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The U.S. is building more apartments than it has in half a century, but the poorest people still can’t afford them. 

The amount of units affordable to the lowest income groups has decreased across the country even as apartment construction has reached a 50-year-high and even as overall rent growth is slowing, according to a report from Harvard’s Joint Center for Housing Studies. 

There are many reasons for this, the report’s authors explain, but the main one is that new units being produced are on the higher end and not affordable to people with the lowest incomes. Coupled with rent increases and deteriorating buildings, it means the benefits of the housing boom have been uneven. According to the report, “while multifamily rental construction is at a decades-long peak, the high asking rents of new units make them unaffordable for many households.”

According to Sophia Wedeen, a research analyst at the Joint Center for Housing Studies, some of the problems laid out in the report can be remedied with subsidies like housing vouchers. “Housing assistance is really effective and wonderful for the households who get it, and obviously, there's not nearly enough funding,” Wedeen said in an interview with Motherboard.

Wedeen said the loss of low-income units was a geographically widespread problem. “It's a little bit startling that the supply of low rent units is falling everywhere. Even in places like Ohio and Michigan, Missouri, Indiana, low cost states that have previously had the largest shares of low rent units. These states are losing low rent units too.”

In theory, the increased supply of apartment units should slow rent growth. And the report shows that, broadly, this is happening. But the housing market, as reflected in the report, is more complicated than that. There are many housing markets depending on your income, geography, or—due to both a wealth gap and widespread illegal discrimination—race. And while these markets interact with each other, they can require different remedies to preserve affordability. But the data suggest that building high-end housing is not easing pressures on the lowest end of the housing market, as some advocates focused predominantly on supply-side housing solutions have hoped.

According to the report, “rental markets are experiencing sharply reduced rent growth and rising vacancy rates,” but this is only compared to the sharp jump in rents that took place during the pandemic, in large part because of migration by remote workers between cities, which created bottlenecks for housing applications and around the block open houses in Brooklyn.

While rent growth is slowing down—even on the lower end of the spectrum—the cheapest units are still disappearing faster than they can be replaced, and building high-end housing isn’t remedying that. Wage growth has also not caught up to rent growth, so the overall slower growth in rents may not mean much to people on the lowest end of the income spectrum. 

The report says that, adjusting for inflation, the number of units with rents below $600 fell from 11.9 million to 8.0 million between 2011 and 2021. There was also a loss of 1.5 million units  with rents between $600 and $799, as well as a loss of 980,000 units renting between $800 and $1,000 in the same time period.

But new housing is mostly on the higher end: relying on Census data, the researchers found the asking rent for new multifamily rental housing units in 2022 was $1,800, affordable only to people earning at least $72,000. (This is based on the standard used by the federal government that housing costs should be 30 percent or less of someone’s income to be deemed affordable.) 

Even manufactured homes—once colloquially referred to as mobile homes—have seen decreases, with just 113,000 “shipments” in 2022, whereas an average 302,000 were once produced annually in the United States in the 1990’s.

This is all happening as the United States is experiencing a construction boom: according to the report, 547,000 new units of multifamily rental housing began construction last year, the most since the 1980s. In March 2023, 960,000 were under construction, the highest in 50 years.

The share of cost-burdened households (meaning more than 30 percent of their income is spent on housing) increased across the country by 1.2 million between 2019 and 2021, to a record 21.6 million. And 11.6 million households are severely cost-burdened, meaning more than 50 percent of their income is spent on housing. There’s still a housing shortage of roughly 6.5 million homes, the result of a slowdown in housing production after the 2008 mortgage crisis and the deterioration of homes in the last decade.

Housing on the lowest end of the spectrum is being lost to rent increases, as well as “building condemnations and demolitions,” meaning much of the housing stock is simply deteriorating. This trend will not reverse without significant institutional or government investment: The report said that the median home in 2021 is 43 years old, the oldest it has ever been. And the Federal Reserve Bank of Philadelphia estimates the nation’s homes need $149 billion in repairs. The problem will be exacerbated by housing destroyed in climate disasters, and financial data company CoreLogic estimated that 14.5 million homes had $57 billion in damages in 2021, according to the report.

Housing economists refer to a process called “filtering” to explain how new market rate housing construction can alleviate rents across the income spectrum. As the theory goes, once people move into high-end units, they free up homes for people on the lower end of the spectrum, and so on until the lowest income renters have more vacancies and lower rents. But there are huge caveats to this process, which is not nearly as tidy as is often presented. 

