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What Can the Government Do to Increase Housing Affordability?

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Federal initiatives

As concerns about housing affordability grow, so do the initiatives taken from the various government agencies. Many states and cities operate a variety of affordable housing programs as part of their public assistance programs. The affordable housing initiatives include supportive and transitional housing programs as well as rent subsidies.

The federal government provides various subsidies to make housing more affordable to median households. The government provides financial assistance to homeowners in the form of mortgage interest tax deductions. Assistance is also being provided to lower-income households through housing subsidy programs.

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State-level initiatives

Many local governments have initiated measures to increase housing affordability. For example, the California Community Redevelopment Law requires developers of redevelopment projects to construct 15% of the houses to be affordable for low- and moderate-income households. This provision requires affordable housing for rental units to be up to $1,700 per month and for-sale housing priced up to ~$240,000.

In Boston, the Boston 2030 program was initiated to boost affordable housing in the city. This program provides tax incentives and favorable land deals to developers. Boston’s municipal authorities intend to encourage affordable housing in the city over the next 15 years. In 2015, the city permitted 1,022 new affordable housing units—the largest in nearly two decades.

Similarly, other states have also initiated few programs to boost affordable housing. However, their impact has not yet mitigated the intensity of the affordability problem.

Investing in real estate

Investors can take exposure to the residential real estate sector by investing in residential REITs like AvalonBay Communities (AVB). The iShares US Real Estate ETF (IYR) invests 3.1% of its portfolio in AvalonBay Communities (AVB). In addition, IYRF also has exposure to other residential REITs like Equity Residential (EQR), Essex Property Trust (ESS), and UDR Inc. (UDR), with respective exposures of 3.6%, 1.9%, and 1.2%.

In the final article, we’ll wrap up the series with a discussion on the outlook of housing affordability.

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