Scaling Solutions: Innovative Approaches to Increase and Preserve Affordable Housing

Introduction

Across the United States, American families are facing an increasingly unaffordable housing market. As of 2024, the nation faces an estimated deficit of 3.7 million homes, a shortage that is driving up housing costs in nearly every state. This lack of supply undermines neighborhood stability, local economic vitality, and overall economic growth. More than half of all renters are now cost-burdened spending over 30% of their income on housing and over 12 million renters pay more than 50% of their income toward rent.

Decades of affordable housing underproduction, combined with insufficient resources to repair and preserve an aging housing stock, have led to rising costs for both multifamily rental housing and single-family homes. Adding to the instability are rising insurance premiums, which further exacerbate cost burdens for low- and moderate-income families.

In response, cities across the country are adopting innovative strategies to increase housing supply. These include preserving existing housing in Chicago, working with nonprofit developers to scale single-family home acquisitions in Atlanta, and developing new tools to combine funding sources in the Bay Area. Policy interventions such as streamlining land use and zoning processes, leveraging electronic permit submissions in Seattle, and establishing dedicated housing units within planning departments in Denver are showing promise. Local leaders can draw on these place-based strategies to increase investment and scale promising interventions.

JPMorganChase’s Four Promising Strategies

As part of its commitment to power local economies, JPMorganChase has identified four promising strategies to increase affordable housing supply:

1. Simplify and standardize zoning and land use processes to reduce bureaucratic hurdles and expedite approvals.

2. Facilitate promising property acquisition strategies tailored to market needs, prioritizing affordable housing development.

3. Support construction innovations, such as offsite construction, to improve cost-effectiveness and time efficiency.

4. Build and strengthen local finance and development capacity for production and preservation through targeted partnerships and investment in Community Development Financial Institutions (CDFIs).

A Closer Look: Chicago’s Housing Supply Challenge

Chicago, the third largest city in the U.S. with over 2.6 million residents, faces significant housing supply and affordability challenges. Home prices have soared 40% faster than average incomes over the past 30 years. Newly built homes are 65% more expensive than the average home in the city. Chicago is estimated to be short 142,000 homes, with the largest gap in a decade. Housing development is unevenly distributed due to entrenched segregation, limiting economic growth. Lower-income families have few affordable rental or homeownership options, and moderate-income families struggle to move up within the market.

The "Missing Middle" Housing

A key concept in the document is the "missing middle" housing. In Illinois, this refers to moderate-cost housing types like duplexes, townhomes, single-family "starter" homes, and older, smaller multifamily rental buildings. Historically prevalent in urban areas, these housing types have become less common due to restrictive zoning and market dynamics. Missing-middle housing is largely unsubsidized, so if the mainstream real estate industry is not building it, few public resources are available to fill the gaps.

Streamlining Municipal Zoning and Land Use Processes

Overly burdensome land use and zoning processes deter developers from building or preserving housing. Zoning regulations that limit density, restrict housing types, or add costly requirements like high parking ratios limit affordable housing options. By removing redundancies and standardizing processes, municipalities can facilitate faster approvals.

More than 20 states have implemented housing policy reforms. Montana enacted state-level reforms to streamline housing regulations. Chicago is implementing the Cut the Tape initiative, a suite of process improvements aimed at removing barriers, establishing concurrent review steps, increasing transparency, and streamlining applications. The city is also piloting expedited reviews for affordable housing development and eliminating minimum parking requirements, especially near public transit. JPMorganChase has supported this by investing in the Metropolitan Planning Council and Civic Consulting Alliance.

Facilitating Effective Property Acquisition Strategies

Acquiring land for housing can be a challenging, time-intensive, and costly process. In economically distressed areas with high vacancies, municipalities can transfer publicly owned property to developers who commit to build or rehabilitate homes. In high-cost markets, the public sector can develop streamlined land acquisition strategies that prioritize affordable housing preservation.

Chicago developed a comprehensive strategy to review its landholdings. The Cut the Tape initiative eliminates unnecessary environmental review steps to expedite development. The Illinois Ad Hoc Missing Middle Housing Solutions Advisory Committee recommended clear state and local land inventory processes, grants for site preparation, and intergovernmental agreements with land banks. Chicago owns over 10,000 properties, and the Cook County Land Bank Authority owns another 1,600. Past fragmented redevelopment efforts have given way to coordinated efforts like Reclaiming Chicago, Connecting Capital and Community (3C), and the city’s Missing Middle Pilot.

Case Study: Reclaiming Chicago

United Power for Action and Justice launched the Reclaiming Chicago campaign to acquire and build affordable homes. They help homebuyers access affordable mortgages and plan for long-term maintenance. Over the next decade, they plan to build 2,000 affordable for-sale homes in four communities on Chicago’s South and West sides: Roseland, Lawndale, Chicago Lawn, and Back of the Yards. JPMorganChase has supported this campaign since 2020, investing over $10 million to leverage vacant city-owned land. After years of advocacy, United Power secured 500 lots from the city in 2024. As a result, Reclaiming Chicago has built more than 150 homes and aims to build 125 per year moving forward.

