Affordable housing is experiencing a shift — one that could soon make it more profitable for developers and real estate investors. Amid a deepening housing crisis in the U.S., recent legislation and growing market pressures are creating new incentives to solve the supply gap.
With over 10 million affordable housing units needed nationwide, real estate developers have long cited cost barriers: soaring land and construction prices, regulatory red tape, and NIMBYism (Not In My Backyard) resistance from homeowners. These factors have made it especially difficult to build or renovate apartments for low-income families.
“All of real estate is being challenged by higher interest rates and by higher construction costs,” said Jonathan Rose, founder and CEO of the Jonathan Rose Companies. “But there’s also a lot of support… our job is to weave the pathway in between the complexities.”
A Major Boost: Tax Credits for Developers
Support for affordable housing has recently expanded through the passage of a tax and spending bill that strengthens the Low-Income Housing Tax Credit (LIHTC) — the federal government’s most effective tool for building affordable rental units.
The legislation:
- Permanently increases the 9% credit allocation to states by 12%
- Lowers financing barriers for developers
- Is projected to produce or preserve over 1 million additional affordable rental homes between 2026 and 2035
Developers like Rose sell these tax credits to investors to help fund their projects. As a result, interest from family offices and foundations is growing, alongside institutional impact funds. Rose’s firm recently closed a $660 million impact fund to acquire and improve mixed-income housing across urban areas in the U.S.
Demand Grows – But Risks Remain
Despite this momentum, challenges still exist. A proposed $27 billion cut in federal rental assistance programs by the Trump administration has already made some lenders more cautious. However, Congress — particularly the House — has shown bipartisan support for affordable housing in past votes.
On top of that, the Senate Banking, Housing and Urban Affairs Committee recently advanced new legislation aimed at:
- Removing regulatory barriers to development
- Providing infrastructure funding for water and sewer systems in housing projects
Though this legislation focuses more on for-sale homes, it signals political will to tackle the affordability crisis.
Overcoming the Stigma of “Cheap Housing”
While tax incentives may attract developers, NIMBYism is still a serious hurdle. Opponents fear that affordable housing — even when integrated into mixed-income buildings — could drive down property values.
Rose acknowledges these concerns:
“A lot of affordable housing built in the ’60s and ’70s was cheap and ugly… I wouldn’t want it in my neighborhood either.”
His solution? Build beautiful, sustainable, and cost-efficient buildings that elevate neighborhoods rather than drag them down.
Key Takeaways:
- Affordable housing may soon become a viable, even profitable, sector for investors
- Tax credit expansions under the LIHTC are driving renewed interest from developers
- Political and investor support is rising, but NIMBYism and policy cuts still pose risks
- High-quality, mixed-income developments are becoming the new standard
