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In much of the United States, for a low-income family than a market-rate one just down the street – sometimes far more. It is one of the central paradoxes of the nation’s housing crisis: The affordable homes that lower-income renters need most tend to be the costliest to build.

Colorado is an exception. In a recent in California, Colorado and Texas, researchers at RAND, , found that affordable apartments in Colorado cost about $50 less per square foot to build than market-rate units. Colorado was the only one of the three states where affordable developments cost less to build than market-rate ones.

I’ve spent nearly three decades trying to understand why affordable housing costs so much to build – and how to bring those costs down. I now direct the , where we study how to expand housing supply and affordability in Colorado and across the Rocky Mountain West. Earlier, I led the research office at the U.S. Department of Housing and Urban Development that studies housing markets, affordability and federal housing programs.

, I keep running into the same paradox: The tools designed to make housing affordable are also a big part of what makes it expensive to build.

When rent can’t cover the bill

At the core of the housing paradox, the numbers just don’t add up.

Affordable housing programs typically serve households earning well , the midpoint where half of local households earn more and half earn less. Their capped rents fall below what it costs to build a new apartment, especially where land, labor and materials are expensive.

To close that gap, developers assemble multiple layers of public and private subsidies. The cornerstone is the federal , which gives investors a tax break in return for financing apartments that must stay affordable for decades. Typically, those units are rented only to households earning at or below 60% of area median income, at capped rents, for at least 30 years. Because the credit rarely covers the whole gap, developers usually combine it with other sources of public money: state credits such as Colorado’s own , local housing funds and .

Each funding source has its own application, deadlines and income rules, and assembling this financing takes lawyers, accountants, consultants and staff time – the that sit on top of the hard costs, such as concrete, steel and labor.

Studies that find that soft costs are where a large share of the cost difference originates. Affordable projects tend to have significantly higher soft costs, even when the . In other words, much of what makes an affordable apartment expensive isn’t the building – it’s the financial and regulatory machinery wrapped around it.

Affordable housing is built largely with public dollars, yet the full cost picture is surprisingly hard to see. A 2023 found that no federal agency has clear authority to collect and compare development-cost data nationwide. The HUD office I led was also responsible for maintaining the government’s data on federally assisted housing, and my team routinely struggled with inconsistent and incomplete cost information. Policymakers are making billion-dollar decisions with only a partial view of where the money actually goes.

How Colorado breaks the pattern

So why does affordable housing cost less to build in Colorado? The RAND study points to . Unlike their counterparts in California and Texas, Colorado’s affordable developers built for less, per square foot, than the state’s own market-rate builders.

In Colorado, a key distinguishing factor is land: Developers paid just $1.50 per square foot, against about $23 for market‑rate builders, often on public land offered at little or no cost. That cheaper land, along with lower-cost building sites, more than offsets the higher soft costs that affordable projects still carry everywhere, Colorado included.

What actually lowers costs

In recent years, aimed at easing the frictions that inflate housing costs, especially for subsidized projects, making the state a real-time test of what works. Research already points to several promising levers, none of which requires weakening the protections that keep homes affordable.

The most powerful lever is land. Cities and states across the country are increasingly offering public land at little or no cost, reducing one of .

authorizes school districts, universities, transit agencies, housing authorities and qualifying nonprofits to build homes on land they already own, through a streamlined approval process that limits how restrictive local zoning can be. It lowers two costs at once: the price of the land and the months spent winning approval.

Colorado is also reducing the paperwork that inflates soft costs. In 2022, , which requires communities that want state housing dollars to act on affordable-housing applications within 90 days. More than 100 jurisdictions, Â鶹ԭ´´ among them, have adopted such .

The state has also that lets developers apply once for money from the state, its housing finance agency and the city of Â鶹ԭ´´, instead of submitting separately to each. In a , developers called this their top priority for reducing soft costs.

Parking rules are another hidden driver. Requiring builders to include parking forces them to construct expensive structures – sometimes $50,000 per space – and give up land that could hold homes. A estimated that ending Â鶹ԭ´´â€™s parking mandates would boost housing construction by about 12.5%, or roughly 460 additional homes a year. dropped its parking minimums in 2025, following that lifted them near transit.

On construction, Colorado is easing its to make factory-built housing simpler to permit. Affordable developers are using to narrow the gap with market-rate building. These homes, which are assembled in a factory, can cost less and get built faster. While leading research at HUD, I toured affordable developments built this way, including one in Detroit that cost . The savings matter most in rural and mountain areas, where labor is scarce and the building season is short.

The country still struggles to measure what actually drives housing costs. Building stronger regional data, and the partnerships among agencies, lenders, universities and developers to use it, can show where rules add value and where they instead add delay and cost.

Affordable housing’s impact

Stable, affordable housing is linked to better health, stronger school performance and . In one national study, each additional year that a child spent living in assisted housing as a teenager . So every dollar lost to unnecessary cost – the delay and duplication that make housing no better – is a home that never gets built for a family who needs one.

Affordable housing will always require some subsidies: When the rents that low-income households can pay fall short of what building costs, public or philanthropic dollars must close the gap. But those costs are not fixed. Colorado’s experiment is a reminder that the gap between affordable and market-rate housing can be narrowed, but only by treating the financial plumbing as seriously as the bricks and mortar.

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, Executive Director of the Center for Housing Research and Innovative Solutions,

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