortgage crisis near[ed], recovery continue[ed] to be uneven, with low-income communities and communities of color facing the steepest climb toward economic stability.”

All levels of government — federal, state and local — play a role in addressing homelessness and the affordable housing challenge.

In March 2018, the U.S. Congress passed a funding bill–which the President signed–that targeted over $6 billion dollars of federal funding for homelessness assistance. In particular, the Department of Housing and Urban Development (HUD) received its largest one year increase of 4.7 billion, taking the total to $52.75 billion in gross discretionary spending.

Much of the funding goes to Homelessness Assistance Grants (now $2.513 billion), to public housing infrastructure overseen by both public and private entities, and to “Section 8” vouchers that provide subsidies for housing in designated rental units.  Additional details on these programs can be found here: National Alliance to End Homelessness.

States and municipalities also administer public housing and local rental assistance programs, with funding through various sources. For example, San Francisco’s Direct Access to Housing Program deploys city and federal funds, whereas The San Francisco Housing First Program uses only city funds. (National Low Housing Coalition).

In many cases, local and state funds are not specifically deployed for ‘direct’ rental assistance programs but instead are put toward the ‘indirect’ costs associated with a lack of affordable housing, namely policing and behavioral health programs.

Salt Lake City and Seattle Case Studies

In 2016, Salt Lake City spent almost $14 million on homelessness and related issues, with the city providing $12.5 million, and the balance provided by federal and state funds (Deseret News Utah). Here’s the breakdown:

Total spent on homelessness and related issues in 2016 = $13.6 million. That is up from $10.3 million in 2015 and $8 million in 2014. For 2016:

  • $12.5 million in city funds
  • $823,000 in federal money
  • $184,012 from the state

Seattle, with some of the highest rates of homelessness in the country, spent over $60 million in 2017. A significant portion of that total goes to nonprofits, which spend a total of almost $750 million to address homelessness each year. Additional costs incurred and absorbed by the city include law enforcement, EMS and health care resources, and housing and shelter costs. Taking all these added costs into account, the total spent by the city of Seattle could easily top $1 billion dollars this year, and that is in addition to federal funding (Puget Sound Business Journal)


Government, at all levels, plays a large role in creating access to affordable housing for those in need. While some programs help bridge the gap for a rent payment, others encourage a path to home ownership — but not without consequences. This brief will help you better understand government involvement in housing policy, what this has meant for affordable housing programs and housing values, and the trends when it comes to housing and the American Dream.

Without recognizing and correcting policy mistakes made in the past, we are likely to find ourselves in yet another housing crisis of our own making.



Borrowing Money to Buy a Home

Individuals and couples who can afford to buy a home typically borrow money in the form of a mortgage. People have borrowed money to fund home purchases for centuries; the original idea of the mortgage dates back to English common law documents from the 12th century.

The modern mortgage – a loan secured by a property – was first seen in the 1930s. During the Great Depression, the economy hit a standstill and banks had very little capacity to make loans to finance housing purchases, so many New Deal programs were established in an attempt to stimulate growth.

In 1934, in an attempt to rebound after the Great Depression, the Federal Housing Association was established to reduce the risks associated with lending and to protect lenders in the case of a borrower default. Among FHA’s solutions was the 30-year mortgage, a reduction in down payments on homes, and a new set of quality standards. Before this, the 30 year mortgage – now a common feature of a home loan – was unheard of. (Be Businessed, History of Mortgages)

Additionally, Congress created the Federal National Mortgage Association (“Fannie Mae”) in 1938 as part of the New Deal. Fannie Mae’s purpose was to “stimulate the housing market by making more mortgages available to moderate- and low-income borrowers.” To do this, Fannie Mae purchases FHA-insured loans from banks, pools them together, and sells them as mortgage-backed securities, usually to institutions such as insurance companies and investment banks, thus creating a secondary mortgage market and increasing the total amount of capital in the mortgage market. (Investopedia)

The Rise of Home Ownership

After the end of WWII through the 1960s, homeownership rose from 45 percent of the population to 60 percent, mainly due to the rise of suburbs, the baby boom, low interest rates, and extended loan periods, like the 30-year mortgage. Once home from the war, families focused on building lives and home ownership was the center of that life.  