Overproduction on the high end can lead to disproportionately high vacancies at the top of the market, as institutional landlords can prefer prolonged vacancy to lowering rents when no one wants to pay their asking price. New York City, for instance, has long had a glut of empty luxury apartments.

And the effects of filtering offer diminishing returns for people on the lower end of the market, with vacancies higher at the top and consistently lower on the bottom. Building new market-rate units also doesn’t resolve the problem that lower-end housing is often in poor shape and in need of rehabilitation. One 2022 report out of UC Berkeley’s Urban Displacement Project even found that new market rate units led to rent increases for people on the lowest end of the spectrum as well as people in deteriorating housing stock, even as it moderated rents for mid-income and high-income renters. Filtering also does not address how patterns of residential segregation can constrain the supply for some renters but not others.

The mismatch is most pronounced in Texas, which had “the largest decline of any state, losing 512,000 units with rents below $600,” over half the housing stock at the income level. At the same time, the state gained 742,000 units renting for $1,400 or more. 

According to the Harvard report, “Given that the bulk of new construction targets the higher-cost market segment, the robust pipeline of multifamily units may lead to additional vacancy rate increases that will simultaneously help to limit rent growth for high-cost units, while likely providing less relief to renters with lower incomes.”

There are other culprits. Incomes have not risen nearly as fast as rents. According to the report,  between 2019 and 2021, median monthly rents increased 3 percent as the median income of renters dropped 2 percent. It was even worse for renters who make less than $30,000 a year; their rents rose 5 percent in the same time period while their incomes fell 6 percent.

Compare this to the profits of landlords, calculated as net operating income (NOI), or what property owners have left over after paying taxes, maintenance and other costs. NOI grew 8.1 percent in the first quarter of 2023, and this was actually a stark decrease in growth from the 24.8 percent NOI growth in the second quarter of 2021, according to the report’s analysis of the NCREIF property index.

And people at the lowest end of the income spectrum often end up paying different types of “poverty taxes,” as landlords overcharge tenants, deeming them high-risk, as research has shown.

While apartment construction was at a peak, new single family home construction slowed down in 2022, largely due to the federal reserve’s decision to raise interest rates and make it more difficult for developers to borrow money. 

The economic situation has been working out for corporate investors, though, and their overall share of the housing market has grown. According to the report, “the share of rental properties owned by non-individual investors increased by 9 percentage points over the past two decades to 27 percent in 2021.” About two-thirds of properties with 5 to 24 units are now owned by corporate investors. Research from the National Low-Income Housing Coalition found increased investor purchases led to more evictions.

A law designed to build affordable housing in Montreal—and which an elected official predicted would lead to 600 new units a year—has led to zero units of affordable housing, according to the city’s data. The law required developers to either build housing or pay into a fund. Every developer chose the second option. 

In April 2021, Montreal adopted the Bylaw for a Diverse Metropolis. According to the law, developers who build five dwelling units (or the equivalent in terms of space) must sign an agreement with Montreal to either construct new city-subsidized housing or new affordable housing subsidized by the developer, along with other subsidies. If developers don’t build this housing, they can either donate land or pay directly into a fund that the city will use to build affordable housing units. 

According to data on the city’s website, and first reported by CBC, 150 agreements have been signed under the bylaw as of May 2023, resulting in 7100 units of housing, all of which are market rate. Every single developer opted to pay a penalty and five donated property rather than build affordable housing, resulting in $16.5 million for city-subsidized housing operated by co-ops or nonprofits—what the city classifies as “social housing”—and $8 million for affordable housing with other subsidies. 

Guillaume Pelletier, press officer for Ensemble Montreal, the official opposition at City Hall, told Motherboard the city was supposed to release another report on the bylaw this year but has failed to do so.

According to Véronique Laflamme, spokesperson for FRAPRU, an umbrella organization of housing associations and tenant groups, the problem is not just the lenient design of the 2021 bylaw but the lack of funding for social housing from the Quebec and federal government. 

Laflamme told Motherboard that FRAPRU advocates for more social housing and supported the bylaw in 2021, despite believing at the time it was not strict enough. The group does not believe developers should have had an option to pay a fee instead of producing affordable housing. But the city also set its fee far too low, and developers found it made more sense economically to pay a fee instead of ceding land or adding affordable housing. 

“It's cheaper to opt out than to build social housing or to transfer land,” Laflamme said. “We think we should not give the choice to opt out. Ultimately if we give this choice, the compensation should be higher.”

