In many parts of the country, there is a severe shortage of affordable and workforce housing. Supply constraints, often related to restrictive state and local policies, exacerbate the problem. 

The impact of this growing undersupply of affordable housing is far-reaching and undermines economic growth, particularly in urban areas.

The Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, play a crucial role in addressing the affordable housing crisis by backing multifamily property loans, which increase the housing supply and create successful apartment communities. Yet, over a decade after the GSEs were put into conservatorship, the U.S. housing finance system still needs to be reformed.

The federal regulator and conservator of Fannie and Freddie—the Federal Housing Finance Agency (FHFA)—should remain focused on leveraging federal incentives to bolster new affordable housing supply instead of considering the imposition of new or expanded federal obligations on private rental housing providers such as rent control.

The low-income housing tax credit (LIHTC) is a public-private partnership that serves as a federal incentive for new construction and redevelopment. It is an efficient, market-based housing solution that relies on the private sector to finance, build, and operate affordable housing. 

Under the successful LIHTC program, states can award housing credits based on their affordable housing priorities. They can target credits to certain populations, such as seniors or veterans, or to specific regions most in need of affordable housing.

Tax-exempt private-activity bonds (PABs) are proven tools to mobilize public and private co-investment in affordable housing. States and cities use PABs to borrow on behalf of private companies and nonprofits, lowering borrowing costs for entities that might otherwise turn to corporate bonds or bank loans. Interest on PABs is not excluded from gross income unless it is a qualified bond, which must meet strict requirements and serve a public benefit—such as affordable rental housing or mortgage provisions for first-time lower-income borrowers.

A federal "YES In My Backyard" (YIMBY) approach when awarding grants to states and municipalities is needed to counter local “Not In My Backyard” (NIMBY) policies that drive up costs and create barriers to the development of affordable housing. A YIMBY approach is also needed to counter burdensome and duplicative federal government reviews that are necessary to obtain real estate development and transportation permits.

The Biden administration recently announced federal actions to lower housing costs and boost the supply of affordable housing. As part of this government-wide effort, the General Services Administration (GSA) will identify and market surplus federal properties that represent the best opportunities for commercial-to-residential conversions. The GSA initiative will continue to convene developers, municipalities, and other stakeholders to learn about opportunities and challenges.