“Between 1940 and 1990, the West had the highest housing growth rate, 349 per­cent, followed by the South, 232 percent. Increases in the Northeast and Midwest were only slightly more than 100 percent. The South had the greatest numerical increase, 25 million, during the 50-year period (See tables 3 and 4 below).”

“The majority of housing growth since 1940 has taken place in the suburbs of metro­politan areas” (Book: Current Housing Reports: 50 years of Housing History from the Census Bureau).

The 1970s in particular marked a surge in homeownership as the Baby Boomer generation grew older and demanded a greater supply of larger, more expensive homes. To finance the new demands, in 1970 Congress created the Federal Home Loan Mortgage Corporation (“Freddie Mac”) to further increase the amount of capital available.

Unfortunately, it was also around this time that interest rates began to rise, and they stayed high throughout the 1980s and into the 1990s, which discouraged home-buying and was at odds with the government’s desire to increase home ownership rates among Americans to 70 percent.

To counter the interest rate problem, Congress passed the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, including the creation of the Office of Federal Housing Enterprise Oversight to oversee Fannie Mae and Freddie Mac, thus increasing government power over the mortgage industry.  But with this oversight, the government reduced mortgage requirements and encouraged a risky category of lending called subprime lending, which resulted in loans to millions of people who were not really qualified to buy homes, but they became homeowners anyway.

The 2008 Housing Crisis and Rebound

By having homeownership goals drive its underwriting, [the FHA] is bound to repeat the fiscal calamities of the past. What is needed—what all of the commentators agree upon—is for appropriate underwriting to drive the FHA. This position is not to say that promoting homeownership for various groups is not a legitimate goal. But rather it can do more harm than good to the FHA itself and the homeowners it serves if it is not done in a way that avoids frequent default and foreclosure.” (American Bar)

The housing industry began to implode in 2006, when housing prices started to decline, and culminated in 2008 when the housing bubble burst. Many subprime loan holders could not pay their loan obligations, and defaulted. Additionally, when the housing bubble burst, many “regular” mortgages were worth more than the actual value of the home, which meant that selling a home to pay back the loan was not a viable option.

In September of 2008, Fannie Mae and Freddie Mac came under government control. For more on the housing crisis read The Policy Circle’s brief on Dodd Frank, which was legislation that sought to regulate the banking industry to avoid another housing crisis and recession, but led to unintended consequences.  

The housing market in the U.S. has rebounded since the market crashed in 2008, specifically:

  • Home foreclosures have dropped from 4.5 percent (in 2010) to early 2000s levels of around 1.5 percent.
  • Home sales have risen, growing from 4.1 million in 2008 to 5.5 million
  • New monthly housing starts (adding to the housing supply as opposed to remodeling/refurbishing) are also increasing, reaching about 700,000 in 2015 up from averages of 500,000 since 2007. Still, levels remain well below those of the early 2000s, which ranged between 1.2 and 1.8 million. (Congressional Research Service)
  • Home Ownership Rate in the United States increased to 64.40 percent in the third quarter of 2018 from 64.30 percent in the second quarter of 2018. Home Ownership Rate in the United States averaged 65.23 percent from 1965 until 2018, reaching an all time high of 69.20 percent in the second quarter of 2004 and a record low of 62.90 percent in the second quarter of 1965. (TradingEconomics)

Naturally, as home prices have increased since 2012 due to the strong market, affordability for prospective homebuyers has taken a hit. In fact, adjusting for inflation, the median home value rose 112 percent between 1960 and 2016, while median homebuyer incomes only rose by 50 percent.

Compounding rising home prices is the decline in access to mortgages. The mortgage market has remained tight since the end of the recession, making it too difficult for many households to obtain mortgages to buy homes, even if they have a strong desire to buy. (Congressional Research Service)  

Thus renters have flooded the market after the recession; apartment vacancy rates fell from 8 percent in 2009 to 4 percent in 2017. With strong demand and diminishing supply, conditions are tight, which explains why rental property prices are at an all-time high. Prices are 30 percent higher than their mid-2000s peak. In fact, after adjusting for inflation, the median rent payment rose by 61 percent between 1960 and 2016, while median renter incomes rose only 5 percent.

