Avoiding Government Bureaucracy to Build Affordable Housing

The Low Income Housing Tax Credit system (LIHTC) has a reputation for bureaucracy, which results in higher costs. “You can produce housing much more quickly and affordably if you can avoid all the (well-intentioned) constraints placed on housing production by various public funding sources,” according to economist Jason Ward. The necessary kind of housing for an acutely low-income population depends on long-term rental subsidies and services for a segment of society that displays an inordinately high number of physical and mental health disabilities.

When the government takes on a typical subsidized project, the process can move painstakingly slowly, beginning with identifying a building site. Then the developer seeks out grants and/or loans from as many as five different government programs, and finally applies for tax credits. This full process takes years. Since private developers don’t have to adhere to the same government restrictions and processes, they can creatively invest large amounts that can turn into a revolving account to finance ongoing building. “It’s very encouraging to see so many people trying to solve this affordability problem through non-traditional means,” said David Garcia, policy director for the Terner Center for Housing Innovation at UC Berkeley.

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