Affordable housing isn't just a policy idea. It's an entire ecosystem of organizations, funding streams, and development processes. Learn who the key players are and how they work together.
Why This Industry Exists
Here's the fundamental challenge: In a market-driven economy, housing developers build what makes financial sense. They pay market rates for land, materials, labor, and financing, then set rents high enough to cover those costs and provide a return on their investment. This system works fine for households with middle to high incomes, but it leaves behind families earning less.
The math is straightforward but unforgiving. We can't make land, wood, or steel cheaper just because a family earns less. Construction costs what it costs. So when a household can only afford to pay $800 per month in rent, but it costs $1,200 per month to build, finance, and operate that same apartment, the market simply won't produce it.
The gap between what low-income families can afford and what the market naturally provides is where the affordable housing industry steps in. As we explored in “What is Affordable Housing,” the 30% rule helps us understand when housing is affordable for a particular household. But how do we actually create housing that meets that standard for people earning below-market incomes? Industry professionals and policymakers often distinguish between two types of affordable housing: housing that's naturally affordable in the market (“little a”), and housing that's intentionally built or preserved with subsidies and restrictions to remain affordable long-term (“Big A”).
“Big A” Affordable Housing
“Big A” affordable housing refers to properties developed or preserved using government subsidies and programs. These projects receive financial support in the form of tax credits, grants, below-market loans, or direct subsidies. In exchange for this support, developers agree to keep rents affordable and follow strict regulations. The subsidies help close the gap between market-rate construction costs and what low-income tenants can pay.
These properties operate under recorded regulatory agreements (also called land use restriction agreements or extended use agreements) that legally restrict how the property can be used, who can live there based on income, and how much rent can be charged. The restrictions typically last 15 to 55 years depending on the program and location. “Big A” developments primarily serve households earning 60% of Area Median Income or below, with many specifically targeting the deepest affordability levels at 30% and 50% of AMI.
“Big A” affordable housing can also include supportive housing, which combines affordable units with on-site services like case management, mental health counseling, or job training. Supportive housing is often targeted at people experiencing homelessness, those with disabilities, or individuals transitioning from institutional settings. These projects provide not just a home, but the wraparound support some residents need to maintain stable housing.
Examples of “Big A” affordable housing include properties financed through the Low-Income Housing Tax Credit (LIHTC) program, public housing, Section 8 project-based rental assistance, and developments using HUD loans or state housing finance agency programs.
“little a” affordable housing
"little a" affordable housing achieves affordability without federally-subsidized development financing or income-restricted occupancy requirements typical of programs like LIHTC or Section 8. Instead of relying on public funding, "little a" affordable housing efforts use alternative ownership structures, creative financing, or market conditions to keep housing costs lower.
This category includes naturally occurring affordable housing (NOAH), which refers to older buildings that happen to rent below market rate without any formal affordability requirements. It also includes community land trusts (CLTs), where a nonprofit organization owns the land beneath homes, reducing purchase costs and maintaining long-term affordability through ground leases. Limited equity housing cooperatives (LEHCs) are another model, where residents collectively own the building and resale prices are restricted through the cooperative's bylaws to maintain affordability for future residents.
Self-regulated market rate properties also fall into this category. These are properties where owners voluntarily keep some or all units affordable, sometimes in exchange for local property tax benefits or other incentives, but without the extensive regulatory agreements required by “Big A” programs.
“little a” affordable housing typically serves a broader income range, often reaching households earning between 60% and 120% of AMI. This range is sometimes called “workforce housing” because it includes teachers, nurses, retail workers, and other essential workers who earn too much to qualify for “Big A” programs but still struggle with housing costs in expensive markets. Some programs define workforce housing more narrowly as 80-120% of AMI, but the terminology varies by region and program. Because these properties don't have the same regulatory restrictions as “Big A” housing, they offer more flexibility in how they're managed and financed, but also provide less guarantee of long-term affordability since there's no legal mechanism preventing rents from rising to market rate.
Why Both Matter
“Big A” affordable housing is essential for reaching the lowest-income families who face the largest gaps between what they can pay and market costs. Without government subsidies, it's simply not financially possible to build housing for households at 30% or 50% of AMI. “little a” affordable housing expands the toolkit, serving moderate-income households and offering models that can be faster to develop, more community-controlled, or more flexible in their operation.
An entire ecosystem of organizations and professionals works across both categories:
- Government agencies (HUD, state housing finance agencies, local housing authorities)
- Developers (nonprofit and for-profit, we'll explore their differences in future posts)
- Community Development Corporations (CDCs)
- Investors and syndicators
- Lenders and Community Development Financial Institutions (CDFIs)
- Architects, contractors, and construction teams
- Property managers
- Legal professionals
Each plays a specific role in making affordable housing projects financially viable and operationally successful, whether through “Big A” government programs or “little a” alternative models.
