Three Western states are seeing policy momentum to tackle the nationwide affordable housing crisis, but financing challenges continue to be a barrier to scaling similar projects in other parts of the country.
That was the key takeaway from a Thursday webinar hosted by the Terner Center for Housing Innovation at the University of California Berkeley and the Federal Home Loan Bank of San Francisco. Housing experts on two back-to-back panels shared wins—and struggles—in providing more affordable housing in their communities against a backdrop of economic and political headwinds.
Nevada, for instance, has made serious moves. The state went from passing just three to five housing bills a decade ago to advancing more than 60 this year alone—with 40% being signed into law.
“We had an unprecedented amount of money allocated towards housing,” said Maurice Page, executive director of the Nevada Housing Coalition.
The biggest win? Nevada Governor Joe Lombardo’s Housing Attainability Act, which created a $133 million investment fund expanding income eligibility to 150% of area median income. The state also locked in permanent funding for supportive housing and mandated by-right multifamily development on commercial corridors.
Page noted Nevada’s unique challenges.
“We were the fastest-growing city over the last 70 years,” Page told over 300 webinar attendees. “It took Chicago, New York and other places centuries to get to where they (were) going. We achieved it in under 70-plus years, and we’re still top five in the country as far as growth.”
Meanwhile, in Arizona, accessory dwelling units (ADUs) were legalized statewide on single-family lots while addressing common city codes that could impede development, according to Kirin Goff, executive director with the Arizona Neighborhood Project. Goff noted that Arizona took lessons from California’s adoption of ADUs to craft its own legislation.
Additionally, Arizona now allows fourplex developments near most downtown areas and on single-family lots statewide. The momentum is spreading; Texas borrowed from Arizona’s playbook to pass similar starter home legislation.Â
These types of reforms proved elusive for many years, often blocked by local grass-roots opposition. But a growing recognition of just how severe issues with supply and affordability have become appears to be driving change.
California scored a “historic” California Environmental Quality Act (CEQA) reform victory after a decade of work, paving the way for more urban development, according to Michael Lane, state policy director with the San Francisco Bay Area Planning and Urban Research Association (SPUR).
“It really creates that type of consistency, predictability that we need at the local level,” Lane said. He noted that California has also made strides in reducing the time and cost to build housing, which are key barriers. These efforts include putting shot clocks on permitting, addressing development impact fees and eliminating parking minimums near transit, among other efforts.
Perhaps most instrumental in helping housing advocates cut through red tape was the passage of the Affordable Housing Credit Improvement Act in May, providing meaningful federal support with bipartisan backing.
The law restores a 25% cut to housing credit allocations and bumps annual credits by 50% over two years. For California alone, that means adding 200,000 new affordable homes annually, according to Laura Archuleta, president and CEO of Jamboree Housing Corporation.
“I think some of us were a bit surprised, because we’ve been working on it for a while, but you never know where it’s going to come through,” Archuleta said.
The Federal Housing Finance Agency (FHFA) sweetened the deal by doubling Fannie Mae and Freddie Mac’s investment capacity in low-income housing tax credits to $2 billion each per year.
While larger affordable housing developers are busy turning down projects, small-scale developers face a different reality. Jim Heid, founder of UrbanGreen and Craft Development based in Sonoma County, California, rated the current environment close to a 10 on a scale where 10 means no deals are flowing.
“Unfortunately, so many of these programs, just to paper them and get them done…are not being set up for the smaller-scale project,” Heid said.
The challenges go beyond zoning wins. Heid estimates policy changes solve maybe 20% of the problem, with the other 80% involving financing hurdles, construction defect liability, insurance costs and utilities issues.
Key needs for small developers include solving “the guarantor problem” for emerging developers without strong balance sheets, streamlining draw processes and creating standby capital facilities, Heid noted.
With uncertainty around the future of the HOME Investment Partnerships (HOME) and the Community Development Block Grant (CDBG) programs, states are stepping up with their own solutions. California allocated $500 million for state low-income housing tax credits and millions more for various housing programs. Nevada’s transferable tax credits have produced 1,500 to 2,000 units since 2019.
Sindy Spivak, west region market executive, community development banking, with Bank of America, emphasized the need for efficiency: reducing redundancies, sharing third-party reports and “not focusing so much on square pegs and round holes.”
Policy reforms have laid crucial groundwork, but implementation remains the wild card. States are innovating with financing while federal support shows signs of stabilizing.
For real estate pros, opportunity exists if you’re willing to navigate the red tape, but the industry still needs better tools—especially for smaller-scale developers who could help fill the missing middle gap and make affordable housing more accessible.
