Improvements in Financing Could Increase the Single-Family Affordable Housing Supply

Abstract

The United States faces a shortage of housing supply, estimated to be millions of units. This shortage is especially acute in the affordable sector. Although the causes of the supply shortage are many, we focus on one major set of constraints: financing. In particular, we focus on how to improve financing for the three types of affordable single-family housing where we see the most potential: manufactured housing (MH), accessory dwelling units (ADUs), and housing preservation. We argue that these financing issues constrain production; improving financing will grow consumer demand for affordable housing and preservation and prompt builders and manufacturers to respond by increasing supply. Finally, we try to quantify the potential impact in each of these areas to increase housing supply. Overcoming these financing hurdles would remove a major roadblock facing MH, ADU, and housing preservation and allow for the addition of a significant number of units of affordable housing supply.