Dead Reckoning: Nobody Does The Real Math On Affordable Housing

I have been preparing testimony to support a housing supply bill before the Colorado state legislature. While reviewing the economics – specifically, trying to understand what public subsidies achieve compared to simply allowing more housing to be built – I looked for a number that should be easy to find: what is the total public subsidy per affordable unit in Colorado, including all sources?

Colorado, it appears, doesn’t have complete data.

The state enacted a law in 2021 requiring an annual report on housing subsidy spending. That report is published each year diligently. It only includes the dollars managed by the state’s own Division of Housing. The federal tax credits, local grants, land donations and fee waivers applied to the same projects are not counted. The total public subsidy per unit – what taxpayers at all levels contribute to produce one deed-restricted affordable home – is not tracked.

I thought this was a Colorado issue, but it’s not. From what I can tell, no state tracks the total public subsidy per affordable unit across all sources. Neither does the federal government. The Government Accountability Office has pointed out this gap for years, but Congress has not taken action.

Here’s what I found when I tried to put the number together myself.

The all-in public subsidy per affordable unit – what taxpayers actually contribute, counting all sources – is not tracked anywhere.

The capital subsidy pool

To focus solely on the cost of producing new affordable housing, we need to set aside rental assistance – the Housing Choice Vouchers and project-based Section 8 contracts that help low-income households pay rent on existing units. These programs are important, but they provide operating support; they do not build new housing. The relevant pool for our purposes is the capital subsidy: the public money used to directly construct or rehabilitate deed-restricted affordable units.

That pool costs roughly $20 to $25 billion each year. The Low-Income Housing Tax Credit, the federal government’s main construction tool, accounts for about $14 billion of that in lost federal tax revenue. The HOME Investment Partnerships Program adds around $1.5 billion. State housing trust funds, local contributions and other programs make up the rest. This is not a small amount – it is roughly what the federal government spends on the entire National Institutes of Health – but it is a manageable number, and it provides the right basis for asking what we get per unit.

The subsidy per unit

The capital subsidy pool funds two types of activities: new construction and rehabilitation of existing units. The difference is important because they receive very different subsidy levels. The LIHTC program explicitly states that rehabilitation projects usually qualify for the 4% credit, which is intended to cover about 30% of project costs. New construction generally uses the 9% credit, designed to cover approximately 70% of costs. In short, the program itself reflects a roughly 1-to-2.3 ratio of rehabilitation to new construction subsidies per unit.

Typically, new construction and rehabilitation each make up about half of LIHTC activity, generating approximately 60,000 to 70,000 units annually. Distributing the capital pool proportionally – with rehabilitation units receiving significantly less subsidy per door than new construction – results in an estimated public subsidy for net new construction of around $200,000 to $300,000 per unit.

That range should be considered approximate because the underlying data does not exist in a consolidated form. A typical affordable project draws on federal tax credits, HOME funds, Community Development Block Grant dollars, a soft second mortgage from a local housing authority, a land discount from a municipality and a state trust fund grant – each managed by different agencies with varying reporting requirements and no shared ledger.

The $200,000 to $300,000 figure is a reasonable estimate, not an official statistic, since no official statistic exists.

Existing real-world project data generally supports the order-of-magnitude estimate.

California, which monitors its program spending more strictly than most states, reported an average state subsidy of $128,000 per unit in 2021–2022 – before accounting for federal tax credits, local contributions and other sources. Industry analyses of fully layered projects in high-cost markets consistently show all-source public subsidies ranging from $150,000 to $350,000 per unit.

This reconstruction aligns with what practitioners observe in practice.

The public subsidy for a net new affordable unit runs roughly $200,000 to $300,000 – an approximation, because no official figure exists.

The Shortage and the math

Estimates of the national housing shortage vary widely depending on the methodology used.

The Congressional Research Service summarizes the major credible studies: Freddie Mac estimates the shortfall at 3.7 million units, Brookings at 4.9 million, and Zillow at 4.7 million. The National Association of Home Builders, using a narrower vacancy-gap methodology that it explicitly describes as a lower bound, estimates 1.2 million. A reasonable range that brackets the mainstream estimates is approximately 1.5 to 4 million units.

Even at the lower end of that range, the subsidy numbers are striking. One and a half million units at $200,000 each in public subsidy totals $300 billion – about 12 years of the entire capital subsidy budget, leaving no funds for ongoing needs or maintenance. At the midpoint of the shortage estimate – roughly 2.5 million units – and $250,000 per unit, the catch-up cost reaches $625 billion.

At the highest estimate, it nears $1 trillion.

These numbers assume the shortage is static, but it’s not. The capital subsidy system produces between 60,000 and 80,000 net new affordable units each year. Compared to a shortage of 1.5 to 4 million, that means it would take 20 to 65 years to close the gap – again, assuming no ongoing new need. Additionally, affordable units are not permanent. The LIHTC program requires affordability covenants for 30 years; after that, units can revert to market rate. Nearly 500,000 current LIHTC units – about a quarter of the total stock – will reach that point before the end of this decade. Much of the current capital spending is simply replacing units exiting the program.

The system isn’t closing the gap. At best, it’s preventing it from widening any further.

The question that should come first

The supply crisis calls for a supply solution.

The first honest step toward this is a question that should already be answerable but isn’t: what is the true cost of public subsidy per new affordable unit, including all sources?

Before any legislation votes to fund another affordable housing program, that question should have a clear, verified answer. Not the state’s share. Not the federal allocation. Everything – the tax credits, the local land contribution, the fee waivers and the soft debt from the housing authority.

What did taxpayers, in total, pay to produce one deed-restricted unit?

We are allocating somewhere between $20 and $25 billion each year (I believe) to a system that cannot be evaluated by its simplest output metric. We monitor inputs carefully but lack knowledge of the denominator. This isn’t a minor accounting oversight; it explains why the system can operate at scale for decades without anyone confidently knowing if it’s effective.

I have no doubt that some of the math I’ve presented here isn’t entirely accurate.

Not all affordable housing units are LIHTC, although the number of non-LIHTC units is fairly small (again, no official figures). However, not all sources of funds are properly accounted for either. The per-unit estimate aligns with my anecdotal observations from projects, where I rarely see less than $150K per unit and usually much more.

Frankly, I wish someone could definitively improve my numbers. It’s unfortunate that I don’t believe anyone can.

There are strategies for addressing the housing shortage that don’t depend on solving this accounting issue because they don’t require public subsidies at all: zoning reform, allowing by-right permits for smaller homes on smaller lots and removing regulatory barriers to missing-middle housing.

These approaches have a key advantage over the subsidy system: when they succeed, the cost per unit is clear – zero.