Government incentives help, but cost overruns and red tape are slowing development
A new report from Yardi Matrix sheds light on the role government incentives play in supporting the US affordable housing, despite ongoing funding limitations, red tape, and rising development costs that continue to hinder progress.
According to the data, the United States faces a shortfall of 2 million to 5 million affordable housing units, underscoring the urgency of expanding its viable housing stock.
Roughly 14,000 of the 26,000 fully affordable multifamily properties tracked by Yardi Matrix rely on some form of federal, state, county, or municipal subsidy. These support programs range from tax-exempt bonds and LIHTC financing to grants, low-cost loans, and renter subsidies, all of which are targeted at a diverse mix of low-income renters, the elderly, farm workers, the disabled, and residents in urban or transit-accessible areas.
The federal tax-exempt housing bond program, often paired with the Low-Income Housing Tax Credit (LIHTC), remains a central vehicle for financing affordable development. Yardi Matrix tracks nearly 3,300 properties that utilize tax-exempt bonds, most of which are likely to also employ LIHTC to make projects financially feasible.
Still, rising costs are eroding the effectiveness of these tools.
“Expenses per unit have increased by more than one-third for affordable properties since 2019,” the report found. That’s forced developers to stack multiple funding sources, sometimes 10 or more, for a single project, which complicates compliance and delays delivery.
The housing supply-demand imbalance is pushing more renters to the brink. Data from the Harvard Joint Center for Housing Studies shows that 22.6 million renters spent more than 30% of their income on housing in 2023, with over 12 million spending more than 50%. Yardi Matrix reported that as of May 2025, the average household in Rent-by-Necessity units spent 31.4% of income on rent, up from 29.6% five years earlier.
“Public funding is an essential piece of meeting the population’s need for affordable housing,” the report said, but “simplifying the building process is critical.”
Other bottlenecks include complex zoning and environmental regulations, extensive paperwork for funding compliance, stipulations limiting how public funds can be allocated, and gaps in coverage for pre-development or staffing costs.
To address these challenges, the Affordable Housing Credit Improvement Act, currently under congressional review, proposes streamlined reporting requirements and zoning reforms to remove barriers like minimum lot sizes, parking mandates, or height restrictions.
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The report said that while government backing is crucial, better alignment between public policy and development realities is necessary. “The diversity of the programs... provides a laboratory to study what works and what doesn’t,” the report stated, adding that these lessons could shape future refinements to federal and local housing policy.
Meanwhile, a new tax bill under consideration would expand LIHTC support and increase funding for underserved areas—but it may also cut direct renter subsidies, community block grants, and several loan programs, further complicating the affordable housing response.
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