Read the full report here.

Executive Summary

America has a housing shortage. Depending on how you count, we’re short between 2 and 7 million units, and the gap is widening. As cities, states, and the federal government increasingly address regulatory barriers that hamper construction like zoning restrictions, permitting processes, and environmental reviews, we will now highlight another piece of the puzzle.

This report rests on a simple claim: closing the housing gap requires multifamily housing production rising from its current level of 350,000 units to at least 500,000 units per year, and sustaining that elevated level for 8-10 years. The only times in modern American history we’ve achieved anything close to that were periods when coordinated federal investment policy made apartment construction unusually attractive for investment. For the past 40 years, we’ve had no such policy. And for 40 years, multifamily production has flatlined.

The HUD-driven boom of 1968-1973 leveraged mortgage insurance, liquidity, and interest rate subsidy, contributing to 3 million apartment units started over four years. The accelerated depreciation boom of 1981-1986 leveraged billions into multifamily construction. Both programs had some flaws, and both eventually ended. But importantly, both worked: when government made it financially attractive to build apartments, large numbers of apartments were built.

We lay out the broad strokes of five approaches that could support similar outcomes today:

1. Streamline FHA multifamily lending by accelerating processing times and expanding categorical exclusions for infill development. We believe this could increase FHA-supported production by tens of thousands of units annually at essentially no fiscal cost.
2. Scale state housing finance agency acceleration funds through a federal matching program. Several states have pioneered subordinate construction loan programs that unstick stalled projects. Scaling these programs up nationwide could be done with a one-time federal match and could support tens of thousands of additional units annually.
3. Allow GSE construction lending, including construction-to-perm loans, forward commitments, or a secondary market for mezzanine loans. These changes would require regulatory action, not appropriations, and could support one hundred thousand units per year.
4. Accelerate depreciation schedules for rental housing. The government accelerates depreciation for things it wants more of, like clean energy infrastructure, and can extend that treatment again to multifamily housing. There are several ways to accelerate depreciation, such as shortening straight-line timelines, partial expensing, or full expensing. These approaches could add tens of thousands of units annually.
5. Renew the FHLB’s mandate to support affordable housing supply by moving toward a portfolio with a larger share of housing investments, supporting both construction and long-term financing, adding tens of thousands of units per year at no fiscal cost.

These levers are neither particularly expensive nor are they particularly partisan. Taken together, they could allow us to quickly realize the potential of ongoing zoning reform efforts by adding hundreds of thousands of units to annual multifamily production, resulting in the elevated—and sustained—multifamily production needed to end the housing shortage once and for all.

Read the full report here.