There is evidence from the U.S. that offering an optional development fee instead of mandating affordable housing leads to very little housing being built. In New Jersey, towns are required to build their fair share of affordable housing based on job growth and population growth in local counties. Towns were permitted to pay a fee instead of building housing from 1985 to 2008 and during this time many chose this path, leading to entrenched residential segregation. The practice was banned through legislation in 2008.

Quebec’s population has grown dramatically in the past few years but housing production has not kept up. The province’s population grew by 149,000 people in 2022—a fifty-year high largely driven by international migration. According to a report released by Montreal’s Chamber of Commerce, the city would have to build 23,000 units of housing every year until 2041 for the housing market to level out.

Laflamme said that the city should more aggressively acquire land to develop social housing rather than relying on the bylaw, which she said leans too heavily on market rate development that is too costly for many people. 

“We have never said that [the bylaw] was the only way to make sure that we have social housing,” Laflamme said. She said that developers have been building out neighborhoods with new condos and expensive rental units but no affordable units. Adding a small percentage of affordable units, as the bylaw requires, would still create mostly exclusionary neighborhoods, she believes. 

Even if developers opted to build social housing under the bylaw, Laflamme said that the province has failed to appropriately fund social housing, which means the projects still might not have been completed. “If you don't have a program dedicated to social housing and if there is not a funding plan for social housing, we have to wait,” Laflamme said. “It's ridiculous to be in this situation budget after budget.”

Over the past week, bank runs have caused multiple U.S. institutions serving the technology and crypto industries to collapse. Two banks, Silicon Valley bank (SVB) and Signature Bank, have been placed into receivership with the Federal Deposit Insurance Corporation (FDIC), which will put all deposits into bridge banks run by the FDIC until they can be sold in an effort to quell panic about the stability of the banking system.

According to the FDIC, customers “will continue to have uninterrupted customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before. Signature Bank’s official checks will continue to clear.” 

Like SVB, there’s new scrutiny about how risky Signature’s lending practices have been. The bank was well-known as a key banker for the hyper-speculative crypto industry, which has experienced a collapse over the past year. While most of its deposits were not crypto-related, it launched a product called Signet that facilitated commercial crypto payments and which was approved for use by the New York State Department of Financial Services. 

Despite its crypto notoriety, Signature Bank is a far larger player in the housing market; former senator Barney Frank, who sat on Signature’s board, told Bloomberg that the bank is “the biggest lender in New York City under the low-income housing tax credit.” Low-Income Housing Tax Credits (LIHTC) are a federal program where states grant tax subsidies to private developers, who in turn sell them on the private market to finance construction. Signature Bank maintains about $80 million of the credits in New York; the purchase helps fund affordable housing while the credits lower the bank’s tax liability. 

A publicly available FDIC evaluation from 2022 shows that nearly half of all Signature’s lending was in real estate. And $16 billion of those real estate loans—over half—went to financing multifamily apartment buildings. And it owns a Real Estate Investment Trust that invests in mortgage-backed securities, the same type of speculative assets that helped drive the 2008 financial crash. 

While Frank points to LIHTC as the reason why Signature is a worthy investor, tenant advocates have been criticizing Signature Bank’s other lending practices for years, alleging that they lend to corporate landlords that have been among the state’s worst evictors and whose risky business model destabilizes neighborhoods. In 2019, New York Communities For Change said Signature Bank had, together with Capital One, “loaned out $468 million to landlords that are among the city's worst evictors.”

For this reason, advocates are not thrilled that Signature clients are getting full coverage of their deposits from the government. Even though shareholders will be wiped out and the bank’s top management removed, experts have suggested that a new implicit guarantee that all large, uninsured deposits in any bank will be covered by the government will encourage more risky behavior. 

“I think it's a problem that we're doing full coverage of all deposits with banks that are investing in some really risky things,” says Saqib Bhatti, co-director of Action Center on Race and Economy, a member of the Public Bank NYC coalition. A bailout “seems like a big slap in the face to all the communities and workers that they screw over as a part of their normal business practice,” Bhatti said. 

The Association of Neighborhood & Housing Development (ANHD), which has been organizing campaigns against Signature’s lending practices for years, issued a statement thanking the New York Department of Financial Services for shutting down the bank.

