I have spent much of my career deploying billions of dollars of capital into affordable housing, so it should be no surprise that I believe in leverage. But good leverage isn’t about borrowing every last dollar. It’s about using a modest amount of capital, placed strategically, to unlock many multiples of responsible private investment. That distinction matters now because the need for affordable housing has rarely been greater, while the economics of producing it have seldom been more difficult.
Over the past year, the United States has taken meaningful steps to expand the capacity of the low-income housing tax credit (LIHTC). In 2026, annual allocations of the 9% credit increased by 12%, and the financed-by threshold for 4% LIHTC transactions using tax-exempt private activity bonds was reduced from 50% to 25%. The Joint Center for Housing Studies of Harvard University, citing Novogradac, estimates that these changes could support as many as 1.2 million additional affordable homes by 2035. That's extraordinary potential. But capacity isn’t production.
Requiring fewer tax-exempt bonds allows scarce private-activity bond volume to reach more projects, but it doesn’t make the rest of the development cost disappear. In many transactions, reducing the amount of tax-exempt debt means replacing it with higher-cost taxable debt, increasing borrowing costs and potentially creating new financing gaps. Developers must then fill those gaps with increasingly scarce tax credit equity, soft funds, and other limited sources of capital. The question is no longer simply, “How much bond capacity do we have?” but “What capital belongs in the rest of the stack, and how should it be structured?”
LIHTC is one of the great successes of public-private partnership, attracting enormous amounts of private capital to affordable housing for nearly four decades. In today’s market, however, tax credit equity has become an increasingly scarce resource. Expanding the pool of private capital and creating greater flexibility among the funding sources can give developers more choices and allow the capital stack to be structured around the needs of each transaction.
This is where private and institutional capital can play a larger role. Private credit shouldn’t be viewed simply as a replacement for banks, Fannie Mae, Freddie Mac, Federal Housing Administration, or public subsidies. Its greatest value may be its ability to efficiently solve problems standardized capital cannot.
For example, Airbnb recently announced a $250 million Housing Accelerator focused on “last-dollar financing.” The company plans to invest low-cost capital in multifamily developments that have assembled most of their funding and cleared major regulatory hurdles but still cannot move forward because one final piece of the capital stack is missing—roughly 750,000 housing units, representing approximately $225 billion to $265 billion of potential investment, according to Airbnb’s research. Airbnb says it expects the $250 million commitment to unlock more than $5 billion of housing investment over the next decade—roughly $20 of housing investment for every dollar it commits —and intends to recycle investment proceeds into additional projects.
But the lesson is bigger than Airbnb. In today’s market, the most valuable dollar in a housing capital stack isn’t necessarily the cheapest dollar or the largest dollar, but the dollar structured to fill the gap that allows every other dollar to work. Better financial architecture is the kind of leverage affordable housing needs.
At the same time, we should be careful not to assume that every financing gap requires another layer of capital. Affordable housing is extraordinarily complex, and there are many requirements that make projects more expensive to develop. Ultimately, we cannot capitalize our way out of an affordability problem that we’re simultaneously making more expensive to solve. If a requirement materially improves residents’ lives or reduces long-term operating costs, it may well justify the expense. But we should be willing to ask what each requirement costs, what benefit it produces, and how many additional homes could be built if those dollars were deployed differently.
That means moving from layering to leverage. It means pairing the historic expansion of the LIHTC program and bond capacity with a more disciplined approach to cost, a more flexible approach to private capital, and a willingness to rethink how the pieces of a transaction fit together. After all, a relatively small amount of well-structured capital can sometimes unlock an entire development.
There has never been more demand for safe, affordable housing. At the same time, renters are under enormous pressure, operating expenses continue to rise, construction remains expensive, and traditional subsidy sources are stretched. The answer cannot simply be to add one more layer to an already complicated capital stack.
We need better architecture—not only in the housing we build, but in the way we finance it. If public resources can be deployed to attract multiples of responsible private investment, if private capital can be structured to solve the gaps that conventional sources cannot, and if we can reduce unnecessary cost and complexity at the same time, the result won’t simply be more capital. It will be more housing.
Jim Gillespie is an executive vice president at BWE.