Also, millennials who came of age during the crisis are increasingly not purchasing homes but renting instead.

There has long been a desire to make homeownership affordable for every American and presidents across political parties made pledges to increase homeownership. The fall out from the 2008 housing crisis brought attention to housing and brings up a couple questions: is owning a home still part of the American Dream?  And what about those for whom owning a home is out of reach and even finding affordable housing is a struggle?


Affordable Housing

Homelessness rates in 2017 in the U.S. rose for the first time since 2010. Many households in America who do have a roof over their head spend far too much on their homes.  


Why did homelessness in the U.S. rise in 2017 for the first time since 2010? And what are we doing about it?

“According to the U.S. Department of Housing and Urban Development (HUD), there were roughly 554,000 homeless people living somewhere in the United States on a given night [in 2017]. A total of 193,000 of those people were “unsheltered,” meaning that they were living on the streets and had no access to emergency shelters, transitional housing, or Safe Havens.” (The Data Face)

The Data Face provides a helpful infographic of where in the nation homelessness is more prevalent, and where is has been a growing problem over the past five years.

When a homeowner is in a cost-burdened situation, they are often only one unexpected crisis away from losing their home.

“Cost burdened”

A household is termed “cost-burdened” if more than 30 percent of its income is put towards housing costs. In 2016, nearly one-third of US households were cost-burdened, and the majority of those households are renters. According to State of the Nation’s Housing 2018 report, 80 percent of renters and 63 percent of homeowners making less than $30,000 annually are cost-burdened.

For this reason, more US households are headed by renters than at any point since 1965. From 2006 to 2016, the total percentage of homeowners remained flat while renters increased from 31.2 percent to 36.6 percent. Between 2006 and 2016, the percent of renters under 35 years old increased from 57 percent to 65 percent; for those between 35 and 44, the rate increased from 31 percent to 41 percent; and for those between 45 and 64 years old, the rate increased from 22 percent to 28 percent. (Pew Research)

Single-parent families are the most likely to be cost-burdened. More than half of these households (53 percent) “pay at least 30 percent of income for housing, reflecting the absence of multiple earners.” By comparison, only 18 percent of married households without children are cost-burdened.

Age is also a factor; 44 percent of households under age 30 are cost-burdened, mostly because these households tend to have low incomes as single-person or single-parent renters. For those over 65, 54 percent of renters and 43 percent of owners paying off mortgages are cost-burdened.

Black (45 percent) and Hispanic (43 percent) households are also more likely to be cost-burdened than Asian and other minority households (36 percent) or white households (27 percent). The cost-burdened rates for black and Hispanic households have also increased by 3 percentage points between 2001–2016, whereas the rates have only increased 1 percentage point for white households and by even less for Asian and other minority households. (Harvard)

Being cost-burdened is also a problem among millennials; millennial-run households represented the largest group in number of households living in poverty in 2016. As millennials are the largest living generation by population, their delayed homeownership has contributed to the increase in rental households. (Pew Research)

The Infrastructure of Public Housing

How has government responded to the struggle to find housing in the past?

The Housing Act of 1937 provided federal funds for public housing, specifically for low-income households. The bill authorized local public authorities “to construct, manage, and own housing for the working poor.” Construction and operations would be financed by tax-free bonds and tenant rents, respectively. It sought to  address social problems such as the discrepancy between low wages relative to housing costs, although it was met with opposition to public ownership. (Book: Opportunity and Progress)

Efforts culminated in the Housing Act of 1949 (, which officially established the national housing policy goal of providing a “decent home and suitable living environment for every American family.” The Housing Act included measures to stimulate private investment (although private enterprise appeared to lack the necessary financial resources even with incentives) and established new appropriations for public housing to address low-cost rental housing. (Book: Opportunity and Progress)

As part of President Johnson’s Great Society, in 1965 Congress established the Department of Housing and Urban Development (HUD). Special programs developed quickly after HUD’s implementation, most notable; The Fair Housing Act ( of 1968, which outlawed discrimination in housing and mortgage lending. It was yet another piece of legislation that was meant to address the shortage of affordable housing and broader societal challenges.