Common Questions
If affordable housing is so complicated, why do people do it?
People work in affordable housing for a mix of reasons. Many are motivated by mission-driven work and the tangible impact of providing stable homes to families who need them. But it's also a viable business model with stable long-term returns. “Big A” affordable housing properties typically have high occupancy rates, strong rent collection, and long waiting lists because demand far exceeds supply. For investors, this stability is attractive. For developers, there are development fees and the satisfaction of building something that genuinely serves the community. It's one of the few areas of real estate where doing good and doing well can align.
Can my company get involved even if we don't specialize in affordable housing?
Yes. While some developers and property managers specialize exclusively in affordable housing, many service providers work across both market-rate and affordable projects. Architects, contractors, lawyers, engineers, appraisers, and consultants often serve affordable housing clients alongside their other work. The main difference is familiarity with the regulations, compliance requirements, and financing structures. If you're interested in this work, partnering with experienced affordable housing developers or attending industry conferences can help you build the knowledge you need.
Is this only for nonprofits?
No. While nonprofit developers play a major role, especially in “Big A” housing, for-profit developers are also heavily involved in affordable housing development. The Low-Income Housing Tax Credit program, for example, works with both nonprofit and for-profit developers. For-profit companies bring development expertise, access to capital, and operational efficiency. We'll explore the differences between nonprofit and for-profit developers, and their respective strengths, in a future post.
Are for-profit companies that create affordable housing exploiting residents?
Not necessarily. This is a common misconception rooted in valid concerns about predatory landlords and profit-driven displacement in market-rate housing. However, “Big A” affordable housing comes with strict rent caps, income restrictions, and oversight from housing authorities or other agencies. A for-profit developer can't suddenly raise rents or convert units to market-rate without violating their regulatory agreements, which can result in serious penalties. The profit in affordable housing development typically comes from development fees, tax credit syndication, and long-term stable operations, not from rent increases or exploitation. That said, quality varies by developer, which is why tenant protections, strong regulatory oversight, and community engagement matter.
How do developers make money if rents are capped?
Great question, and one that leads directly into a future post on affordable housing financing. The short answer: developers earn fees for managing the development process, and investors receive returns through tax credits, stable cash flow from operations, and sometimes modest appreciation. Because rents are capped, these projects require creative financing that layers multiple sources like tax credits, grants, below-market loans, and conventional debt. This complex financing structure is what makes affordable housing development possible despite the rent restrictions. We'll break down exactly how this works in the next post.
What roles exist inside affordable housing development organizations?
“Big A” affordable housing developers typically need teams with specialized skills. Larger organizations might have development staff who shepherd projects from concept through construction, asset managers who oversee the performance of existing properties, compliance officers who ensure projects meet regulatory requirements, and financing specialists who structure the complex funding stacks these projects require. They also need acquisition teams to find suitable properties, construction managers, and often policy or advocacy staff who work on securing funding or changing regulations. Smaller developers might have staff wearing multiple hats across these functions.
“little a” affordable housing organizations look more varied. A community land trust might have land acquisition staff, homeownership counselors who work with prospective buyers, and stewardship staff who monitor ground leases. A limited equity housing cooperative might have member services coordinators, technical assistance providers who help residents govern themselves, and financial managers. Organizations focused on preserving naturally occurring affordable housing operate more like traditional property management companies but with a mission focus. The common thread is that all these roles require understanding both the real estate fundamentals and the community impact mission.
Do people get rich off affordable housing development?
It depends on who you're talking about and what kind of housing. On the for-profit side, there are companies focused on maximizing every dollar from their properties. Some of these operators, particularly those managing older subsidized housing or naturally occurring affordable housing with minimal oversight, can generate substantial profits by cutting corners on maintenance and services. These are the operations that give affordable housing a bad name.
For mission-driven developers, both nonprofit and for-profit, the financial picture is different. Employees at nonprofit developers are typically passionate about the work and mission-driven, often earning less than their counterparts at for-profit development companies. That said, nonprofit developers can still provide healthy salaries and stable careers for their teams.
Development companies can earn fees that seem substantial to the average worker (a large project might generate $2-3 million in developer fees), but these fees are smaller than what market-rate housing or commercial development generates, and the work is often riskier. Projects take years to complete, financing can fall through, and there's significant competition for limited resources like tax credits. It's not uncommon for LIHTC projects to show losses on paper while generating modest positive cash flow. The business model works over time by developing multiple projects, but it's not a path to extraordinary wealth.
The people who achieve financial stability in this industry are those who've built efficient, mission-aligned businesses that can sustain operations across multiple projects. Most people in this field could make more money in market-rate real estate or other development sectors, but they choose affordable housing because of the mission and community impact.