While mixed-income housing often is discussed as a means to transform areas of concentrated poverty, it can also advance housing opportunity and racial equity in higher-income and gentrifying neighborhoods. Some localities have attempted to expand access to affordable housing in these neighborhoods through inclusionary zoning, which requires developers to build affordable units as part of a market-rate project. However, these projects often are contested, and high rates of inclusionary units can make a development financially infeasible. We believe that “80-20” deals—a use of tax-exempt bonds to finance mixed-income housing that was popular in the 1970s and 1980s—offer a promising means to generate and preserve low-cost income-restricted housing in opportunity neighborhoods. Due to their structure, 80-20 deals can be used to increase access to higher-income neighborhoods as well as to preserve affordable housing in gentrifying neighborhoods.

Moreover, they rely on an underutilized source of funding: Each year, states leave billions of dollars in bond authority on the table. Tapping into this potential will require building the capacity of the affordable housing and community development industry to do market-rate rental development or to partner with market-rate developers, since 80-20 deals require large projects and experienced teams from both the private and public sectors. This is due largely to the high fixed costs of bond financing and the complex federal administrative and compliance regulations that come with bonds. Nonetheless, we believe that this is an opportune time to reconsider the potential of mixed income, bond-financed deals. Expanding public and private sector capacity to arrange 80-20 deals would tap into an underutilized funding stream without reducing the resources for 100% affordable projects. Furthermore, as cities increasingly turn to inclusionary zoning and other policies to expand the supply of affordable housing, 80-20s may help make more projects financially feasible.

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