Housing Programs

Despite these efforts, public housing was still considered a “failure.” In 1974, Congress passed the Housing and Community Development Act, which created the Community Development Block Grant (CDBG) program and the Section 8 housing Choice Voucher.

The CDBG works to ensure decent and affordable housing to the most vulnerable and lowest-income population. Appropriation of resources is allocated between the states and local jurisdictions. HUD determines how resources are allocated between the states and local jurisdiction by accounting for community needs such as levels and extent of poverty, population, and overcrowding.

Section 8 Housing Choice Voucher Program ( is “the major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market.” It is administered by Public Housing Authorities (PHAs) who handle public housing at the local level and are financed by federal funds from HUD. PHAs determine eligibility for vouchers, which is determined by family size, total annual gross income (which normally may not be more than half of the area’s median income), and citizenship status. Once deemed eligible, households may apply for the program. If selected, households receive a housing voucher and are responsible for finding private housing in which the owner agrees to rent in accordance with the voucher program. The subsidy is then paid to the landlord directly by the PHAs, and the household pays the difference.

Currently, over two million low-income families participate in the Section 8 program, amounting to over 5.3 million people.

  • 11 percent (600,700) of voucher recipients are elderly,
  • 23 percent (1.2 million) are disabled, and
  • 70 percent are in families with children (1 million families with 2.2. million children). (Center on Budget and Policy Priorities)

Three-fourths of vouchers go to families that earn less than 30 percent of their median area income. In numerical terms, this equates to an annual income of less than $20,000 for the majority of families receiving vouchers in mostly metropolitan areas. (Section 8 Housing)

The program, however, has not gone without criticism. Vouchers are becoming difficult to renew due to rising gaps between low-income tenants’ incomes and the ever-increasing prices of rents in the market. The growing cost of the program has also made it much more difficult to address the number of people in need of housing; those on the waitlist for vouchers can wait well over one year before they are approved. (Congressional Research Service); (Eligibility Sec 8)

The Tax Reform Act of 1982 introduced the Low-Income Housing Tax Credit (LIHTC) program, which links investor credits to units occupied by households “earning less than 60 percent of the area median income.” Investors can only claim and keep those tax credits, however, if the housing actually provide the benefit that was promised. This reinforces the role of states, as the tax credits are distributed by the states (Book: Opportunity and Progress). The LIHTC program is currently the primary source of federal funding for creating low-cost, affordable housing (The Nation).

However, the program did not account for the declining rental incomes, aging and poorly designed properties, and other such structural, economic, and social distresses. In 1992, the HOPE IV Urban Revitalization Demonstration Program began distributing grants to support low-rise, mixed income housing. With a combination of capital improvements and community and support services, the program helped reverse poverty concentration in many urban neighborhoods (Book: Opportunity and Progress)

Other Key Terms and Hot Topics you will hear in the housing debate are:

Redlining – The policy of ‘redlining’ originated from FDR’s New Deal programs and The National Housing Act of 1934, which created the Federal Housing Authority (FHA). FHA was created for the purpose of salvaging the home building and financing industries that had collapsed during the Great Depression. “The New Deal represented a defining moment in the history of American social policy with the establishment of nationally based social insurance programs, public assistance programs, and other innovative social programs.” (Sociological Perspectives Journalism) So, the goal seems to have been generally benevolent, yet as with many government policies, there are often unintended consequences.

In an attempt to prevent further foreclosures following the Great Depression, the FHA asked the Home Owners Loan Corporation to assess mortgage-lending risk in hundreds of American cities.  Their findings were presented through mapping. (City Lab, NPR)

On the maps, the newest areas—those considered desirable for lending purposes—were outlined in green and known as “Type A”. These were typically affluent suburbs on the outskirts of cities. “Type B” neighborhoods, outlined in blue, were considered “Still Desirable”, whereas older “Type C” were labeled “Declining” and outlined in yellow. “Type D” neighborhoods were outlined in red and were considered the most risky for mortgage support. These neighborhoods tended to be the older districts in the center of cities; often they were also black neighborhoods. (City Lab)

According to the American Bar, “Prior to 1948, legally enforceable restrictions based on race, ethnicity, and religion were common among private property owners. Even more, the federal government actively encouraged such restrictions through a variety of methods, including underwriting decisions of the FHA. The Supreme Court rejected this form of discrimination in the landmark case of Shelley v. Kraemer in 1948.” In addition to bias within the FHA, the practice of redlining older, decaying city centers kept those poor families outside of the effort to support home buying that took place in other communities.

