Why Local Governments Should Make Housing Part of Their Economic Development Plans


  • Jenn Steinfeld
January 16, 2024 - (4 min read)

NLC’s Entrepreneurship and Economic Development team helps cities meet their economic security needs by building robust and inclusive economies. We do this by seeking opportunities to explicitly address the historical income and wealth inequalities that impact Black and Indigenous people and other people of color in entrepreneurship and small business growth and development. In the last few years, we have seen many communities start to see having an inclusive, affordable housing strategy as good economic development. This has accelerated as the cost of housing has increased dramatically, while communities have had incentives to think differently as part of their economic recovery from the COVID-19 pandemic.

There are several economic development reasons to consider an affordable housing strategy:

  • Access to affordable housing allows businesses to have access to a reliable workforce. A lack of affordable housing can put pressure on employees with long commutes or financial pressure from unaffordable rents or mortgage payments. A reliable workforce is critical to the financial success of any business of any size. Additionally, housing affordability at all income levels can support a talent attraction strategy.
  • Mixed-income developments reduce poverty concentration and allow for more opportunities for community diversity. Without a clear strategy on housing costs, lower-income households often wind up in underfunded areas. Mixed-income housing allows everyone to benefit from neighborhood resources and amenities and offers more opportunities for economic mobility.
  • New developments are usually in underutilized areas that may be blighted or low density. Building new housing, especially in mixed-use, mixed-income developments, increases the value of the property and the tax base of the community. This in turn can allow for more investment in the community.
  • Affordable housing at all income levels means that residents have more disposable income which can be spent on local businesses and services. This means more money flowing through the community and in turn more business tax revenue for the community.

There are several ways that communities can make affordable housing investment part of their economic development strategies. Some examples are provided below.

  • Tax increment financing (TIF) investments into affordable housing: Salt Lake City’s comprehensive Growing SLC plan includes a provision that 10% of all new tax dollars from tax increment financing districts be paid into a housing trust, allowing the SLC Redevelopment Agency, a division of their Department of Economic Development, to build new affordable units. The more successful the TIF, the more funding goes into the trust. Note that it is important to be extremely clear about the purpose of TIF-generated funds to ensure that the funds are used as intended.
  • Community Benefit Agreements with developers that include affordable, workforce, and market rate units: The City of Nashville created a CBA with the developer of a soccer stadium that included a provision of having at least 16% of units be income-restricted as affordable or workforce housing.
  • Inclusionary housing policies: the City of New York requires a share of all new housing developments to be permanently affordable units. This means all new housing developments are mixed-income developments, allowing them to reap the benefits discussed above.
  • A set-aside from new market-rate housing: the City of Sacramento, CA has a  that requires all large developments to pay a fee into a trust administered by the city’s redevelopment authority to build new affordable housing. The City of Philadelphia provides an incentive to developments that pay into the affordable housing fund, letting them build larger or taller developments than would otherwise be allowed.

It makes sense to consider affordable housing as part of any community’s economic development strategy. Conversely, communities can make an economic development argument in support of affordable housing. The bottom line is that housing is a huge part of every resident’s budget, and providing an environment in which residents can afford their housing means a more reliable, less stressed workforce; more money to be invested in local businesses; and a stronger tax base.

About the Author

Jenn Steinfeld

About the Author

Jenn Steinfeld is the Director, Entrepreneurship & Economic Development at the National League of Cities.