The need for affordable homes continues to grow while the available inventory falls. Even with the recent housing slump, the long-term trend of rising values in many regions of the country has claimed formerly low-cost rental units for condominium conversion, at the same time as government resources to support the maintenance and development of affordable rental housing have declined. The preservation of affordable housing is getting harder every day.

For years, the federal government’s housing production programs focused on contracting with  the private sector to develop, build, rehabilitate, and operate more than three million affordable homes. Most of the initial funding occurred during the 1970s and early 1980s. Those direct subsidies, government-insured mortgages, capital grants, and continuing operating subsidies were a response to housing needs at the time, but the terms that the owners committed to were limited in duration—in fact, the terms of the contracts between the government and private-sector firms for production of what are known as “expiring-use properties” have either ended, been extended for short periods, or are about to end. As a result, most of the taxpayers’ billions of dollars of investment in affordable housing are at risk of being lost to the market or to deterioration.
Read more

Federal policy at the time looked to the private sector to create affordable rental units because it had the necessary capacity and political clout. Under the big production programs, the government’s primary policy goals were to house low-income people and reduce their rent burdens. The leading motivation of the typical property owner, on the other hand, was to make a profit—both as an operator of an apartment building during the contract term and through the reuse of the building when the government contract ended. There was nothing wrong with the owners’ intentions, and they were clearly articulated in the contracts that they entered into, but the goals of the government and the for-profit owners were not necessarily in alignment. That is especially true considering the lack of restrictions on ending the affordable use of the properties once the contract terms ran their course.

This is an excerpt from The NEXT American Opportunity. The full text can be downloaded as an Adobe PDF Document.