Bending the Cost Curve on Affordable Rental Development
Introduction
The demand for affordable rental housing has surged in recent years, driven by a combination of economic, demographic, and social factors. However, the costs associated with developing such housing have also risen significantly, posing a major challenge for developers, policymakers, and communities. In response to this growing need, Enterprise Community Partners and the Urban Land Institute’s Terwilliger Center for Housing initiated a joint research effort in September 2012 to delve into the various factors influencing the cost of developing affordable rental housing. This comprehensive study aimed to identify key challenges and potential solutions to make affordable rental development more feasible and sustainable.

Research Background
The Growing Need for Affordable Rental Housing
The need for affordable rental housing is becoming increasingly critical. According to recent data from the Joint Center for Housing Studies of Harvard University, the number of renter households in the United States has been steadily increasing over the past decade. This trend is driven by several factors, including rising housing costs, stagnant wages, and an increasing number of individuals and families choosing to rent rather than buy. Additionally, the economic impact of the COVID-19 pandemic has exacerbated housing insecurity, further highlighting the urgency of providing affordable rental options.
Rising Development Costs
Despite the growing demand, the costs associated with developing affordable rental housing have also been on the rise. Factors such as land acquisition, construction materials, labour, and regulatory requirements have all contributed to increased development costs. This has made it more challenging for developers to create affordable rental units without substantial financial support from public or private sources. As a result, many communities are struggling to meet the housing needs of their residents, particularly those with low to moderate incomes.
Research Methodology
Roundtable Discussions
To gain a comprehensive understanding of the challenges and opportunities in affordable rental development, the research team organized roundtable discussions in five major cities: Chicago, Denver, Los Angeles, New York City, and San Francisco. These cities were chosen due to their diverse demographics, economic profiles, and housing market conditions. The roundtable discussions brought together a wide range of stakeholders, including developers, policymakers, community leaders, and housing advocates. The goal was to foster an open dialogue and gather insights on the specific challenges and innovative solutions being implemented in each city.
Interviews with Practitioners, Developers, and Financiers
In addition to the roundtable discussions, the research team conducted in-depth interviews with practitioners, developers, and financiers involved in affordable rental development. These interviews provided valuable firsthand accounts of the financial, regulatory, and operational challenges faced by those working in the field. The insights gathered from these interviews were crucial in identifying common themes and potential strategies for addressing the rising costs of development.
Key Findings
Land Acquisition and Development Costs
One of the most significant challenges identified in the research was the high cost of land acquisition and development. In many urban areas, land prices have skyrocketed due to increased demand and limited supply. This has made it difficult for developers to secure affordable land for rental housing projects. Additionally, rising construction costs, driven by increased demand for materials and labour, have further compounded the problem. The research highlighted the need for innovative land acquisition strategies and cost-saving measures to mitigate these challenges.
Regulatory and Policy Barriers
Another major factor contributing to the high cost of affordable rental development is the complex regulatory environment. Zoning laws, building codes, and environmental regulations can significantly increase the time and cost required to bring a project to fruition. The research underscored the importance of streamlining regulatory processes and implementing policies that encourage affordable rental development. This includes incentives such as density bonuses, tax credits, and expedited permitting processes.
Financial and Funding Challenges
Developing affordable rental housing often requires significant financial resources, particularly in the face of rising costs. The research identified a need for increased public and private investment to support affordable rental development. This includes leveraging federal and state housing programs, such as the Low-Income Housing Tax Credit (LIHTC), as well as exploring innovative financing mechanisms like community land trusts and social impact bonds. The study also highlighted the importance of partnerships between developers, financial institutions, and community organizations to pool resources and share risks.
Conclusion
The joint research effort by Enterprise Community Partners and the Urban Land Institute’s Terwilliger Center for Housing has shed light on the multifaceted challenges facing affordable rental development. By examining the factors influencing development costs and engaging stakeholders in key cities, the study has provided valuable insights and potential solutions to address these challenges. Moving forward, developers, policymakers, and communities must work together to implement strategies that make affordable rental housing more accessible and sustainable. Only through collaborative efforts and innovative approaches can we hope to meet the growing demand for affordable rental housing and ensure that all individuals and families have access to safe, decent, and affordable homes.
External Links
For more information on the research conducted by Enterprise Community Partners and the Urban Land Institute’s Terwilliger Center for Housing, please visit the following links: