I wrote a post at Forbes highlighting the Low Income Housing Tax Credit (LIHTC) program and how it is too complicated and opaque. I did a simple thought experiment in the post about how the program might work if we made it super simple.

What if we started all over again and made the program itself really, really simple? What if:

  • Businesses or individuals could directly invest in housing projects that would produce rent restricted units;
  • Projects that set aside at least 50% of their units for rents less than 60% of Area Median Income (AMI) would be eligible;
  • The state Housing Finance Agency (HFA) would approve the application and certify the project when Certificate of Occupancy (C of O) was approved;
  • The business or individual could apply the tax credit to their taxes when they filed them the following year.

But in another post from a long time ago (2018!), I proposed the idea of Household Development Credits. The notion is that people who earn less income and have trouble keeping up with rent could be allocated "development credits" for increased density or even permitting that they could sell developers for cash.

If a developer shows up with 10,000 tokens she will be allowed to build an additional 10,000 square feet, no debates or bickering from the surrounding neighbors. For the households selling their credits, there is no tax on the cash they receive and the funds can be used for anything the household wants. And, if the developer agrees, the household, or group of households, can become equity investors in a developer’s project, receiving a return on their investment if the project is successful.

Far fetched? Yes. Downright crazy. Imagine redistributing wealth this way, allowing more market rate development that directly benefits people who are struggling with housing inflation. Of course, it would require a local government that could restrain the urge to limit new development. But if there was a lot of demand, this sort of credit system would move money being invested in new market rate housing (a good thing!) into the pockets of people who have less money.

We'll keep refining these ideas in a way that channels money from people like developers and tax payers looking for a break into the bank accounts of people who are truly experiencing the downsides of housing inflation, a condition made worse by limits on production. Without changing or eliminating those limits such a program probably won't work. But now is a good time to start reimagining how we fund subsidies for housing.