How governments finance housing: bonds, TIF, public land, tax credits and direct subsidy, and whether public capital can lower the cost of a unit.
Governments can influence the cost of capital in a way private parties cannot. They can borrow at lower rates, contribute land they already own, forgo taxes they would otherwise collect, and issue credits that investors buy. Each of these is a form of public finance, and each replaces or cheapens a piece of the private capital stack described in our Financing section.
The question we ask of every public finance tool is the same one we ask of a private one: what does it cost, who bears that cost, and what does it change in the required rent? Cheaper debt lowers debt service; a grant lowers the equity that must earn a return; a tax abatement lowers operating expenses. Articles here trace those effects and compare them honestly, including the cases where public money is not the cheapest solution.
The capital stack behind a new apartment building: who lends, who invests, who signs personally, and who ultimately repays all of it.
Public Finance
Tax-exempt bonds, public land, patient equity, revolving loans, grants and tax abatements each lower required rent on a modeled 120-unit building. Each also has a payer. Here is what every model is worth per month.
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