Vacant Property Crisis – this short City Lab article titled, Vacancy: America’s Other Housing Crisis, explains that while “empty homes sit in purgatory, neighborhoods fray and cities are left to pick up the bill.” Vacant properties breed negative impacts, including compromised security and lowering property values to increasing costs local governments have to put into maintenance and policing.

Workforce Housing – In some cases workers cannot afford to live near their jobs and the concept of workforce housing developed to address this need.  “Workforce housing … is homeownership, as well as rental housing, that can be reasonably afforded by a moderate to middle income, critical workforce and located in acceptable proximity to workforce centers.” (National Association of Realtors)  

Workforce housing originally encompassed public employees – such as teachers and firefighters – but now extends to others ranging from young professionals to constructions workers.  

“The term ‘workforce housing’ has become somewhat of an industry buzzword,” within hedge funds. Managers’ definition of workforce housing can include any apartment building catering to middle-income renters, with middle income defined as people who earn 60% to 150% of the area median income. By comparison, the Urban Land Institute defines workforce housing as housing for people who earn 60% to 120% of the area median income.” (Pensions&Investments)

Zoning Laws –  Zoning regulations, often instituted to preserve certain aspects and character of a community, can also make it more difficult to meet housing needs of is population.  

“It is a simple question of supply and demand: By restricting the supply of new housing, zoning and land-use regulations drive up the cost of housing and rents beyond the reach of many poor Americans. Studies show that such regulations add as much as 20 percent to the cost of a home in Baltimore, Boston, and Washington, 30 percent in Los Angeles and Oakland, and an astounding 50 percent or more in cities such as San Francisco, New York, and San Jose.” (National Review)

These higher prices make housing more difficult to afford, especially for poor Americans.  To address this challenge, Housing Secretary Ben Carson “has decided to go directly after the source of the problem. Specifically, he has let it be known that he intends to link federal housing funds to local officials’ willingness to reduce regulations that restrict affordable housing. He wants to ensure that if mayors and governors continue to pander to wealthy special interests by enacting barriers to housing construction, Washington will no longer bail them out.” (National Review)

Gentrification – Any time an investment is made in a distressed or an ‘up-and-coming’ community, there is a threat that property values and cost of living will increase to a point that it pushes out the residents who have long lived in those communities. One solution to counteract the consequences of gentrification is to ensure that local community partners have an ownership or equity stake in the investment, with the idea being that through shared ownership, all boats will rise together.

If you would like to read more about other innovative efforts to protect affordable housing, check out these sites:

The Federal Government and Affordable Housing

In March 2018, Congress passed and the President signed an FY2018 funding bill that targeted over 6 billion dollars for homelessness assistance. Only two of the programs fall under HUD (The U.S. Department of Housing and Urban Development); other programs are administered by Veterans Affairs, Health and Human Services, and six other agencies. See the chart at the end of this brief for a snapshot of the programs working to end homelessness.

The National Alliance to End Homelessness views the FY2018 budget as a serious attempt by the federal government to address homelessness. “Overall, the ten largest HUD accounts increased by $4.4 billion and are at the highest level ever. Programs that are most targeted to people with the lowest income got $3.5 billion of that. This is by far the largest one-year increase in at least the last 20 years.”

