Building affordable housing is hardly affordable.
Developers need loans and other elusive funding to build their communities, but they can only secure the money if their development will produce enough revenue to pay back lenders and investors. That’s not easy because the community must be affordable to low-income families, which limits the amount of revenue that comes from rents.
It’s a tough puzzle to solve. Without government subsidies to help create, preserve, or operate affordable housing, it would often be impossible to build affordable homes, reports the Urban Institute.
To illustrate the problem, the Institute and the National Housing Conference have unveiled The Cost of Affordable Housing: Does it Pencil Out?, an interactive tool that shows just how difficult it is to finance affordable housing.
“We tried to design this to put people in the shoes of the developer, so they can better understand what is in the control of the developer and what is out of the control of the developer in relationship to costs,” says Erika Poethig, institute fellow and director of urban policy initiatives at the Urban Institute.
In an earlier project, the Urban Institute highlighted the extreme lack of affordable housing in the country, showing that for every 100 extremely low-income households, there are only 29 adequate, affordable, and available rental units.
As part of her work, Poethig has tried to explain the difficulties of developing affordable housing to journalists and others interested in the problem.
“I would walk them through the math for what it takes to build housing that extremely low-income people can afford,” she says. “If you walk up the income spectrum a little bit, you can get closer to being able to do it, but it’s still very challenging in a number of markets.”
The new tool, which features data from the Denver metro market, shows users just how tough it can be. Denver was selected as a model because it’s fairly representative of other U.S. cities. It’s experiencing a growth in rental housing demand but is not a traditionally a high-cost city.
Users can select a number of settings, including the expected income of renters, rent levels, and operating costs to see what the gap looks like in their project.
Even if a developer builds on donated land, shaves construction costs, and makes other moves, it’s going to be tough to make a project pencil out.
The tool is reaching lawmakers, journalists, and other key audiences, according to Poethig.
You can try it here.