“Signature Bank’s collapse comes as no surprise to the [ANHD], who has long called out their faulty business model, which relied on predatory and speculative activities in New York City,” the statement said. “Signature paved the way for thousands of tenants to suffer living in unsafe conditions, the victims of harassment, or displaced from their homes and communities.”

The city’s Right To Counsel Coalition, a group of nonprofit providers advocating for free attorneys for people in eviction court, compiled a list of New York City’s worst evictors during the early days of the COVID-19 pandemic, along with the funding sources. According to that list, Signature Bank lent to Jay Rosenfeld of AMA LLC / Revona Properties, whose portfolio is 86 percent rent-stabilized housing and who successfully filed 202 evictions between 2017-2020. (Rosenfeld also received loans from Fannie Mae and Freddie Mac, the government-run housing corporations.) Alma Realty, Parkash 242 LLC and Memadet Realty Corporation are also top ten evictors who were lent money from Signature.

Signature Bank has lent to Zara Realty, A&E Real Estate Holdings LLC and Sugar Hill Capital Partners, among other real estate companies that are known for large purchases of rent-stabilized multifamily housing and who made aggressive attempts to deregulate those buildings.

The funding source and the aggressive attempts to deregulate units cannot be decoupled; landlords of these buildings leverage massive amounts of debt to purchase rent-stabilized portfolios that can only be paid back if the buildings’ units become market rate. The nature of the debt means deregulation is baked into the business model that underwrites a loan.

“When you compare the rent-stabilized rent rolls, the revenue generated by the building to the debt service required to pay back the loans and keep up the maintenance of the building, there's a mismatch,” says Will Spisak, senior program associate of New Economy Project and a member of Public Bank NYC, a coalition that is pushing NYC to put its funds into a public bank rather than private ones like Signature. “It's this understanding between the bank and the landlord that the landlord will find ways to deregulate units.”

Zara Realty, for instance, has not only been on the New York attorney general’s “worst landlords” list for years in a row, but was sued by the attorney general in 2019 for illegally raising rents and coercing tenants into signing illegal leases. Zara Realty’s portfolio is 91 percent rent stabilized, and they came under fire for years for using loopholes, including  major capital improvements to deregulate units. 

Major capital improvements allow landlords to raise rents on otherwise rent stabilized apartments by claiming that building-wide improvements were made, but the law was loosely regulated, and landlords often inflated the costs of improvements, something Zara came under fire for. 

In 2019, sweeping tenant-friendly reforms narrowed the parameters for landlords of rent regulated units to raise rents and deregulate buildings, including through MCIs. It meant that landlords like Zara were deregulating far fewer apartments. (There are still, however, loopholes that allow for deregulation.) It also meant Zara and others could potentially have more trouble paying back their loans to Signature and other lenders.

Spisak suspects this risky lending contributed to Signature’s shaky footing. “We have a suspicion one of the challenges that Signature Bank is having is that a lot of the landlords that are highly over-leveraged are now having trouble making those payments on those buildings,” he said. Sugar Hill Capital, for instance, recently stopped making payments on mortgages for some of the 50 mostly rent stabilized buildings it owns in Manhattan.

These predatory owners were also often ignoring basic maintenance. Coupled with the higher interest rates, it makes the buildings harder to resell, Spisak said. 

As expected with a bank of its size, Signature has a diverse range of lending and investments, some of which affordable housing developers relied on. It maintains about $80 million worth of LIHTCs that fund housing development in New York.  It invested $45.3 million through LIHTC to rehabilitate a 204-unit Nassau County rental property consisting of Section 8 tenants. (Critics have long pointed out that , however, that LIHTC-funded housing is not necessarily always deeply affordable and properties it finances revert to market-rate within a few decades.)

Yet the FDIC was unimpressed by the scale of Signature’s affordable housing investments, especially since the bank’s assets grew by nearly 150 percent during the pandemic. The evaluators wrote that, “Signature, with its significant increases in total assets and securities, could have pursued other qualified investment opportunities, including those that are not LIHTC-related.” Its overall score for Signature under the Community Reinvestment Act was “low satisfactory,” meaning the bank met its minimum obligations for lending within the communities where it takes deposits under the 1977 law.

Spisak says Signature was aware of how their loans were being used by landlords who planned to jack up rents and evict tenants. He says tenant advocates had multiple sit-downs with Signature to explain the predatory practices of their customers and Signature employees received walk-throughs of dilapidated properties, but the bank did not change course. According to a statement from ANHD, Signature Bank agreed to adopt ANHD’s best practices for lending in July 2018. “Unfortunately, in the more than four years since that pledge, Signature Bank had yet to fully live up to its commitments and often fought back against doing so,” according to ANHD’s statement.  