Two key projects that some of the additional funding is supporting:

  • “HUD’s Homeless Assistance Grants received an additional $130 million compared with FY 2017, bringing total funding to $2.513 billion.” National Alliance to End Homelessness projects this will move an additional 20,000–25,000 people from homelessness to housing over one year.
  • Section 8 Housing Vouchers also received an increase in funds in FY2018. This includes new ‘incremental’ vouchers totaling “40 million for HUD-Veterans Affairs Supportive Housing for homeless veterans with disabilities, $20 million for the Family Unification Program for families and youth in the child welfare system, and approximately $385 million for “811 vouchers” for people with disabilities. That money will provide approximately 60,000 new vouchers for vulnerable Americans.” (National Alliance to End Homelessness)

The Business of Affordable Housing and the Role of Private Enterprise

In addition to the federal government, private enterprise plays a role in housing and community development.  Private groups invest in building and new housing; improving older, more neglected housing; or by funding pools of mortgages and working with homeowners to prevent foreclosures; and taking advantage of tax reforms, such as Opportunity Zones.

The Obama administration launched a program to utilized private money to address at $26 million backlog of public housing project by launching the Rental Assistance Demonstration (RAD) program. The goal of RAD is to ‘allows developers to take over and renovate the units as long as they continue to offer it as affordable housing.’ Julian Castro, former HUD Secretary, explains, ‘Because of that, we will have 185,000 public housing units that get renovated that otherwise probably would not.’ Government maintains a substantial stake in the properties, so the properties are not privatized but RAD is attracting many private investors, especially ‘social impact investors’ who see their mission as earning a return while meeting a social need.” (Business Insider)

More recently, the Tax Cuts and Jobs Act of 2017 created the new Opportunity Zones tax benefit, which “aims to give investors an incentive to put money into an Opportunity Fund that then invests in low-income neighborhoods, according to the census, as designated by the governor of each state.”  In exchange, the investor receives a deferred tax bill on it’s original investment, and a reduced tax bill on the gains from it’s new investment depending on the length of the investment. “In theory, it seems like a program that could benefit investors and communities. Investors would receive partial forgiveness and be taxed less on their capital gains and neighborhoods designated as Opportunity Zones would receive a nice jolt of economic activity” (Bisnow).

The regulations for this law were just recently issued in October 2018, so keep an eye out for new affordable housing units and other investments in these distressed communities.

A complaint against the Tax Cuts and Jobs Act is that lower taxes for corporations reduces the need for tax benefits like the Low Income Housing Tax Credits (LIHTCs), and could therefore reduce the number of housing units that the LIHTC program is able to produce (Housing Finance).

A Moral Hazard

Generations have come to rely on government housing and there will be an ongoing need for government funding to support this population who ideally would eventually move to independent housing.  But therein lies a “moral hazard.” Landlords need the profit stability of tenants who reliably pay rent and are therefore motivated to keep those tenants in place, versus encouraging them to work toward a goal of moving into non-subsidized housing units. Renters also have to remain below a certain income level to maintain access to housing subsidies, which serves as a disincentive to increase their income which would enable finding independent housing.  A principle of subsidized housing policy should be that everyone is moving up and out — not holding in place.

While for-profit entities have an incentive to keep reliable affordable housing renters in place, the renter themself becomes attached to their home and community and also often desires to stay put. These issues present challenges in our affordable housing structure.

Role of Hedge Funds

Hedge funds see a strong market in affordable and workforce housing. As one investor said, “We think that class B (multifamily) is almost recession-proof.” The thinking is that “these properties are generally not leveraged, and investors tend not to syndicate the properties into synthetic instruments. Plus, occupancy tends to be constant, around 80%. Demand for workforce housing remains steady even in a financial crisis… Renters might double up, but there is still more demand than supply for affordable apartments.” (Pensions&Investments)

Synthetic products are created artificially and structured to suit the cash flow needs of the investor. They are created in the form of a contract and, therefore, given the name “synthetic.” (Investopedia)

And this is not just a U.S. phenomenon, a hedge fund in the UK planned to make 12 to 15 percent returns off of it’s investment building affordable housing, buoyed by guaranteed rent payments from the local government. (Financial Times)  

And here’s some insight into the returns on this side of the pond: “In financial terms, many impact investors expect a market-rate return, but about one-third are prepared to compromise financially for social returns… According to a small survey of funds owning rented accommodation…impact investments can generate a greater return than other housing assets: where the benchmark for rented “multi-family” apartment buildings is an 11.4 percent internal rate of return (IRR), five impact investment funds in the sector generate an average IRR of 17.2 percent” (Financial Times).


