The financial intricacies involved in building affordable housing can be difficult to understand. This explainer breaks down the foundational concepts.
Affordable housing is hard to build not because of lack of need, but because of how it's financed. This guide explains the basics, including:
- Capital Stack: Projects are funded through a mix of debt and equity, used to cover land, construction, and soft costs.
- The Funding Gap: Affordable rents generate less income, meaning smaller loans—creating a gap that must be filled to make a project viable.
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Closing the Gap: Developers use a mix of:
- Subsidies (grants, tax credits, vouchers)
- Cost-saving strategies (donated land, fee waivers)
- Lower-cost capital (below-market loans and equity)
- Why It Matters: Understanding these tools helps advocates, policymakers, and funders support more sustainable, equitable housing development.
FULL STORY: Affordable Housing Finance 101
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Affordable Housing Finance 101
The financial intricacies involved in building affordable housing can be difficult to understand. This explainer breaks down the foundational concepts.
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