The FDIC was also aware of Signature’s lending practices. In their 2022 evaluation, officials spoke to tenant advocates and reviewed public comment and learned about the “ongoing problem of bad landlords who continue to own and operate multifamily buildings that are deteriorating,” and heard complaints that Signature is “continually able to secure financing from area lenders and private entities to purchase additional multifamily buildings.” FDIC evaluators also learned that landlords “appear to engage in various forms of harassment tactics to encourage current tenants paying lower rent levels to move out, in order to move the properties to full market rate rents.”

For this reason, advocates are hoping this moment will force Signature to apply higher scrutiny to its real estate lending. 

“We look forward to working with State and Federal regulators to ensure that tenants’ homes are protected and affordability is preserved—especially in the midst of a housing crisis, and on the edge of an eviction tsunami.  We can not allow another financial institution to take control of loans and continue Signature’s practice of predatory lending,” ANHD said in its statement. 

The Public Bank NYC collective also want the city of New York to stop putting its money in Signature Bank, where about $50 million of the city’s funds sit, and put that money in a public bank instead. 

“At the end of the day, whether it's predatory equity landlords or cryptocurrency or mortgage backed securities, these banks proved time and again that they're just interested in making the biggest and fastest profits that they can,” Spisak said. “Public banking is the clear alternative to this.”

The failure of Silicon Valley Bank and Signature Bank, both known for making risky investments and concentrating on banking speculative sectors, is invigorating the nationwide movement to get cities and states to put their deposits in public banks, which are designed to reinvest in communities and which do not have to reap profits for shareholders.

Public banks are typically operated by government or tribal authorities and, in theory, would be chartered to achieve social good and invest in communities. Only two public banks currently operate in the United States: the Bank of North Dakota, founded in 1919, and the Territorial Bank of American Samoa, founded in 2018. Organizations pushing for a public banking option exist in 37 states, according to the Public Banking Institute. 

In contrast to private banks, which are responsible to their shareholders, , public banks are responsible to their boards and are chartered to invest in public needs. The Bank of North Dakota, for instance, is chartered to offer a “revolving loan fund” to farmers, and profits from loans are directed back into the fund to keep interest rates low.

Legislators in New York renewed calls for a vote on statewide public banking legislation after SVB and Signature were taken over by the FDIC last weekend amid bank runs that triggered a crisis of liquidity. Public advocate Jumaane Williams tweeted on Tuesday that “NYC deserves a public bank that serves the public good.” Williams joined with community groups to “condemn banks like Signature—designated the ‘Worst Funder of Bad Landlords’—that endanger public interest.”

The same day, State Senator James Sanders, who chairs the state’s banking committee, released a statement decrying Silicon Valley Bank and Signature Bank’s investment decisions and saying, “this crisis speaks volumes to the soundness of public banks.”

They’ve both championed a statewide bill called the Public Banking Act that has failed to get a vote in the past few legislative sessions but which was reintroduced in February. The bill would allow local governments across New York to form and control public banks and invest public money in them.  

“It's just made clear how unstable and risky and often predatory our banking system is,” said Andy Morrison, a member of the Public Bank NYC coalition.

Morrison said that the New York state officials will have more time to focus on the bill once the state’s budget is passed in early April. “I think it's going to take center stage come April and May,” he said.

On Thursday, the Public Bank NYC coalition sent a letter to Carl Heastie and Andrea Stewart-Cousins, the heads of New York’s state legislature, criticizing local governments for continuing to place deposits in Signature. “We write to express our alarm over recent reports that hundreds of millions of dollars in public deposits belonging to New York local governments are held at failed Signature Bank,” the letter states.

The letter criticizes the practices of Signature Bank, which banked the crypto industry but also had a history of lending to predatory landlords looking to cash in on rising rents. “The sudden meltdown of Signature Bank–a New York State-chartered financial institution—should serve as a wake-up call for the state. Across New York, billions of public dollars are deposited in banks that engage in risky and abusive activities that run counter to the state’s public policy objectives,” it states.

According to the coalition, 30 of New York’s 63  state senators and 60 of the state’s 150 assembly members support a bill that would pave the way for public banks. 

The modern movement to invest in public banks grew out of the 2008 financial crisis and was galvanized during the pandemic, fueled by a populist distrust of the banking and finance sectors.