Role of Government

Since the Housing Act of 1949 declared the goal of a “decent home and suitable living environment for every American family,” the government (mainly through HUD) has gone to great lengths to meet that goal. Today, there are close to 100 government programs, including mortgage and grant assistance, and regulatory programs. A complete list can be found at However, many of these programs have received criticism for being redundant and duplicative of each other. Others criticize the fact that many programs reside outside of the appropriations process. For example, the Housing Trust Fund and the Capital Magnet Fund, two affordable housing funds established by the Housing and Economic Recovery Act of 2008, are funded through Fannie Mae and Freddie Mac. This means that Congress has a limited oversight role when it comes to spending on certain programs. (Congressional Research Service)  

Despite critiques, the instability of the post-housing crisis era has resulted in even more government oversight. The National Housing Trust Fund (HTF) was established in 2008, which focuses on the acquisition, new construction, and reconstruction of rental units for extremely low-income families or families with incomes below the poverty line (

Since the housing crisis, the federal government has also become more involved with the housing market. Two years after the financial crisis, President Obama signed the Dodd-Frank Act (check out The Policy Circle Dodd Frank Brief), which requires banks to have more capital on hand and limits the risky bets banks can make. It also created the Consumer Financial Protection Bureau, which issued rules related to mortgage standards, and reduced the $700 billion bailout package under the Troubled Asset Relief Program to $475 billion. (

The government also re-asserted its role over Fannie Mae and Freddie Mac. Originally created by Congress to support homeownership, Fannie Mae and Freddie Mac cannot offer mortgages, but they can purchase mortgages and package, guarantee, and sell mortgage-backed securities to investors. After the crisis in 2008, the two entities entered a voluntary conservatorship overseen by the Federal Housing Finance Agency (FHFA). Under these commitments, the Treasury provides investments so each can continue functioning despite the lack of capital. More information on Fannie Mae and Freddie Mac can be found here.


Principles of Reform

The government is involved in nearly every aspect of the housing finance market, and therefore its role is difficult to balance. Particularly since the end of the recession, increased government intervention has made the mortgage system and the housing market more reliant on the federal government. There is tension between reducing the government’s influence and ensuring the market makes a full recovery, and does not collapse again.

It is not possible to easily extricate the government from the housing market since housing programs are also crucial for many to access a roof over their head, and for others to access mortgages to buy a home. Still, some argue it was excessive government emphasis on and interference in housing that has fueled housing crises in the past. (Washington Post)

Bank Lending

Around the financial crisis, Congress and the administration took steps to enhance protections for consumers while reestablishing a stable and reliable financial market. The mortgage market, however, remains tight. Now that the air has cleared from the immediate crisis in 2008-2009, government policies are working to balance the new protections for consumers (which led to regulations on banks’ holdings of mortgage-related assets) with the desire for banks to still be able to lend. In other words, the regulatory burden on banks that drives up costs can’t be so high that banks stop lending.

While the FHA insures mortgages, which protects a lender in case of borrower default, it is also tasked with expanding access to affordable mortgage credit. In January of 2015, for example, the FHA announced that it would reduce fees charged to borrowers for mortgage insurance. Many industry and consumer groups supported the idea to lower fees, which would make FHA insurance more affordable and attractive to borrowers. However, critics have noted that, because the FHA is self-supporting on those fees, lowering them may inhibit its ability to rebuild and stabilize the financial markets. (Congressional Research Service).

There is also a difference between an annual and an up-front guaranteed fee (or LLPAs). For more on this, check out American Action Forum’s piece on the idea of lowering fees.

Affordable and Sustainable Housing Options

Affordable housing extends far beyond grant programs and vouchers to renters. In response to critics, HUD established a new set of goals for 2018 to 2022 that includes reimagining “how the Department works, how it delivers its services and how it might do so more efficiently and effectively.”

HUD’s strategic plan focuses on:

  • leveraging private sector partnerships,
  • creating sustainable homeownership,
  • encouraging more private investment in affordable housing, and
  • encouraging public housing authorities to seek additional investment opportunities.

