What Drives the High Cost of Affordable Housing

A combination of ineffective funding mechanisms, strict building regulations, and inflation are pushing per-unit construction costs higher.

1 minute read

January 23, 2024, 8:00 AM PST

By Diana Ionescu @aworkoffiction


Wood-framed four-story building under construction.

Christian Delbert / Adobe Stock

Writing in Crain’s Chicago Business, Judith Crown explains the various factors behind the high cost of affordable housing construction.

According to Crown, “Costs are driven by the byzantine rules of the federal tax credit system that require builders to assemble a ‘capital stack’ of funders, each with sets of fees and requirements. On top of that comes ever more rigorous government standards for accessibility, sustainability and design.”

Additionally, federal resources dedicated to affordable housing have not kept up with inflation, and the complex tax credit funding system comes with “incredibly high transaction costs.” Some experts say it would cost far less if the federal government directly subsidized affordable housing construction.  

Per-unit costs sometimes increase due to the addition of new infrastructure, but improvements such as new sidewalks can help make a housing development a vehicle for broader revitalization in the surrounding neighborhood. Modern affordable housing is also designed to blend in. “Planners want to get away from the institutional design of infamous public housing projects, such as the Robert Taylor Homes and Cabrini-Green. While these 1960s-era buildings aren't directly comparable to today's scaled-down affordable projects, there's a priority to design buildings that look like they're part of the neighborhood, architects say.”

Tuesday, January 16, 2024 in Crain's Chicago Business

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Get top-rated, practical training

Wastewater pouring out from a pipe.

Alabama: Trump Terminates Settlements for Black Communities Harmed By Raw Sewage

Trump deemed the landmark civil rights agreement “illegal DEI and environmental justice policy.”

April 13, 2025 - Inside Climate News

Logo for Planetizen Federal Action Tracker with black and white image of U.S. Capitol with water ripple overlay.

Planetizen Federal Action Tracker

A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.

April 16, 2025 - Diana Ionescu

Blue and white Seattle Link light rail train exiting concrete Downtown Bellevue Tunnel in Bellevue, WA.

Why Should We Subsidize Public Transportation?

Many public transit agencies face financial stress due to rising costs, declining fare revenue, and declining subsidies. Transit advocates must provide a strong business case for increasing public transit funding.

April 7, 2025 - Todd Litman

Two people on bikes in red painted bike lane with bus in traffic lane next to them.

Understanding Road Diets

An explainer from Momentum highlights the advantages of reducing vehicle lanes in favor of more bike, transit, and pedestrian infrastructure.

April 17 - Momentum Magazine

Aerial view of large warehouses across from development of suburban single-family homes in Jurupa, California with desert mountains in background.

New California Law Regulates Warehouse Pollution

A new law tightens building and emissions regulations for large distribution warehouses to mitigate air pollution and traffic in surrounding communities.

April 17 - Black Voice News

Purple Phoenix light rail train connected to overhead wires at sunset.

Phoenix Announces Opening Date for Light Rail Extension

The South Central extension will connect South Phoenix to downtown and other major hubs starting on June 7.

April 17 - Arizona Republic