In October 2020, Representatives Alexandria Ocasio-Cortez and Rashida Tlaib introduced the federal Public Banking Act, which would allow state and local governments across the country to create public banks.

In the first two months of 2021 there were sixteen bills across the country designed to pave the way for public banks, according to Yes Magazine.

The largest recent success for the public banking movement came when California passed AB857 in 2019, approving a legal framework for regional public banks to be established across the state. The law allows jurisdictions with 250,000 people to form their own regional banks, and lets counties and cities to partner up to form such banks if they have under 250,000 people. No public banks have been established in the state yet, but organizers are pushing for them in Los Angeles, San Francisco and in the Central Coast (Monterey, Santa Cruz, Santa Barbera)  A group called Public Bank East Bay says its bank will be up and running by 2024, and the cities of Oakland and Richmond have taken the first steps to establish it.

Supporters of public banks are hoping that any deposits from state and local governments can be used to fund community-based projects that have trouble getting funded by private banks. Private banks like the ones that made loans to chronically unprofitable startups, speculative financial products, and over-leveraged landlords are hesitant to make investments in more stable forms of innovation that stress democratic ownership, like community land trusts and worker cooperatives. 

And private banks are oddly costly for states to do business with. Cities often finance projects by selling municipal bonds to private banks, which requires them to pay out interest to those banks. But governments are limited in their ability to set the terms of those bonds. As Ellen Brown, Chair of the Public Banking Institute wrote in 2021, “Local governments are extremely good credit risks; yet private, bank-affiliated rating agencies give them a lower credit score (raising their rates) than private corporations, which are 63 times more likely to default.” 

The result of this lopsided arrangement is that $160 billion in interest is paid out each year by local governments. Public banks could potentially reduce some of these costs with lower interest rates.

But the idea that public banks will disinvest from harmful industries is not a foregone conclusion.  The Bank of North Dakota provides mixed lessons; it has excelled financially and weathered the Great Depression, the 2008 financial crisis and the pandemic uniquely well, but some of its investments have raised eye-brows. The bank outperformed Goldman Sachs and J.P. Morgan in 2014, but this was largely due to investments in fracking. In 2016, the Bank of North Dakota lent $10 million to law enforcement to fund the response to protestors opposed to the Dakota Access Pipeline in Standing Rock.

Public bank proponents have suggested this is because Bank of North Dakota’s board has all-white leadership. The New York Public Banking Act requires that any board of a public bank in the state be set up so that “the composition of the board reflects the composition of the population in terms of people of color and women.” It also requires each bank to have an advisory board chartered to “ensure that the public bank's operations are consistent with social equity principles, including racial, gender, and environmental  justice and indigenous rights.” But how each public bank interprets those principles and decides to invest its money will largely depend on each bank’s charter.

The push for public banks comes as the Federal reserve’s actions in insuring deposits far above the $250,000 available to average citizens for both SVB and Signature potentially threatens smaller community banks, whose customers have no such guarantee. The problem was laid bare in a recent exchange with Treasury Secretary Janet Yellen.

Asked by Oklahoma Senator James Lankford whether every community bank in Oklahoma would be covered regardless of the size of its deposits, Yellen responded that banks would only receive such coverage if the Fed and FDIC determined that the bank’s failure would “create systemic risk,” effectively leaving customers at smaller banks without any lifelines and incentivizing them to invest at larger, “too big to fail” banks.

Members of the Public Bank NYC coalition are hoping that regional public banks could increase investments in affordable housing and projects that stress community control, particularly by partnering with local credit unions. One of the reasons that developers have historically been hesitant to build housing with a higher ratio of affordable units is because private banks judge such projects riskier due to the lower return on investment.

Melissa Marquez is the CEO of Genesee Co-Op Federal Credit Union in Rochester, New York, and a member of Public Bank NYC. She says the 40-year old credit union, which has about 4,000 members and holds about $40 million, is too small to provide large loans like those that might be required to affordably set up a local community land trust. She wants to invest in a local land trust with commercial space and co-op residential units. “That's not a project that we could do ourselves,” she said.

She says private banks are unlikely to lend to land trusts because they’re not familiar with the model or because they find the model, in which a nonprofit owns land and restricts the resale value of homes to keep them affordable, to be too risky. 

But it’s clear from the past week that risk is not the problem—private banks are eager to take many large risks if even a few of them pay off. They are less likely to invest when risks are lower but profits aren't a guiding principle.