Interactive social housing finance tutorial

My favorite thing about the belief that developers regularly make huge profits is that it suggests an immediate and obvious solution to the housing crisis: you! That's right, you can simply build affordable housing. Build housing and rent it out at honest working-class prices by accepting meagre or no profits.

Of course, this is a fantasy. The reality is that margins in development are below average across all industries—about on par with the restaurant industry. Of course some people who are developers do get rich. So do some restauranteurs. Moreover, when they do get rich, it's often as landlords, not through their productive activity.

So to build affordable housing, we either need to find free money (i.e., subsidy), or get creative. One way of getting creative is using social housing—letting your city or state be the developer. That has certain advantages which are explained in the tutorial above.

Most people have no idea how much it costs to build housing, or where their rent goes. As JW Mason points out in his essay After the Rent Freeze, rents for new buildings go to pay the cost of building (good! necessary!) while rents for old buildings are accumulated by unproductive landlords as economic rents (bad! feudal!).

I created this tutorial to democratize knowledge about housing finance. For as much mystery as surrounds the subject, the basics are not actually that hard. It starts with a very simple model. Once you feel like you kind of understand how it works, the following models add details bit by bit. The final model shows how social housing development is different. I hope that's incentive enough to get you to play through the end.

Kingston, NY is the market I know best, so I have built this tool with numbers that I believe are accurate for Kingston development (based on analysis of a handful of recent projects and conversations with local practitioners). I'd like to support other places too—shoot me an email if you know the local numbers.

See if you can build something nice. Good luck!