Building more homes and making them affordable are two different funding problems

A discount on a home only helps if the home gets built

A city needs more apartments. It also needs homes that lower-income families can afford. Requiring a portion of each new development to carry discounted rents appears to solve both problems at once: private capital builds the housing, and some of that housing becomes affordable without a separate public appropriation.

The difficulty is that the discount still has to be funded.

A building with lower rents generally supports less debt and produces less income for its investors. Construction, insurance, maintenance and property taxes do not fall simply because some residents pay less. The difference must be absorbed through cheaper land, lower returns, additional development rights, cost savings or subsidy.

Sometimes that combination works. Sometimes it changes the decision from building to waiting.

That is why we think housing policy should distinguish two questions: What will allow this housing to be built? And what will allow a lower-income family to live in it? The same program can answer both, but it should have to demonstrate that it does.

Twelve discounted apartments can change the decision on all 120

Consider a hypothetical 120-unit apartment project costing $36 million. Assume monthly market rents of $2,500, 95% economic occupancy and $1.08 million of annual operating expenses.

The building generates $2.34 million of annual net operating income (NOI)—a 6.50% yield on development cost. If the investment requires a 6.25% yield to justify proceeding, the project clears that threshold.

Now require 12 apartments—10% of the building—to rent for $1,500 per month, without an offsetting incentive.

The rent reduction helps 12 households if the project proceeds. But it also pushes the entire building below the assumed investment threshold.

Approximately $749,000 of cost reduction or equivalent nonrepayable subsidy would restore that threshold. Additional density, tax relief or fee waivers might produce an equivalent improvement. Without an offset or another adjustment, the project falls below the assumed threshold.

For a marginal project, the affordability requirement can affect whether all 120 homes proceed. Across a market, projects with larger margins may absorb the obligation, while others may be delayed, redesigned or abandoned. Land prices and investor expectations can also adjust. This example illustrates the mechanism; it does not forecast a cancellation rate.

The policy package matters more than the headline requirement

An August 2026 CalMatters commentary highlights a California working paper finding that inclusionary requirements reduced construction in the setting studied. The broader evidence is mixed. Seattle research finds that development responses differ with the intensity of upzoning and include relocation across policy boundaries. Research in the Baltimore–Washington region finds no evidence of fewer building permits. ^{[1] [2] [3] [4]}

A requirement paired with valuable additional density is economically different from the same requirement imposed on an unchanged building. Seattle’s Mandatory Housing Affordability program combines increased development capacity with affordability obligations and offers performance and payment options. ^[5]

Our interpretation is that affordability policy needs the same discipline as a development budget. The benefits and costs must work together at rents the market supports and construction costs someone can actually deliver.

Even generous financing has to match the rent gap

Washington’s Family Housing Fund, or WAFAM, illustrates the scale of capital being committed to this problem. Ballmer Group publicly describes zero-interest, forgivable loans of up to $150,000 per qualifying home. The program supports family-sized apartments serving households earning approximately 50% of area median income, with affordability lasting at least 60 years. ^{[6] [7]}

That is meaningful assistance. Whether it makes a particular development feasible still depends on the relationship between construction cost, restricted rents and the remaining financing.

Consider a separate hypothetical example. If an apartment’s restricted rent is $1,000 per month below its market rent, the difference is $12,000 annually before vacancy. Assuming 95% collections and unchanged operating expenses, that reduces annual operating income by $11,400.

For scale, replacing $150,000 of conventional debt carrying a hypothetical 7.5% annual debt-service constant would reduce annual payments by $11,250—if the replacement financing required no current payments. A debt-service constant includes both interest and scheduled principal repayment.

Those two amounts are nearly equal. A larger rent discount could outweigh the financing relief; a smaller discount could leave the project better positioned. This is an illustration of the economic relationship, not a model of WAFAM’s loan documents or a determination that a project qualifies.

WAFAM reported approved financing and its first project under construction as of June 2026. Its progress matters: the question is which projects the assistance can unlock, and what conditions allow it to do so. ^[6]

For developers and funders, the useful comparison is between the income given up, the financing expense avoided and the additional housing made possible. A substantial subsidy can close that gap. Its headline amount alone cannot tell us whether it does.

Funding access separately can protect development feasibility

An alternative is to let housing proceed at economically supportable rents, then use separately funded programs to help qualifying households access it.

Rental assistance supports the household directly, allowing the property to retain income needed for financing and operations. Acquisition takes another route: a housing organization purchases completed apartments, or pays for enforceable affordability restrictions, and funds the difference between market economics and lower rents.

Both approaches make the affordability cost explicit. They can also let the funder compare opportunities across buildings and locations. Neither eliminates that cost. Assistance needs available homes and dependable funding. Acquisition needs an acceptable purchase price and a budget for maintenance.

A fair comparison also distinguishes a loan from a grant. Repayment, forgiveness, duration and risk determine the economic subsidy. The same funding commitment does not necessarily support the same number of households through each approach.

Funding assistance separately only changes the development economics if the funding obligation also changes. Charging the same project at completion or sale still affects its underwriting today. Uncertain future profits are an uncertain source of assistance. Public revenues, philanthropy or committed acquisition capital can distribute the burden beyond new construction, but each has competing uses.

The question we would put to funders is straightforward: Will this dollar help more families by enabling restricted new construction, supporting rent in available homes, or acquiring housing for long-term affordability? The comparison should use the same economic subsidy cost and period of assistance.

Our development thesis begins with a cost basis that works

For Strigine, the starting point is to understand the cost of delivering the housing, the income it can support and the gap between them. Repeatable design, coordinated construction and disciplined financing matter because they can reduce the subsidy needed to achieve a given rent.

We then evaluate whether an affordability program closes that gap efficiently—and whether the same resources could produce a better outcome through household assistance or acquisition.

Development-linked assistance can be compelling when it unlocks a project and secures durable affordability. Household assistance can be compelling when homes are available and purchasing power is the immediate constraint. Acquisition can be compelling when existing properties can be bought and maintained at a better basis than new construction.

A successful affordability policy needs homes available to occupy and households able to pay for them. We see value in funding those needs together when the economics work—and separately when that produces a better result.