Supporting Construction Innovations

Even with reduced costs from streamlined processes, housing development remains capital-intensive. Macroeconomic factors like supply chain disruptions and rising labor costs increase required capital. Developers in Chicago are exploring new models like modular building construction done offsite and assembled onsite. This shortens development timelines, extends the construction season (beneficial in cold climates like Illinois), and provides year-round employment. To achieve cost savings, modular builders need more capital, expanded manufacturing capacity, and access to bulk purchasing. Cook County has launched a $12 million Modular Homes Pilot to support homebuyers earning up to 120% of the area median income (AMI).

Case Study: Connecting Capital and Community (3C)

The Connecting Capital and Community (3C) program is a five-city national initiative supported by JPMorganChase and managed by the Center for Community Investment. The Chicago initiative, convened by The Chicago Community Trust, brings together a cross-sector collaborative to expand homeownership supply and demand. It starts in two West Side neighborhoods East Garfield Park and Humboldt Park—aiming to build affordable homes on 100 publicly owned vacant parcels and establish a pipeline of 200 buyer-ready residents earning 80-120% AMI. 3C is piloting a non-conventional secondary market loan product providing low-interest mortgages for 25 families. The 3C Developer Alliance includes homebuilders using traditional and modular construction, has organized over 60 lots, and built the first six homes in 2024.

Strengthening Local Financing and Development Capacity

Because housing development is capital-intensive, it is often economically inefficient to build or rehabilitate housing at prices affordable to low- and moderate-income households. Nonprofit and mission-driven developers, along with financial institutions and CDFIs, play a crucial role by bringing together public and private capital. Coordinated efforts across public, private, and civic sectors are fundamental to moving affordable housing from pilot to scale.

Case Study: The Preservation Compact

The Preservation Compact within the Community Investment Corporation (CIC) a local CDFI, coordinates strategies across government, nonprofit, real estate, philanthropic, and finance sectors to preserve publicly subsidized housing at risk of loss due to expiring contracts, as well as naturally occurring affordable housing (NOAH). Since 2008, the coalition has preserved 7,000 rental units, helped develop a $48millionloanprogramanda$5 million CDFI collaborative, and financed energy retrofits. Recently, the Preservation Compact established a national preservation tool to help other communities identify preservation approaches based on housing market typology.

Financing New Construction and NOAH Preservation

Innovative financing strategies are essential. These focus on closing development cost gaps, appraisal gaps, and leveraging tax credits.

• Closing development cost gaps: Reclaiming Chicago has raised over $24 million in low-cost forgivable loans and grants. Chicago’s 3C initiative provides predevelopment grants to developers.

• Closing appraisal gaps: An appraisal gap occurs when the cost to build a home is greater than its market price. Chicago’s Building Neighborhoods and Affordable Home Program provides up to $100,000 in forgivable grants. Geographically concentrated development helps enhance appraisal comparisons.

• Federal tax credits: A proposed Neighborhood Homes Tax Credit would add 500,000 starter homes in economically distressed areas.

• Public finance tools: Tax Increment Financing (TIF) can be combined with philanthropic resources but may increase complexity. Some regulations lead to escalated costs, hindering efficient development.

• Non-conventional resources: 3C is exploring New Markets Tax Credits (NMTC) for scattered-site homeownership development.

For naturally occurring affordable housing (NOAH) preservation, effective financing includes:

• CDFI lending: The Community Investment Corporation (CIC) offers a Multifamily Loan Pool providing first mortgage financing for rental housing with five or more units, coupled with property management training.

• Property tax incentives: In 2021, Illinois enacted new property tax incentives for rental property owners with seven or more units to build new or invest while keeping rents affordable. Cook County piloted this approach, which has benefited affordable and missing middle housing development without significant public capital.

Looking Ahead and JPMorganChase’s Commitment

Addressing the housing supply crisis requires a collaborative, multi-sector approach. By streamlining zoning, facilitating property acquisition, supporting construction innovations like modular building, and strengthening local financing capacity, communities can tackle housing affordability challenges. Every sector public, private, and civic, has a role in scaling these solutions.

In summary, the document provides a comprehensive blueprint for scaling affordable housing solutions. Key takeaways include the importance of the missing middle housing, the effectiveness of modular building and offsite construction, the critical role of CDFIs and the Preservation Compact for NOAH, and the success of targeted initiatives like Reclaiming Chicago and 3C in leveraging vacant land and closing financing gaps. By adopting these innovative approaches, communities across the country can transform the housing crisis into an opportunity for sustainable growth and economic vitality.

Also Read: 2022-2027 Berlin Affordable Housing Plan