Producing Affordable Housing in Rising Markets: What Works?

Lance Freeman
Columbia University

Jenny Schuetz
Board of Governors of the Federal Reserve System

The analysis and conclusions set forth in this article are solely the responsibility of the authors and do not indicate concurrence by the Board of Governors of the Federal Reserve System.

As cities across the United States have rebounded from the Great Recession, an increasing number of households in urban areas are facing high rent burdens in order to remain in their current neighborhoods. Several policy options have been used to maintain or increase the supply of below-market-rate housing, including inclusionary zoning (IZ), tax increment financing, and household-based subsidies such as vouchers. In this article, we describe the problem of affordability in rising markets and review existing evidence on how well local policy approaches work. The most widely used policies, local IZ and statewide “fair share” laws, have produced relatively small numbers of affordable units and are therefore unlikely to substantially mitigate the effects of rising housing costs. More effective policies to develop and preserve affordable housing, particularly in high-opportunity neighborhoods, will require increased public and private funding and political support.