Financing the Future of Affordable Housing

Financing the Future of Affordable Housing

At the 2025 Innovative Housing Showcase, panelists Dennis Shea and Jeb Mason discussed the role that regulatory reform, technological innovation, and financing tools can play in expanding affordable housing.

On September 9, 2025, as part of the Innovative Housing Showcase in Washington, D.C., HUD hosted "Financing the Future of Affordable Housing," an educational panel moderated by Matt Jones, deputy assistant secretary for single family housing at HUD. The panel featured Dennis Shea, executive vice president and chair of the J. Ronald Terwilliger Center for Housing Policy's Bipartisan Policy Center (BPC), and Jeb Mason, partner at Mindset, a bipartisan consultancy and policy advocacy firm that explores innovations and reforms to expand housing affordability nationwide. 

Jones framed the discussion around identifying opportunities for HUD and its partners to cut red tape and improve efficiency in both mortgage finance and housing production.  Shea and Mason then covered themes that included regulatory barriers, technological innovation, the One Big Beautiful Bill Act, and physical construction and land use. 

Removing Red Tape in Construction and Mortgage Finance

The panelists offered two perspectives on how the regulatory environment inflates costs and risks in ways that disproportionately affect first-time and lower-income buyers. Shea described cost impacts by citing a National Association of Home Builders study estimating that 25 percent of the cost of a single-family home and 40 percent of the cost of multifamily housing stem from expenses associated with regulatory red tape, including prevailing wage requirements under the Davis-Bacon Act and environmental reviews under the National Environmental Policy Act.  

Mason argued that excessive compliance requirements compound the risks built into the Federal Housing Administration's (FHA's) mission. Because FHA serves borrowers with smaller downpayments, weaker credit, or limited savings, a higher baseline risk of default is inherent in these mortgages. When heavy regulation and the threat of punitive enforcement are added to that risk, many lenders withdraw from the program, leaving FHA borrowers with fewer financing options. Mason stated that, in addition to reducing red tape, FHA and other regulatory agencies need to be effective partners with the industry in terms of originating and servicing loans and supporting them through occasional defaults.  

Technical Innovation in the Mortgage and Housing Space

The panel highlighted how data, automation, and artificial intelligence (AI) are reshaping mortgage financing and homebuilding. These technologies can potentially lower costs and expand access. Jones noted that consumers are identifying homes online and relying on automated valuation models. Panelists discussed how AI and alternative data could broaden mortgage eligibility for individuals outside traditional W-2 employment, such as gig and part-time workers. By incorporating new indicators such as a history of on-time rent and utility payments, AI-driven models could better capture creditworthiness without increasing lender risk. Mason hopes that more robust datasets could lower FHA default rates and open homeownership opportunities to households historically excluded from the market. Shea emphasized, however, that human oversight must remain central in areas such as appraisals, and lenders should be able to explain a decision to deny someone access to credit. 

One Big Beautiful Bill Act

Although technology offers new ways to cut costs and expand access, panelists stressed that large-scale financing tools are equally critical to mobilizing private capital for affordable housing. Jones discussed the potential of the One Big Beautiful Bill Act to "supercharge the financing on single-family and multifamily" housing. He highlighted how the permanent extension of mortgage insurance deductibility would provide not only an affordability benefit for FHA buyers but also tax savings for current FHA borrowers who have been in the program for years. Shea praised the legislation as well as the permanent expansion of the Opportunity Zone incentive. He reported estimates stating that "from 200,000 to 300,000 homes have been built as a result of the incentive since 2018." Mason described these provisions as bipartisan and highlighted the qualified business income deduction, which he believed "helps more projects pencil out and encourage people to deploy capital in support of new housing production."

Innovations in Construction and Land Use

Reforms that directly affect how housing is built and supplied can increase housing affordability. Shea pointed out that although manufactured housing is the most affordable unsubsidized source of housing in the United States, outdated rules add unnecessary costs and barriers to construction. As an example, he mentioned the permanent chassis requirement for manufactured housing, which persists even though many manufactured homes are laid on a permanent foundation. "[T]his permanent chassis requirement has been used as a kind of blocking device by local communities," noted Shea, and removing the mandate would lower costs and expand access. Accessory dwelling units (ADUs) are another focus of FHA, which has started allowing rental income from ADUs to help borrowers qualify for loans. Shea added that states such as California, Utah, and Montana have demonstrated how ADUs can be integrated into affordability strategies. 

Beyond zoning and regulatory changes, the panelists emphasized that innovation in construction also plays a role in affordability. Shea shared that BPC has observed that AI and robotics increasingly are being incorporated into predevelopment and modular building. For example, Reframe Systems in Massachusetts uses robotics in microfactories to produce modular homes more efficiently and in compliance with zoning and building codes. 

Ultimately, Shea and Mason emphasized that federal leaders should focus on aligning reforms across regulation, technology, tax policy, and construction standards. They agreed that lasting gains in affordability depend on bipartisan action and stronger partnerships between the government and the private sector.