By incorporating more private sector activity, and coordinating at the local and state levels, HUD claims that these measures will create strong, sustainable, and inclusive communities where quality affordable homes are available to all. The goal of strengthening the housing market in this manner is to support the economy, protect consumers, and meet the need for affordable housing. (

Many of these goals require undertaking the reforms that critics of housing programs have proposed in order to make affordable housing programs more accessible and less complicated. First, housing programs are described as “overly complex and burdensome to administer, especially in light of recent funding reductions.” Proposals have recommended changing the income eligibility and rent determination processes in programs to make these less complicated. The 114th Congress did pass the Housing Opportunity through Modernization Act of 2015 (H.R. 3700), and although some of the more controversial provisions to make large changes to housing programs were omitted, it did include reforms for reducing complexity, such as changing income definitions. (Congressional Research Service)



The Housing Act of 1949 established the goal of “a decent home and a suitable living environment for every American family.” However, since the housing crisis, the complications, complexity, and instability of the financial market, as well as the question of the role of government oversight, have raised the question of whether or not all Americans should own homes.

As this Washington Post article put it, “If the Great Recession taught anything, it was that, despite decades of rhetoric about the ‘American Dream’ from real estate lobbyists, politicians and well-meaning low-income-housing advocates, homeownership is not a surefire ticket into the middle class.” The typical way the government assists in home-buying is through a federally-backed mortgage, which, as seen in the housing crisis, is not necessarily going to garner wealth (Washington Post).

As easy as it may seem from the outside to fix, true housing/housing finance reform in Congress for the next several several years (or decades) will be difficult because of the politics of the issues.  One side tends not to budge on its affordable housing priorities; the other holds on to its housing finance/reform priorities.

Outside interests such as mortgage bankers, mortgage insurers and credit score companies also influence the housing dialogue and benefit from keeping the status quo.

More likely will be accomplished on fighting homelessness through nonprofits, churches, and community organizations than through D.C.


What You Can Do


    • Find out if your representatives in Congress sit on the committees which oversee HUD
    • Search on your local government websites to find the committees in your state legislature oversee public housing. To start, use search terms such as the capital city in your state “government” “budget” “affordable housing” and “efforts to fight homelessness.”  Specifically find out:
      • Names of representatives 
      • State budget
      • Agencies that oversee public housing
    • At a local level which alderman, village trustees and city agencies are responsible for affordable housing?
    • Which non-profits address homelessness in your area? 


Inform and Initiate Dialogue

  • Meet your state and local representatives to find out what their views are on Housing/HUD and discuss the consolidation and measures of effectiveness of existing programs.
  • Organize a community forum at the local library on public housing with state and city managers, elected officials, nonprofits to present:
    • What is the vision and measures of success?
    • How much is spent by local government on housing programs, what are their measures of success, how many people are employed in government to manage public housing?
    • Who are the local non-profit and private sector business who are involved in housing from planning to development to management?



  • Organizations such as Union Rescue Mission in LA takes people from the street, helping  them through rehab getting back on track whether that’s with micro-loans to start their own enterprises, connections to jobs, housing etc.
  • Find an organization like this in your area and use your network to connect people to jobs in which they can grow and become self-reliant.



Questions for Discussion

  • What is your personal experience with housing?
  • Should owning a house be a life goal and meant to accumulate wealth?
  • What is the role of government, the community, and families in housing?
  • What are the priorities of reform?
  • What do women need to understand about the business side and not-for-profit side of affordable housing and fighting homelessness?
  • Should the 30-year mortgage exist?
  • What are the responsibilities of a community regarding affordable housing?
  • Would you support low income housing in your community?   What if any is the right level of government encouragement in this regard?



Thought Leaders and Resources

  • In which cities are Americans struggling the most to afford their homes? USA Today



Cisneros, Henry G., Jack F. Kemp, Nicolas P. Retsinas, and Kent W. Colton. Opportunity and Progress: A Bipartisan Platform for national Housing Policy. The Joint Center for Housing Studies of Harvard University, 2004.


© 2018 The Policy Circle  ALL RIGHTS RESERVED

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